Good morning, Senator Crapo, and thank you for the opportunity to testify here today on implementation of the NOAA Fisheries 2000 Biological Opinion on Hydropower Operations for Endangered Species Act-listed salmon and steelhead in the Columbia River Basin.
I am Judi Danielson, and I chair the Northwest Power Planning Council. The Council is an agency of the four Northwest states of Idaho, Montana, Oregon and Washington. The Council was created by the state legislatures in 1981 under authority of the Pacific Northwest Electric Power Planning and Conservation Act, which the Congress approved in December 1980. The Power Act directs the Council to prepare a program to protect, mitigate and enhance fish and wildlife of the Columbia River Basin that have been affected by hydropower dams while also assuring the Pacific Northwest an adequate, efficient, economical and reliable electric power supply.
The Council implements the Power Act through two broad, integrated planning processes. One process is for our Northwest Conservation and Electric Power Plan, and the other is for our Columbia River Basin Fish and Wildlife Program. Today I will focus my comments on implementation of our fish and wildlife program, and specifically on how the program incorporates elements of the 2000 Biological Opinions issued by NOAA Fisheries for Columbia and Snake River salmon and steelhead and the U.S. Fish and Wildlife Service for Kootenai River white sturgeon and bull trout.
The Council committed in its 2000 revision of its fish and wildlife program to pursue opportunities to integrate program strategies with other federal, state, tribal, Canadian and volunteer fish and wildlife restoration programs. The Council also committed to use subbasin planning to identify coordination needs and opportunities that arise from the Endangered Species Act and Clean Water Act, and also water and land management objectives affecting fish and wildlife. In this way we can use our program funding to coordinate activities that address various legal requirements and provide the maximum benefit to fish and wildlife.
It is important to point out, first, that even though the Power Act is a federal law, the Council is not a federal agency and our fish and wildlife program is not a recovery plan for purposes of the Endangered Species Act. The Council develops the program and recommends projects to implement it, as I will explain in more detail. Consistent with specific direction in the Power Act, these projects are funded by the Bonneville Power Administration from a portion of the revenues it collects from its electricity customers. Implementation of the Council’s fish and wildlife program does not depend on consultations among federal agencies or appropriations by Congress or federal agencies.
I have four main points to make today, Senator Crapo:
* First, I am optimistic about the partnership between local, state, federal and tribal governments that has developed to implement the Council’s fish and wildlife program and elements of the biological opinion. This implementation begins at the local level with locally developed plans. We are having successes, and our efforts are being noticed and copied elsewhere in the nation.
* Second, the Northwest Power Act authorizes Bonneville, through the Council’s fish and wildlife program, to utilize offsite mitigation to accomplish the purpose of protecting, mitigating and enhancing fish and wildlife affected by hydropower dams. The Power Act, not the ESA, is the source of Bonneville’s authority to pursue offsite mitigation activities in the Biological Opinion. The 2000 Biological Opinion acknowledges the importance of offsite mitigation as an aid to recovering threatened and endangered species. Thus, our program integrates Biological Opinion and Power Act requirements for enhancing and recovering fish and wildlife. This is cost-effective and helps avoid duplication while providing benefits for ESA-listed and non-listed populations.
* Third, we are moving ahead with subbasin planning as a means of identifying specific fish and wildlife needs in each of the 62 subbasins of the Columbia River. This is one of the largest planning efforts of its kind in the world, and it is particularly significant because it is locally driven. Subbasin plans will focus implementation of our program and elements of the biological opinion to deliver the highest benefits at the lowest cost.
* Fourth, the Council consistently has complied with the budgets established by Bonneville for implementing our fish and wildlife program, including a significant funding reduction for 2003. But we are concerned that continued reduced funding may jeopardize Bonneville’s ability to meet its legal requirements under the Northwest Power Act and the ESA. It is important to give equal priority to ESA-listed and non-listed fish in our fish and wildlife program.
