garding the Fryingpan-Arkansas Project and the important goal of a sustainable water future. I also want to extend my District's gratitude to the Chairwoman for her commitment to the subcommittee's field hearings and her personal travels throughout the West to see and hear first-hand the issues facing Western water

users.

The Colorado River Water Conservation District is the principal policy body for the Colorado River within Colorado. We are an independent, political subdivision of the State of Colorado responsible for the conservation, use, and development of the water resources of the Colorado River basin to which the State of Colorado is entitled under the 1922 and 1948 Colorado River compacts. The Colorado River District includes all or part of 15 counties in western Colorado, including the Fryingpan and Roaring Fork Rivers which serve as the source waters for the Fryingpan-Arkansas Project. We offer the following testimony in a spirit of cooperation and partnership to ensure that adequate and safe water supplies are developed and maintained in a manner that is both timely and compatible with the competing values for water in the arid West.

I would like to further commend the chairwoman for the topic of today's hearing. The Fryingpan-Arkansas Project, or "Fry-Ark," is a fitting lens through which to view the challenges and opportunities inherent in the goal of sustainable water supplies. The Fry-Ark project, like so many throughout the arid West, faces competition for its water supplies. Competing values place stresses on the source waters, delivered waters, water quality, and management of the project's facilities. Agricultural beneficiaries struggle to maintain viable business operations in the face of lower commodity prices and increasing municipal demand for agriculture's water supplies. Other competing interests seek higher reservoir lake levels for recreation, while downstream interests compete for different water release schedules. White water enthusiasts favor higher flows during rafting season, while anglers seek more consistent flows that optimize trout habitat and are safe for wading. Accordingly, the Fry-Ark project, like other Western water projects, faces on-going challenges to sustainable and acceptable operations.

Ruedi Reservoir

As a federal transmountain water diversion project with a Colorado water conservancy district sponsor, the Fry-Ark project is subject to unique conditions of Colorado water law. The Colorado River basin, as the basin-of-origin for the project's water supply, enjoys certain protections in law not required of non-conservancy district water projects. Colorado law requires the conservancy district to ensure that present and future water uses in the Colorado River basin are not "impaired nor increased in cost at the expense of the water users within the natural basin." (Colorado Revised Statutes 37-45-118(b)(II)) To fulfill this provision of state law, a central feature of the Fry-Ark project is Ruedi Reservoir. Congressional authorization for the Fry-Ark, in fact, specified that Ruedi Reservoir be the first project feature constructed.

The Colorado River basin is not just the source water for the Fry-Ark project. Congressional authorizing legislation and related documents clearly establish Western Colorado as part of the project's service area. Today, Ruedi Reservoir provides supplemental water supplies to cities, towns, commercial interests and individual water users in Western Colorado. As a direct result of Ruedi's operations, Colorado's longest stretch of Gold Medal trout fishing extends from Ruedi dam to the Fryingpan River's confluence with the Roaring Fork River and onto its confluence with the Colorado River at Glenwood Springs.

Western Colorado will continue to advocate for fair and equitable treatment of the Fry-Ark project's western service area in existing operations and any future changes to operations or expansions.

Operating Principles

Like many of today's water projects, the Fry-Ark was originally envisioned as a much larger water project. The original "Gunn-Ark Project" proposed nearly 500,000 acre-feet per year of diversions. Local opposition, however, resulted in project changes and assured operating conditions that ensured a viable project that provided a sustainable water supply without decimating the basin-of-origin. These conditions and the related operating principles were officially incorporated into the FryArk's Congressional authorization in House Document 130. (Operating Principles Fryingpan-Arkansas Project, 87th Congress, First Session. March 15, 1961.) Interpretation and fulfillment of some of these permit conditions and project compromises, however, remain an area of contention.

