February 21, 2012

The second session of the 112th Congress convened on January 3, 2012.

The following Legislative Issues Update outlines the status of the Board-approved Legislative Agenda as well as other relevant federal issues.

Issue Status as of February 21, 2012

2012 CAP FEDERAL LEGISLATIVE AGENDA

EPA Rulemaking regarding

Navajo Generating Station

(NGS) Emissions Controls -

Continue efforts to engage

elected officials, stakeholders,

and governmental agencies in

influencing the EPA to apply

due weight to the economic

impacts of its BART

determination for NGS.

CAWCD and other stakeholders submitted

two-page comments on the National

Renewable Energy Laboratory (NREL)

report on NGS to the Department of the

Interior (DOI), which will be transmitted to

EPA along with the NREL report.

Staff also submitted an additional comment

letter to DOI and EPA expanding upon the

formal comment submittal on the report.

In addition, staff and our Washington

consultants are working with our coalition

partners to secure an Arizona Congressional

delegation letter to President Obama on the

pending BART decision on NGS.

Climate Change and Energy

Legislation -

Monitor legislative efforts and

respond appropriately to

mitigate potential impacts on

CAP operations and on the

sale of Navajo surplus power.

On February 8, the House released the

completed version of a surface

transportation reauthorization bill, the

American Energy and Infrastructure

Financing Act of 2012. The legislation

would use revenues from onshore and

offshore domestic energy leasing to fund the

Highway Trust Fund.

In the Senate, Senator Bingaman has

indicated that he intends to release details of

his Clean Energy Standard (CES)

legislation in the very near future.

Post-2017 Hoover Power

Reallocation - Work with the

appropriate stakeholders to

seek final passage of this

legislation.

Western Area Power Authority (WAPA)

will be working with the states to

implement the Hoover Power Act. A public

process will occur on allocation of the new

Schedule D set-aside for new entries.

Clean Water Restoration Act

- Continue to oppose

expansion of the coverage of

the Clean Water Act from

"navigable waters of the

United States" to "waters of

the United States."

No update to report at this time.

Public Policy Agenda Number 3.

Attachment 1.

Navajo/Hopi Water Rights

Settlement Legislation - Continue to seek a settlement

of these water rights claims

and support legislation

necessary and appropriate to

implement a settlement.

Sen. Kyl introduced settlement legislation

(S. 2109), co-sponsored by Sen. McCain, on

February 14. Reps. Quayle and Gosar

introduced H.R. 4067 on February 16. The

legislation would authorize spending more

than $300 million on three separate

groundwater projects on the Navajo and

Hopi reservations in return for the tribes

waiving their claims to Little Colorado

River water.

The settlement also would authorize

reallocation of 6,411 acre-feet of CAP water

to the Navajo Nation for delivery through

the Navajo-Gallup pipeline if and when the

leases and other agreements for continued

operation of NGS are extended.

Salinity Control Funding -

Support federal funding of

salinity control activities.

No update to report at this time.

EPA Rulemaking,

Greenhouse Gas (GHG)

Emissions - Monitor proposals

to regulate greenhouse gas

emissions from large facilities

under the Clean Air Act.

The EPA once again pushed back their

announcement on GHG rules to sometime

in February. Meanwhile, in the FY2013

budget, the President requested $32.8

million over the current levels for climate

programs, including regulation. EPA wants

$7 million more than last year to craft rules

for stationary sources.

EPA Rule, Hazardous Air

Pollutants (HAP), Maximum

Achievable Control

Technology (MACT) - Monitor development of draft

rule (due March 2011) and

final rule (due November

2011) for potential impact on

NGS.

EPA published the rule in the Federal

Register on February 16. A number of

Congressional oversight hearings have been

held to discuss the impacts of the rule.

Additionally, members in both chambers

continue to pursue legislation to block

implementation of the rule.

EPA Final Rule, Drinking

Water Contaminant

Candidate List (CCL3) -

Monitor the implementation of

the final rule on the Drinking

Water Contaminant Candidate

List 3.

No update to report at this time.

OTHER

BILLS/LEGISLATIVE

ISSUES OF INTEREST

Public Employee Pension

Transparency Act (H.R. 567

and S. 347)

No update to report at this time.

Hydropower Improvement

Act (S.629)

No update to report at this time.

H.R. 795, The Small Scale

Hydropower Improvement

Act of 2011

No update to report at this time.

H.R. 2842, the Bureau of

Reclamation Small Conduit

Hydropower Development

and Rural Jobs Act of 2011

No update to report at this time.

H.R. 2915, the American

Taxpayer and Western Area

Power Administration

Customer Protection Act of

2011

No update to report at this time.