Implementing the Fish and Wildlife Program and the Biological Opinions
The Council’s program is being implemented at the local level, in the tributary subbasins of the Columbia, and also in the mainstem Columbia and Snake rivers at the major hydroelectric projects. But most importantly for our purpose here today, the program is being driven by locally developed assessments of fish and wildlife mitigation needs. These plans account for elements of the biological opinion, as I will explain in more detail in my testimony. The degree of local/state/federal collaboration is impressive and has been noticed by people elsewhere in the nation who are adapting the structure we developed for their own fish and wildlife mitigation efforts. In the state where you and I live, Mr. Chairman, there are impressive collaborative efforts underway for the benefit of ESA-listed salmon and steelhead, and other fish and wildlife, in the Salmon and Clearwater basins. The Idaho Department of Water Resources is coordinating an effort to develop a statewide water transactions program to respond to a specific action item in the biological opinion -- RPA Action 151 -- that calls for experimentation with innovative ways to increase tributary water flows for the benefit of listed species.
Partners in these efforts include the local soil and water conservation districts, Indian tribes, Idaho state agencies, the Power Planning Council and Governor Kempthorne’s Office of Species Conservation. Similar efforts are underway for the benefit of listed and unlisted species in Oregon, Washington and Montana. Throughout the Columbia River Basin, local entities are leading the planning efforts and successfully integrating federal recovery efforts with local efforts.
Key to these efforts is a foundation of solid science and a credible and independent scientific review. The Council takes a science-based, collaborative approach to implementing its fish and wildlife program through projects that are designed to make progress toward the goals and objectives of the program and the biological opinion. Projects proposed for funding are reviewed by the Columbia Basin Fish and Wildlife Authority and the 11-member Independent Scientific Review Panel (ISRP). All projects are treated equally in this review. Project proposal that respond to action items in the biological opinion do not get special preference in the ISRP reviews.
The Council created the ISRP in 1997 in response to an amendment to the Northwest Power Act. In this way, the Council is responding to a 1996 independent scientific review of the program that concluded, among other things, that the program lacked a process for prioritization of projects and provided, at the time, little guidance for annual implementation. The review recommended incorporating an integrated approach based on an overall, scientifically credible conceptual foundation. The Council incorporated such a foundation into its most recent revision of the program, in 2000. The 2000 Program expresses goals and objectives for the entire Columbia basin based on a scientific foundation of ecological principles.
Section 9.5 of the NOAA Fisheries 2000 Biological Opinion states that the development and implementation of the five-year and one-year implementation plans will be coordinated through existing processes. Mentioned specifically in Section 9.5 is the annual project prioritization conducted by the Council for implementation of our fish and wildlife program. The Council believes this prioritization process is well designed to coordinate ESA needs with other Bonneville fish and wildlife funding obligations, and that this can be the principal device for coordinating implementation among the many jurisdictions involved in the salmon restoration and recovery effort.
The Council is committed to collaboration with the NOAA Fisheries and the U.S. Fish and Wildlife Service in meeting requirements of the ESA and the Northwest Power Act. We can incorporate the implementation sequence in the NOAA Fisheries Biological Opinion into our fish and wildlife program implementation planning. The biological opinion sets out a sequence of five-year and one-year implementation plans. These are to be developed by the Action Agencies. The Council sees this sequence of planning, particularly the one-year plans, as “check-in” points to verify that the Council’s schedule for implementation planning and program funding will address the requirements of the biological opinion as well as the objectives of the program.
The Council’s project review process, which is accomplished at the ecological province level (there are 11 ecological provinces in the Columbia basin) permits focused and considered scientific review and public involvement on Bonneville fish and wildlife funding decisions. The province-based review and approval process will lead to longer periods of funding approval -- three years in most instances.
Because the Council’s fish and wildlife program is designed to benefit all fish and wildlife in the basin affected by the hydrosystem, it has been addressing ESA-listed species through a number of actions. Some portion of the annual budget for the direct program over the last five years has benefited species of concern under the Endangered Species Act.
The NOAA Fisheries 2000 Biological Opinion includes numerous specific measures in the hydrosystem and new initiatives for improving salmon and steelhead survival in the stages of their life-cycles that come before and after migration through the mainstem Snake and Columbia -- what we call “offsite” mitigation.  These measures are at the heart of the Council’s 2000 Fish and Wildlife Program.