The Operating Principals of the Fry-Ark Project were incorporated as §3 of the authorizing legislation. (P.L. 87-590, 87th Congress, H.R. 2206. August 16, 1962.) The opening paragraph of these Principles states:

"The project contemplates

(a) The maximum conservation and use of water;

(b) The protection on Western Colorado water uses, both existing and potential, in accordance with the declared policy of the State of Colorado; and

(c) The preservation of recreational values."

(Operating Principles, Fryingpan-Arkansas Project. Page 1.)

The Colorado River District calls for a rededication of the U.S. Bureau of Reclamation ("Reclamation"), along with the project's East Slope and West Slope beneficiaries, to these guiding principles.

To address the additional transmountain diversion of water by the private Twin Lakes Reservoir and Canal Company, the Operating Principles state, "in order to offset adverse streamflow (sic) conditions of the Roaring Fork River above the town of Aspen which might occur as a result of the project enlargement of the Twin Lake Reservoir, the Ashcroft Reservoir on Castle Creek, or some reservoir in lieu thereof, shall be constructed on the Roaring Fork drainage above Aspen...." (Operating Principles, Fryingpan-Arkansas Project. §2; Page 2.) The Principles go on to acknowledge that any such mitigation reservoir for the upper Roaring Fork River had to first be found feasible by the Secretary of the Interior. No feasible project was, in fact, found, and the communities in the upper Roaring Fork basin continue to be concerned about project impacts to stream health and water quality.

Moreover, the Operating Principles include minimum monthly average in-stream flow thresholds for the Upper Roaring Fork River above the City of Aspen that were established by the U.S. Fish and Wildlife Service in cooperation with the (then) Colorado Department of Game and Fish. There are also "hard minimums" below which stream flows are not ever to be reduced by diversions. Both these recommended average and "hard" minimum flows are consistently not met. Proposed further development of East Slope water employing Fry-Ark facilities threatens to further aggravate this situation.

The Fry-Ark Operating Principles also provide for a 3,000 acre-foot exchange between the Twin Lakes Company and the Project as an obligation of the Project. The current agreement implementing this exchange expires in 2014. The Project yield from diversions on the Hunter Creek are dependent on a long-term or permanent Twin Lakes Exchange agreement, as does the health of the upper Roaring Fork River. Reclamation is a necessary party to a future extension of this agreement and must provide leadership to ensure the requirements of the Operating Principles are carried out for the long term benefit of both the East and West Slope portions of the project's service area.

Project Repayment

Ruedi Reservoir is a separately allocated feature of the Fry-Ark project for repayment purposes. Ruedi's repayment was anticipated to come from West Slope water service contracts. There is no sponsoring water conservancy district with repayment responsibilities for Ruedi Reservoir. At the time of project authorization, Ruedi's repayment was projected to predominantly derive from water service contracts with the then-anticipated oil shale industry. Since the anticipated oil shale industry and its attendant industrial water demands did not materialize, scheduled annual payments to the federal government have been delinquent. However, there is no sponsoring local agency responsible for these payments. As a consequence, negative amortization of the project is occurring. Congressional authorization requires that the project's costs, including the original $17.5 million reimbursable portion of Ruedi Reservoir's construction costs, be repaid to the federal government by 2019. With negative amortization, this price is currently over $30 million and growing geometrically. The result is an increasing project cost and a further reduction in water demand because of the resulting increased price for Ruedi water. While a new round of interest in oil shale development is present today, changing technologies and newly proposed project locations outside the Colorado mainstem largely preclude oil shale as Ruedi's repayment solution. The Colorado River District anticipates discussing this matter with this committee and the Secretary of the Interior in the next few years to address these repayment conditions and to ensure the perpetual benefits to Western Colorado of Ruedi Reservoir as an integral feature of the FryArk Project.