Cybersecurity Act of 2012

This legislation, which has been worked on

for three years, was introduced on February

14. The bill would require the Department

of Homeland Security to identify "covered

critical infrastructure" and to establish

performance requirements for protection

from cyber-attack. Owners or operators of

critical infrastructure systems would be

required to determine how best to meet the

performance requirements and submit a

third-party assessment of their compliance.

If you have any questions or would like more information regarding any of the issues contained in this report, please contact CAP Business Planning, 623-869-2150.

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Public Policy Agenda Number 3.

Attachment 2.

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Environmental Protection Agency (EPA) Rulemaking Regarding Navajo Generating Station

(NGS) Emissions Control – EPA's proposed Best Available Retrofit Technology (BART)

rulemaking for emissions control at NGS is the first of several challenges to this coal-fired

power plant. How our chief energy source operates, if at all, and its impact on the price of

water delivered to our customers under various outcomes are at stake.

UPDATE:

The National Renewable Energy Laboratory (NREL) report on the Navajo Generating

Station was released on January 18 and written comments on the report were limited to

a maximum of two pages. CAP’s comments were submitted on February 6.

CAP staff also submitted more extensive comments to the Department of the Interior

(DOI) and to the Environmental Protection Agency (EPA). This second comment letter

expanded upon CAP’s previous formal comments. Also being developed in

conjunction with Bracy, Tucker, Brown and Valanzano (BTBV), is a letter from members

of Arizona’s Congressional delegation to President Obama expressing concerns over

the potential negative impacts to the State of Arizona resulting from the BART

determination on NGS.

And lastly, a letter addressing potential economic and environmental impacts of the

BART rulemaking to the State of Arizona was sent to the EPA Region 9 Administrator,

Mr. Jared Blumenfeld, on February 2 by the Speaker of the House (Andy Tobin), the

Senate President (Steve Pierce), and the District 2 State Representative (Albert Hale)

and State Senator (Jack Jackson).

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Navajo/Hopi Water Rights Settlement Legislation – CAP staff continue to work

with other stakeholders to negotiate a comprehensive settlement of the claims

of the two tribes to the Lower Colorado River, the Little Colorado River and

groundwater in the vicinity of the reservations. If settlement negotiations are

successful, we will seek federal legislation to authorize and fund the

settlement.

UPDATE:

Sen. Kyl introduced the Navajo-Hopi Little Colorado Settlement Act of

2012 (S. 2109) on February 14. The legislation is co-sponsored by

Senator McCain. The House legislative equivalent, H.R. 4067, was

introduced by Representatives Quayle and Gosar on February 16.

In addition to settling the Navajo and Hopi claims to the Little Colorado River, the

settlement provides for the development of groundwater projects for the Navajo and

Hopi Tribes, costing a total of $232 million (in 2011 dollars) for construction costs ($199

million for Navajo and $113 million for Hopi). The settlement also provides for the

appropriation of an additional $34 million for an OM&R trust fund (for each Tribe), and

N-aquifer management plan and a Hopi Springs protection plan.

Additionally, the Navajo Nation could be allocated 6,411 ac-ft/fy of the CAP NIA Priority

water set aside for future Indian water settlements in the Arizona Water Settlements Act

(AWSA) if certain life extension agreements related to NGS are negotiated and executed

by October 31, 2022. This CAP water would be diverted from the San Juan River and

delivered through the Navajo-Gallup pipeline, authorized by Congress pursuant to the

New Mexico Navajo water rights settlement of 2009.

The settlement also retains for future settlement of the Navajo Nation's claims to Lower

Colorado River water an additional 22,589 ac-ft/yr of CAP NIA Priority water (from 67,000

ac-ft/yr of CAP NIA Priority water set aside for future Indian settlements under the

AWSA). The settlement also retains for future settlement of the Hopi Tribe's claims to

Lower Colorado River water 1,000 ac-ft/yr of CAP NIA Priority water, also from the

volume set aside under the AWSA.

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A group of Senators introduced the Cybersecurity Act of 2012 on February 14.

The bill is the product of three years of hearings and debates over how to

protect the nation’s infrastructure from cyber attack.

The Department of Homeland Security would be required to consolidate

cybersecurity programs into one office and identify the most critical

components of the country’s infrastructure, including water and power

infrastructure. Owners and operators of “covered critical infrastructure” would

be required to determine the best way to comply with security requirements

developed by Homeland Security and to submit an assessment of their

compliance conducted by a third party.

Several Republican Senators, including Arizona Sen. John McCain, have

raised concerns with the bill and have urged Senate leaders to allow time for

other committees to consider the issue.

The U.S. Chamber of Commerce also has expressed concerns over the

legislation.