The offsite measures include experimenting with new techniques, such as an experimental voluntary water rights brokerage, attempting to focus landowner enrollment in Farm Service Administration programs where salmon habitat needs the most help and protecting specific reaches of existing high-quality habitat through voluntary landowner agreements. The Council took primary coordinating responsibility for key elements of the offsite measures of the biological opinion for hatchery reform and subbasin planning. Both of those initiatives are well underway with considerable collaboration of state and tribal agencies and local interests. In short, many of the projects the Council recommends to Bonneville for funding implement actions in the Reasonable and Prudent Alternatives of the two biological opinions. I have included with my testimony a list of these projects from recent funding cycles.
Through our project selection process, independent scientific reviews and program implementation we recognized the need for better monitoring and evaluation, and data-gathering, than has been available in the past. Improved data management is key to improved and more focused decision-making in the future. I am pleased to say that the Council is moving ahead with a program to improve data management. We have been working with an independent contractor to develop a more comprehensive, Internet-based data collection and repository system for the Columbia River Basin, a system that will be available to all interested parties and that will store data in uniform formats.
Subbasin plans are the means of integrating Power Act and ESA obligations
The 2000 Program established basinwide objectives for biological performance and environmental characteristics. The 2000 Program also recognized that while impacts such as overfishing and destruction of spawning and rearing habitat contributed to the decline of salmon and steelhead runs prior to construction of the major hydropower dams in the Columbia basin, significant losses of anadromous fish, resident fish and wildlife and their habitats have occurred as a result of the development and operation of the hydrosystem. Biological objectives based on these losses provide regional guidance for subbasin plans. For example, the 2000 Program’s objectives include increasing total adult salmon and steelhead runs above Bonneville Dam by 2025 to an average of 5 million annually in a manner that supports tribal and non-tribal harvest. For resident fish, the 2000 Program recognizes the need for substitution for anadromous fish losses and restoration of native resident fish species (subspecies, stocks and populations) to near historic abundance throughout their historic ranges where original habitat conditions exist and where habitats can be feasibly restored. For wildlife, the 2000 Program calls for development and implementation of habitat acquisition and enhancement projects to mitigate fully for identified losses.
The Council recognizes that achieving these broad objectives is not the sole responsibility of the 2000 Program or Bonneville alone. Complementary actions by other governmental agencies and funding sources, including Canadian entities where appropriate, as well as the support and participation of the citizens of the Northwest, will be needed for these objectives to be fully achieved. However, the focus of the 2000 Program is limited to fish and wildlife affected by the development, operation, and management of the FCRPS.
The 2000 Program organizes the Columbia River Basin into 11 ecological provinces. Within these provinces there are groups of adjoining subbasins with similar physical and environmental conditions. These provinces are further subdivided into two or more tributary subbasins. In all there are 62 tributary subbasins. The 2000 Program is implemented principally at the subbasin level. It is at this subbasin level that the more general guidance provided by the larger province and basin-wide level visions, principles, objectives, and strategies is refined in light of local scientific knowledge, policies, and priorities.
Subbasin planning will facilitate, through a collaborative process, the development of scientifically credible, locally implementable subbasin scale plans to serve the following purposes:
1. Protect, mitigate and enhance fish and wildlife and related spawning grounds and habitat impacted by the development and operation of the FCRPS;
2. Guide Bonneville’s expenditures by giving priority to strategies for ESA recovery activities as Bonneville implements the Council's 2000 Program through subbasin plans.
3. Provide a context for scientific review of program measures;
4. Provide the foundation for NMFS/USFWS ESA recovery planning efforts;
5. Provide stability and certainty for local planning efforts during federal recovery planning;
6. Improve coordination of other state, tribal, federal and private fish and wildlife mitigation efforts within the Columbia River Basin; and
7. Integrate Bonneville funding with funding from other sources such as the Federal Energy Regulatory Commission (FERC), U.S. Forest Service (USFS), Bureau of Reclamation (BOR), and Bureau of Land Management (BLM).
The Council will evaluate subbasin plan recommendations for their consistency with biological objectives and strategies at the basin and province levels. Similarly, as subbasin plan measures are adopted into the 2000 Program, higher-level objectives and strategies may be modified to reflect and accommodate the information and initiatives of each plan.