Finally, it should be noted that Ruedi Reservoir_today is a key source of water for the cooperative Recovery Program for the Four Endangered Fishes of the Upper Colorado River ("Recovery Program"). Over 21,000 acre-feet of water in Ruedi is

dedicated to the preservation and recovery of four local fish species listed as endangered under the Endangered Species Act. Only half of that 21,000 acre-feet,_however, is permanently dedicated to the Recovery Program. The long-term use of Ruedi water and the attendant repayment implications are uncertain but must be addressed.

Conclusion

Western Colorado is an often overlooked project beneficiary of the FryingpanArkansas Project. Ruedi Reservoir is an integral element of the project. In addition to fulfilling the mitigation requirements of Colorado water law, Ruedi provides vital water supplies to West Slope municipalities, industry and agriculture. Lingering issues of compliance with the project's Operating Principles and emerging issues of repayment and future water allocations must be addressed to the mutual satisfaction of all project beneficiaries and the U.S. Bureau of Reclamation.

Mr. LAMBORN. And Mr. Stealey is our next witness.

Mr. Stealey, I notice that you have not submitted a written statement prior to your statement, like everyone else has and which the rules of the committee call for. Will you be able to do that after your testimony?

Mr. STEALEY. After 28 years in government, I have never written anything down, and I'm not starting today.

Mrs. NAPOLITANO. Mr. Lamborn, the Chair agrees that it's always preferable to have written testimony and to have that testimony submitted at least 48 hours before the hearing, and many times that is not done, and we still admit it into the record. The Chair submits that Rule 4B provides clear discretion for the Chair to allow the witness to speak without a written statement and will allow Mr. Stealey to testify, and I welcome his participation and his appearance.

Mr. LAMBORN. Please continue.

STATEMENT OF WALLY STEALEY, ARKANSAS VALLEY

RANCHER, PUEBLO, COLORADO

Mr. STEALEY. Well, Committee, Madam Chairman, we are glad you're here. Welcome to the world of Colorado water buffalos. If you spend a lot of time with them, you will learn very rapidly that the most important thing you can remember is this statement, the difference between the sin of omission and the sin of commission. They will never lie to you, and they'll never tell you the whole truth unless your question is extremely specific as to what they know. I truly enjoy them. Many of them are my friends. I lobbied in the water area in Colorado many, many years.

My first physical job as a young man was working on a transmountain diversion ditch, the (inaudible) ditch in Ouray County with an elevation of 11,000 feet, moving water from the west fork of the Cimarron River into the Cow Creek, and thus the Uncompahgre River and back down into the Gunnison. That ditch was dug in the late 1800's, the early 1900's, by one (inaudible). My family's been here all too long.

Most of the people in the room either know me or heard of me. You heard everything there is to hear, so I'm just going to try to summarize this from just-I guess the best way to describe myself is the cowboy who happened to go to college.

The biggest danger we've got—and I drafted a piece of legislation when I was Chairman of the District, the biggest danger we've got is diminishing the taxpayers' role in the Fryingpan-Arkansas

Project by allowing PSOP participants to diminish our stock, just like in the business world. If I buy stock in your corporation and you add more stock and don't give me more, you have diminished my holding in the company.

That is extremely dangerous. PSOP participants claim they have 11 or 12 members, but let me tell you how that's really going to work. It's created for the big three: Pueblo, Aurora, Colorado Springs. And when it comes time to pony up the water for the dam, the smaller communities are going to have to say, "We probably don't have it." And Aurora has already said to one of those communities, "Well, we'll put your money in for you."

This is a very dangerous project. If you want this to be still a public project, like a municipal golf course, please do not let them put a country club on top of our municipal golf course. It would be very bad for this valley.

The exchange issue is most fascinating. It is not really covered in Colorado law, but we allow it. It took us years to get legislation through that would allow a water judge in Colorado to consider water quality. They don't have to deliver it. They can now consider it. We consider that a big step. We don't do anything with exchanges.