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TO: David Modeer and CAWCD Board FR: Terry Bracy, Tracy Tucker, and Brandon Avila DA: February 13, 2012 RE: Federal Legislative Report for Board Meeting

 

Navajo Generating Station CAWCD and other stakeholders submitted 2-page comments to the draft NREL study. Our team has circulated the comments to the Congressional delegation to inform them of the challenges presented in the study. In addition, we are working with our coalition partners to secure an Arizona Congressional delegation letter to President Obama that Rep. Pastor and Rep. Flake are leading. Rep. Schweikert and Rep. Franks have signed on as well. We are coordinating meetings with the other delegation member offices this week. In addition, a state-leadership letter was sent to the EPA Region 9 Administrator. Reclamation FY 2013 Budget Request Today the President released his FY2013 budget request to Congress and included $1 billion for the Department of the Interior's Bureau of Reclamation. In their official release, the BOR identified priorities for this upcoming year including Ecosystem Restoration, Renewable Energy, Water Conservation and the WaterSMART Program, Strengthening Tribal Nations and Youth activities. The proposal for Reclamation's Water and Related Resources account of $818.6 million includes $395.6 million for resource management and development activities. This funding provides for planning, construction, water conservation activities, management of Reclamation lands, including recreation and actions to address the impacts of Reclamation projects on fish and wildlife. The request also emphasizes reliable water delivery and power generation by requesting $423.1 million to fund operation, maintenance and rehabilitation activities at Reclamation facilities, including dam safety.

Public Policy Agenda Number 3. Attachment 3.

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Energy Proposals On February 8, the House released the completed version of a surface transportation reauthorization bill, the American Energy and Infrastructure Financing Act of 2012. The bill (H.R.7) includes the extension of the authority of the Highway Trust Fund and the motor fuels and transportation taxes that are deposited into the fund. The bill would eliminate the Mass Transit Account of the Highway Trust Fund and end the guaranteed transfer of 2.86 cents per gallon on each of the handful of federal motor fuel and gas taxes that are earmarked for transit programs. It would be replaced by a one-time transfer of $40 billion from the general fund. The legislation also uses revenues from onshore and offshore domestic energy leasing to fund the Highway Trust Fund. These measures were taken up recently through three energy-related bills (H.R. 3407, H.R 3408, and H.R. 3410). The President’s recently released budget also discusses the need to regulate greenhouse gases, calling for $32.8 million over the current levels for climate programs including regulation. EPA wants $7 million more than last year to craft rules for stationary sources. Hearings on Tribal Energy Development This week Committees in both chambers will conduct oversight hearings to discuss energy development on tribal lands. In the House, the Natural Resources Committee's Indian and Alaska Native Affairs Subcommittee will review H.R. 3973 on Wednesday. Introduced by committee Chairman Don Young (R-AK), the bill aims to reduce federal regulations on American Indian lands. The bill, the "Native American Energy Act," would create an Indian Energy Development Office in the Interior Department. It would also establish a project that would promote biomass energy production on Indian forest land starting next year. Other provisions in the bill include establishing a standardized system for referencing and tracking oil and gas wells across all federal agencies and eliminating various BLM fees. The Senate Indian Affairs Committee plans to discuss energy development on American Indian lands Thursday. The committee will take a broader look at the issue, hearing from witnesses about their experiences and challenges in trying to harvest energy on tribal lands. Utility MACT Rule On Wednesday, February 8, the House Energy and Commerce Subcommittee on Energy and Power, Chaired by Rep. Whitfield (R-KY), held an oversight hearing on the impact the EPA’s Utility MACT Rule will have on consumers and the economy.

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Harrison Tsosie, Attorney General of the Navajo Nation, testified on the impacts the rule would have to the Navajo Nation. He also used his testimony to discuss the role of the CAP and the intersection of the NGS, water rates, and settlements. He indicated that this rule could impact both revenues and jobs should the Navajo Generating Station be forced to shutdown. Specifically, he cited the roughly 1,000 jobs at stake at the plant and mine. Panel members also heard from Assistant Administrator for Air and Radiation Gina McCarthy about the costs and benefits of the rule. The agency estimates that the so-called Utility MACT rule will cost power companies an estimated $9.6 billion per year largely to upgrade pollution control technologies at plants. EPA also expects the rule to raise electric rates by an average of 3.1 percent across the country. According to EPA, installing baghouses and scrubbers would reduce mercury emissions by 90 percent. The rules will also cut acid gas releases by 88 percent and sulfur dioxide by 42 percent. EPA's air rules have been a frequent topic of discussion on the Energy and Commerce Committee as part of its "American Energy Initiative." EPA is expected to publish the rule in the Federal Register on Feb. 16. After that, lawsuits challenging the rule are expected. Senate Environment and Public Works Committee ranking member James Inhofe (R-OK) has indicated he plans to attempt to block the new rules using the Congressional Review Act -- a legislative tool that allows resolutions aimed at blocking new regulations to move quickly to the floor. Should Inhofe attempt such a move, he would only need a simple majority to pass the measure, instead of a filibuster-proof 60. President Obama, however, would likely veto such a measure.