The Council believes subbasin plans will establish scientifically sound restoration strategies that rely on local leadership and clear implementation schedules. These plans, once completed, will be the foundation for recovery planning under the Endangered Species Act as well as a broader base of credibility for the Council’s program.
Subbasin plans will include three key elements: 1) an assessment of historical and existing environmental conditions including abundance of fish and wildlife populations; 2) a clear and comprehensive inventory of existing projects and past accomplishments; and 3) a 10-15 year management plan. Subbasin planning will be coordinated by the states and tribes with local governments. The technical review teams appointed by NOAA Fisheries will be involved to ensure consistency with ESA recovery planning. Development of the plans will be funded by Bonneville and administered by the Council.
We expect that subbasin plans will provide the basis for future implementation, monitoring and evaluation of the fish and wildlife program. Subbasin plans also will serve to meet ESA requirements in the short term. They will empower state, tribal and local efforts in coordination with ESA recovery planning. And they will provide a credible basis for other funding sources for fish and wildlife recovery , including Congressional appropriations.
In its 2000 Biological Opinion, NOAA Fisheries commits to rely heavily on the Council’s subbasin planning process to identify offsite habitat mitigation opportunities. The heart of the Council’s offsite mitigation strategy is to complete subbasin plans in each of the Columbia’s major tributaries. Earlier this month, the four Northwest Governors endorsed subbasin planning as a means of consolidating recovery and enhancement actions. Specifically, the Governors said:
The hub for this federal/regional/state/tribal effort is the subbasin planning called for by the Council’s program. The biological opinions should continue to look to these subbasin plans to guide habitat, hatchery, and harvest actions in the watersheds throughout the Columbia Basin in the coming years.
The Fish and Wildlife Budget
The Council believes that Bonneville’s funding obligation for the ESA is part of its overall fish and wildlife responsibilities under the Northwest Power Act, and therefore is tied to the adverse impacts caused by the hydrosystem. While Bonneville’s obligation and financial resources may be significant, Bonneville funds should not be the exclusive source of ESA funding in the Columbia basin. Bonneville funds for ESA-based actions should be combined with funds from other entities, especially federal agencies, that have legal and financial obligations to protect and enhance threatened and endangered species. Some of the actions required by the biological opinion address impacts on the listed species that are not the result of hydrosystem impacts -- reducing predation by birds on juvenile salmon and steelhead, for example, and implementing selective-harvest fisheries to reduce commercial fishing pressure on the listed stocks. These actions should be funded by agencies other than Bonneville -- by the nation’s taxpayers, not the region’s electricity ratepayers.
While the Council supports using the Bonneville fund for offsite mitigation, the fund has limits. The Power Act does not permit the Bonneville fund to be used “in lieu” of funding responsibilities of other entities. In addition, the Council notes that Bonneville’s funding as part of its overall fish and wildlife funding obligations is limited by its ability to ensure the region an adequate, economical, efficient, and reliable power supply. Federal agencies carry some of the responsibility for the loss of salmon and their habitat through the actions of NOAA Fisheries, the U.S. Fish and Wildlife Service, the Army Corps of Engineers, the Bureau of Reclamation, and the Forest Service, quite distinct from the hydropower system. Therefore some part of the financial responsibility for recovering endangered fish in the Columbia Basin rests with the federal government.
In the past, we advocated a supplemental appropriation for actions that address the reasonable and prudent alternatives in the biological opinions. We also urged NOAA Fisheries to work with us to integrate ESA needs with others to be funded by Bonneville in a way that permits Bonneville to meet all of its fish and wildlife obligations in a cost-effective manner.
Until October 1995, there was no formal budget agreement for implementing the Council’s fish and wildlife program. Late that month a draft agreement negotiated by Bonneville Administrator Randy Hardy, National Marine Fisheries Service Regional Director Will Stelle and Power Planning Council Chair Angus Duncan was memorialized in a letter from the federal Office of Management and Budget to U.S. Senator Mark Hatfield (R-Oregon). This was to forestall a legislated budget cap and “sufficiency” language regarding the fish and wildlife program budget. It took another year, until September 1996, to negotiate and execute the MOA institutionalizing the budget commitment.