We've got a little office out there in Crowley County with a nice young man older man now-controlling and watching all of the. exchanges. He knows where they go, Pueblo knows where they go, Aurora knows where they go, Colorado Springs knows where they go. And when I asked the state engineer to give me a list of all of the exchanges for a six-month period, he said, "I don't have a clue what the hell they're doing." That's the water engineer for the State of Colorado.

This has got to be stopped. Exchanges need to be controlled, because they can do their studies until hell freezes over, and when you take all of the good water out of the top of the river, it's going to get worse at the bottom of the river. And as soon as we put this package together, I'll bet every one of you that Kansas comes walking in the door and says, "You're not going to do that." They have a stake in this too. And they should.

We have watched one of our counties, Crowley County, totally destroyed by the purchase of their water. Let me address the water concept of property rights. Justice Douglas wrote in his famous decision, allowing for cities to control for aesthetic purposes planning and zoning was declared a property in the United States was not a right like the right of free speech or the right to a lawyer, but in fact it's a privilege to be used in conjunction with the benefit of the community. And it is not up to the United States government or the State of Colorado to provide farmers with a market for their

water.

They've got to join in there just like the rest of them. God, I love them. I'm a water right holder in the Bessemer ditch. I have water in Fremont County on my ranch, and I cry every time I hear of a ranch going under. But let me tell you one thing they won't admit to. Whenever there's a ranch or a farm for lease, somebody gobbles it up immediately. So it must not be all that bad out there in terms of making a living. They can lease that land immediately.

Mr. LAMBORN. Mr. Stealey, thank you for your testimony. And

you can

Mrs. NAPOLITANO. I will give him some of my time.

Mr. STEALEY. I would only ask one privilege. I could go on forever, but I would like to recognize two people that have not been recognized. They both preceded me as Chairman of the Southeast District, and both of these gentlemen have spent many, many years working on this project. I was only on the board five years, and they both go over 20 years, and that's Glen Everett and Alan Hammill, and with the Chairman's permission, I'd like to have them stand and be recognized.

[Applause.]

Mr. LAMBORN. OK. Thank you.

Mr. STEALEY. Thank you very much, Mr. Chair.

Mr. LAMBORN. OK. At this point we'll have questions. I'll start out, and then we will go down the line here and finish up with Chairwoman Napolitano.

Mr. Peternell, by calling for the kind of study that is explained in Representative Salazar's bill, not just feasibility, but things like economic, social, and cultural factors, do you understand that this is an unprecedented kind of study for a project like this?

Mr. PETERNELL. It may be unprecedented. I don't know that myself, but it may be. I'll accept that representation from you. Nevertheless, we think that studying the impacts of water development is the cornerstone of making smart choices and choosing water supply arrangements that have the least impact on the environment and on the communities.

Mr. LAMBORN. OK. Thank you.

For Mr. Treese. PSOP wouldn't result in any more transmountain diversion from the Western Slope or for that matter from the Pacific watershed, would it, compared to what's happening right now?

Mr. TREESE. It does not specifically authorize it, and it does have mitigation provisions if additional transmountain diversions do occur, so I think additional transmountain diversions are in fact anticipated in the language of the legislation. Not required, excuse me, but anticipated that they are possible.

Mr. LAMBORN. OK. For Mr. Tauer. Mr. Mayor, what assurances are you able to give anyone in the Arkansas Valley that water quality will be dealt with by the City of Aurora as things would go forward?

Mr. TAUER. In the future or up to now?

Mr. LAMBORN. In the future. Should PSOP take effect, then what-and you've heard some concerns about water quality. What is your response? What is the City of Aurora going to do about that?

Mr. TAUER. Well, I think maybe we can make a couple of points. The first one is that remember water quality was mentioned in some of the original legislation. So it's a concern that goes back decades. And so it's not something that necessarily popped up recently. For example, the conduit was part of some of the original legislation. So some of those water quality issues have been around for decades, and they're not a direct result always of how water is transferred. So there's a lot of things that feed into that.