The commitment was for an average budget of $252 million per year -- $127 million to implement the Council’s program and measures in the 1995 Biological Opinions ($100 million in direct expenses and $27 million in capital funding), and $125 million per year for fish-related expenditures that Bonneville reimburses other federal agencies (primarily the Corps of Engineers and the Bureau of Reclamation). The two 1995 Biological Opinions were issued by the National Marine Fisheries Service (NMFS) for Snake River salmon and the U.S. Fish and Wildlife Service for Kootenai River white sturgeon. Bonneville also accepted the financial impact of power system operations that result from the biological opinions, estimated at $183 million per year. The budget figures were incorporated in a six-year Memorandum of Agreement in September 1996, signed by the Secretaries of the Army, Commerce, Energy and the Interior.
The MOA resolved three key funding issues: 1) it provided greater financial certainty through a stable, multi-year budget; 2) it identified a budget sufficient to meet Bonneville’s obligations under the fish and wildlife program and the biological opinions, and 3) it provided mechanisms to ensure the money was spent wisely and efficiently.
In early December 2001, following expiration of the MOA, the Bonneville Administrator said the agency would increase its spending during the current rate period to an average of $36 million per year in capital funding and $150 million per year in expense funding for the Council’s program and implementation of the 2000 Biological Opinions. Thus, the annual average would increase from $127 million to $186 million. The Administrator said the commitment to $150 million for the expense part of the budget likely would yield an annual average of $139 million in actual expenditures (“accruals,” in Bonneville’s accounting terminology) consistent with projections in Bonneville’s September 1998 Fish and Wildlife Funding Principles.
But a year later, in December 2002, the Administrator stated in a letter to the Council that “already in the first year of the new rate period, Bonneville’s expense accruals were $137 million” and that “this rapid increase in program spending has surprised us. He asked the Council, in consultation with the region’s fish and wildlife managers, to take the lead to achieve at least three goals: 1) take steps to assure that spending for the fish and wildlife program not exceed $139 million in expense accruals in FY 2003; 2) prioritize program spending “to create the opportunity to spend less than $139 million in expense annually through the 2003-2006 period, and 3) establish criteria for setting priorities among projects that seek funding to implement the program. He stated a preference for projects that would help implement the biological opinions: “We believe that core among these are projects needed to meet the requirements of the various biological opinions that apply to Bonneville, in particular the 2003 and 2005 check-ins for the 2000 Federal Columbia River Power System Biological Opinion and to preserve previous important investments of the Fish and Wildlife Program.”
The Council began this assignment with the understanding that Bonneville’s power purchase costs during the energy crisis of 2000 and 2001 are at the heart of the agency’s financial crisis, not fish and wildlife costs. In Fiscal Year 2001, during the West Coast energy crisis, Bonneville spent nearly $3 billion on power purchases, causing the agency’s cash reserves to decline by more than $800 million. In November 2002, the Administrator announced Bonneville faced a revenue gap of $1.2 billion for the 2002-2006 rate period.
In agreeing to help Bonneville identify fish and wildlife cost reductions and deferrals, the Council made clear that:
· The financial burden is being borne by ratepayers, and Bonneville’s current financial uncertainty adds to that burden.
· The direct fish and wildlife program is not over budget, but is within planned spending levels.
· The Council would review Bonneville’s program management and accounting procedures and recommend reforms.
· While Bonneville committed to use $36 million per year in borrowing authority to capitalize fish and wildlife projects, less than one-third of that amount has been made available. Failure to provide the $36 million, or shifting fish and wildlife funding from capital to expense, increases Bonneville’s cash requirements and exacerbates its current financial difficulties.
· Reducing expenditures below $139 million per year jeopardizes Bonneville’s ability to meet its obligations under the Endangered Species Act and Northwest Power Act.
The Council developed the following principles to guide its cost review:
* Maintain critical elements for the Biological Opinions’ 2003 and 2005 “check-in” requirements. * Maintain past investments in tributary passage and protection of currently productive habitat (Operations and Maintenance, and Monitoring and Evaluation). * Maintain current fish production programs as approved by the Council (Operations and Maintenance, and Monitoring and Evaluation). * Balance other habitat investments within the budget allocations that remain in the 11 ecological provinces. * Projects that are focused on research, investigation or status reviews, and not defined as critical for Biological Opinion check-ins, are given lower priority and deferred. * Projects that do not immediately contribute to the productivity of a species affected by the hydrosystem are given lower priority and deferred. * Projects that were not reviewed by the Independent Scientific Review Panel and/or explicitly approved by the Council will be terminated (if ongoing) or deferred (if new) unless specifically designated as critical for Biological Opinion “check-ins” in 2003 or 2005.
On February 21, 2003, the Council responded with what could be called a cash management approach to meet Bonneville’s $139 million spending target for the fish and wildlife program. In general, three categories of projects were identified that would yield savings in 2003, as well as one specific spending discrepancy that had been resolved as a matter of policy last year. The three project categories that yielded reductions were:
· Projects that were planned for funding in 2002 but were carried over to 2003. Unfinished Fiscal Year 2002 work cannot be caught up in Fiscal Year 2003 while also performing all anticipated Fiscal Year 2003 project tasks.
· Projects that were not reviewed by the Independent Scientific Review Panel or prioritized in the Council’s project review process. The Council recommended that these projects not be funded because they did not meet scientific review and endorsement standards on a par with those that were reviewed. Within this category are three projects, totaling $900,000 that must be added to Bonneville’s internal overhead.
· With regard to Biop projects, the Council staff focused on those identified by NOAA Fisheries and Bonneville as critical for the upcoming check-ins. While the Council and region put an emphasis on Biop implementation in the provincial reviews, this “critical-for-check-in” standard is a higher standard than was employed during the provincial reviews.
The specific discrepancy was:
· Bonneville’s spending projections assumed that the implementation of the “water brokerage program” (RPA 151) would be funded from the fish and wildlife expense program. This is inconsistent with specific Council action taken last year. At the January 2002 Council meeting in Vancouver, the Council recommended that $2.5 million of “Action Plan” funds made available by Bonneville’s Power Business Line to address the impacts of the 2001 power emergency on anadromous fish be protected in a placeholder for the specific purpose of funding the water brokerage program which is required by the 2000 Biological Opinion. Bonneville has projected spending on this program to be $700,000 for Fiscal Year 2003. This cost must be funded from another source.
After applying the rules and standards noted above, the Council staff estimated Fiscal Year 2003 spending for expense projects at $114,614,422. When placeholders for funding subbasin planning, independent science functions, and addressing “gaps” for research, monitoring and evaluation required by the 2000 Biological Opinion and Bonneville’s overhead are added, the total projects spending forecast for Fiscal Year 2003 is $137, 364,422.
As I said, this is a cash-management response to Bonneville’s request and in no way should be construed as a Council reprioritization of fish and wildlife program spending. To make this approach successful, Bonneville is going to have to follow actual project performance and its project and placeholder spending much more closely than it ever has before. Bonneville must be able to report current project and program-level spending twice a month beginning immediately. We see this as a necessary element in managing the program accounting under the “accrual” accounting rules currently imposed by Bonneville.
This is an important point. Bonneville changed its accounting procedures for the fish and wildlife program in 2002. On November 20, 2002, Bonneville’s fish and wildlife director announced in a memorandum addressed to the Power Planning Council and the Columbia Basin Fish and Wildlife Authority that “… we are moving our administration of the [fish and wildlife program] from obligation-based budgeting to accrual-based budgeting.” The memorandum stated that under an obligations form of management, “… funds are made available for the full value of a project or contract when it is approved even if all of the deliverables and resulting payments will not be made during the budget year the funds were first made available (obligated).” In contrast, under an accruals form of management, “… funds are made available for the amount of deliverables that will actually be received and paid for (accrued) by BPA during the budget year.” Bonneville decided to make this change because the fish and wildlife program was the last large program at the agency still managed on an obligations basis, and “… by managing on an accrual basis, we can better ensure that funds are available when needed without tying up potentially millions of dollars in any one year for activities that do not need the money.”
Importantly, according to the memorandum, “under the accrual-based system, unspent funds from FY 2002 are not carried over” to 2003. These unspent but obligated funds totaled about $40 million, compounding the difficulty of prioritizing, deferring and cutting program spending to fit within the spending cap of $139 million in accruals imposed by the Administrator for Fiscal Year 2003. In a December 31, 2002, letter to project contractors, Bonneville set guidelines for contract renewals, including a request that the contractors eliminate all “carry over” funding (contracted project balances) from Fiscal Year 2002 to Fiscal Year 2003. The accounting change also came without reliable tracking information to monitor and compare the consistency of project implementation with ISRP-reviewed and Council-recommended scopes of work.
To recap, in December 2001 Bonneville committed to an average annual budget of $186 million for the current rate period. Subsequently in 2002, the Council recommended a suite of new and ongoing projects, including approximately $40 million in obligations carried over from the previous rate period, that totaled about $170 million -- well within the budget established by Bonneville. Then, in November 2002 Bonneville announced it would change its financial management of program expenses from an obligations basis, which allowed carry-over from one year to the next, to an accruals basis, which does not. A month later, Bonneville announced it would not allow accruals to exceed $139 million in Fiscal Year 2003 and asked the Council to take the lead in “reprioritizing” existing and proposed new projects to fit within the reduced budget.
Mr. Chairman, our review of Bonneville’s fish and wildlife spending uncovered other issues that must be dealt with. First, we are tremendously concerned about Bonneville’s overhead cost increases. In Fiscal Year 2001, Bonneville’s overhead costs for this program were $ 7.4 million. Bonneville insists that it requires $12.1 million for its overhead costs in Fiscal Year 2003. This is an increase of 64 percent. It is difficult to accept this rate of expansion, especially when these overhead costs compete with on-the-ground fish and wildlife projects. Bonneville has not been effective in reducing its overhead costs. In addition, it has taken a great deal of time and discussion to win Bonneville’s commitment to a more cost-effective approach to monitoring and evaluation. This is not a problem created entirely by Bonneville. However, we are calling on Bonneville to break free of the forces that would ignore and compound the problem, and work with us on a solution.
As I have noted, the Council is concerned that a reduction in Bonneville’s spending commitment below $139 million per year may jeopardize its ability to meet legal requirements under the biological opinions and the Northwest Power Act. Critical biological opinion check-ins are imminent, assuming the Court allows the opinion to continue in force while NOAA Fisheries addresses the offsite mitigation issues identified by the court. These are the funds that are necessary to implement many of the important projects and programs that must be in place to succeed in those evaluations. The reductions precipitated by Bonneville’s immediate switch to its “accrual rules” of accounting are going to have an impact on our fish and wildlife restoration efforts. We are concerned that deeper and sustained cuts in the out-years may have serious impacts that could retard the progress we have been making.
We expect that as Bonneville’s financial situation improves, fish and wildlife funding will return to the level the Administrator committed to in December 2001 for the current rate period and that the current-year funding reduction would be treated as a deferral that would be repaid to the program in future years. This would be consistent with Bonneville’s agreement with its investor-owned utility customers to defer $55 million in 2003 payments until 2007. We also believe that paying back the fish and wildlife program should be accomplished without a rate increase. The fish and wildlife budget is a small but critically important portion of Bonneville’s total spending, and restoring full funding to the fish and wildlife program should not be an excuse to raise rates.
We also are concerned about increasing financial pressure on Bonneville from the salmon and steelhead biological opinion. Bonneville appears to want to pour all funds possible into implementing that plan and, as a result, squeeze out critical work for non-listed salmon, wildlife and resident fish that must be accomplished under the Northwest Power Act. Bonneville coined the term “Integrated Program” to describe a vision of a coordinated and balanced approach to its Endangered Species Act and Northwest Power Act obligations. But this is problematic in that the Council’s program responds to the Power Act, not the ESA, and Bonneville’s offsite mitigation obligation authority is in the Power Act, not the ESA. Bonneville needs to look more to the Council to make the vision of a coordinated and balanced approach a reality. The current federal drift to a listed-salmon only fish and wildlife program is not consistent with Bonneville’s vision of a coordinated and balanced approach and is not supported by sound science, sound public policy, or the law.
The Governors, in their recent recommendations, were critical of the increasing focus on ESA-listed species. The Governors wrote:
The Northwest Power Act requires the Council to prepare a program to protect and enhance fish and wildlife and mitigate habitat losses caused by the development and operation of the hydrosystem. For the last decade, we have been largely preoccupied with ESA-listed fish species in the Columbia Basin. Frequently, because of limited resources, these two efforts are portrayed as being in opposition to each other so that project funding for ESA-listed species is viewed as competing with mitigation actions for non-listed species.
“In our judgment, too much of a distinction between ESA-listed and non-listed fish and wildlife species is being made in fish and wildlife planning and implementation activities. When species are listed under the ESA, it means we may have failed in our management responsibilities. By focusing planning and implementation on all species, the Council’s proactive approach can work to prevent future listings of fish and wildlife species under the ESA while addressing, as a subset, those that are listed.
“We strongly endorse the Council’s Fish and Wildlife Program as a comprehensive, integrated and preventive approach to address fish and wildlife issues in the Columbia Basin.
The Council expects that full funding of our fish and wildlife program will be restored in future years as Bonneville’s finances improve. We also expect this to be accomplished in a way that does not require a rate increase. Fish and wildlife spending was not the root cause of Bonneville’s financial crisis, and the fish and wildlife budget should not be permanently reduced in response to a temporary crisis that evolved from Bonneville’s power supply contracts with its customers and the agency’s exposure to the volatile prices of the West coast wholesale power market.
Mr. Chairman, thank you for the opportunity to speak here today. The Council is moving quickly, but carefully, in collaboration with state and federal fish and wildlife agencies and Indian tribes, and the federal hydrosystem operating agencies, to develop and implement a scientifically credible, locally developed fish and wildlife program. The Council is implementing the Northwest Power Act and the relevant portions of the 2000 Biological Opinions in a manner that benefits all fish and wildlife of the Columbia River Basin -- ESA-listed populations and unlisted populations, too.
I will close my testimony by reiterating a portion of the commitment the four Northwest governors made in their recommendations on fish and wildlife recovery. I think it precisely expresses the Council’s commitment, as well:
We acknowledge that the FCRPS benefits have come with a cost -- adverse impacts on the Columbia Basin’s fish and wildlife. With our locally based efforts in the watersheds, we are following through on our commitments while we are avoiding becoming sidetracked by issues that will only divert and divide us as a region. We will stay the course and solve our problems as a region. We will continue to pursue full implementation of the biological opinions to recover our salmon, steelhead and freshwater species not only because it is the right thing to do, but also because the failure to do so will jeopardize the federal hydropower system.
Biological Opinion Projects recommended by the Council since Fiscal Year 2001
Note: As of the date of this hearing, Bonneville has not made funding decisions on
the Council’s mainstem/systemwide project recommendations
p:\mw\ww\senate epw hearing june03.doc
 In May, U.S. District Judge James Redden of Portland remanded the 2000 Opinion to NOAA Fisheries, agreeing with plaintiffs in a lawsuit that the agency may rely on offsite mitigation actions by non-federal agencies, like those in the Council’s fish and wildlife program carried out by states and Indian tribes, only if the actions are “reasonably certain to occur.” The plaintiffs asserted, and the judge agreed, that while it is likely that subbasin plans will be completed and will direct non-federal offsite mitigation actions, this is not a certainty and, similarly, it is not certain that the non-federal actions will be sufficient to avoid further jeopardy to the listed species.
 Letter of Dec. 3, 2001, from the Administrator to the Chair of the Power Planning Council, Page 3: “On a planning basis for FY 2002-2006, an annual average of $150 million a year of expense dollars is estimated by BPA for funding the offsite ESA mitigation as described in the 2000 FCRPS BiOps and revised Council Program. This amount is 50 percent greater than the previous MOA and consistent with the funding range assumed in the power rate case and with the Fish & Wildlife Funding Principles that projected an annual average of $139 million in accruals for purposes of setting BPA’s revenue requirement. The $139 million represents a weighted average of the thirteen modeled alternatives having a range of $109-$179 million as identified in the FY 02-06 rate period.”
 Letter of Dec. 10, 2002, from the Administrator the chair of the Council, Page 2.