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Issues, Changing Numbers Dog Project Cutting Effort by Barry Espenson Columbia Basin Bulletin - January 31, 2003

The process to squeeze the Northwest Power and Conservation Council's fish and wildlife program under a $139 million budget cap lurched forward this week with thorny policy issues and ever-changing ledger sheet continuing to complicate things.

The financially strapped Bonneville Power Administration, which funds the Council program, has said that no more than $139 million can be spent during fiscal year 2003. The power marketing agency in December estimated that the program was on pace to accrue as much as $180 million in program expenses during the year as bills rush in from contractual commitments made this year and in recent years past. That number was later revised to $173 million.

By down-sizing those estimates in certain areas, such as the amounts penciled in for subbasin planning, and for water marketing experimentation, the problem is reduced to about $168 million in anticipated accruals, according to Doug Marker, NPCC fish and wildlife director. That would still amount to $29 million worth of potential projects and/or deferrals.

But whatever the difference, BPA CEO Steve Wright has asked the NPCC to complete its 2003 project prioritization recommendations by Feb. 21.

The expense-side pain would ease considerably if BPA allowed some $17 million to $20 million in land acquisitions to be capitalized. During its rate case estimation of anticipated 2002-2006 expenditures, BPA assumed $139 million in annual fish and wildlife program expense, on average, and $36 million in capital expenditures. Last year BPA funded $7 million in capital projects and expect to spend less than $15 million in the current fiscal year. In recent discussions related to the expected budget bulge, Bonneville has said that only facilities, such as hatcheries, can be capitalized.

At week's end the Council, its staff, the Columbia Basin's fish and wildlife managers and other project proponents and BPA staff were still comparing numbers and notes. During a special Monday meeting the Council approved a set of principles for prioritizing projects and ultimately deciding which might have to be deferred or cut.

The intention was to have the managers and others apply those principles during meetings over the next two weeks at the provincial level. As a part of its normal project review process, the Council two years ago segmented the Columbia River basin into 11 geographic "provinces."

But with the budget gulf appearing to be a bit smaller, the Council and staff on Friday were still pondering the next move.

"Everybody is working real hard to stay within the $139 (million) budget and get the recommendations to Steve Wright by Feb. 21," said Idaho's Judi Danielson, NPCC chairman.

Marker said Thursday that it still may be possible to employ "management controls," rather than upfront project cuts and deferrals, to keep spending within the budget cap. That could include tracking accruals monthly or over shorter time frames if possible and modifying contracts through the course of the year that may not require as much expense as was originally anticipated.

That would not likely fly, however, BPA's Fish and Wildlife director, Sarah McNary, said Thursday.

The reprioritization called for by Wright would have to be done "at the project level" with the result being a list of projects and planned 2003 accruals. Neither is it likely that a decision to capitalize the planned 2003 land acquisitions would be made in time to eliminate those projects from the expense side of the ledger, she said.

Tom Iverson of the Columbia Basin Fish and Wildlife Authority says Bonneville's accrual estimates need to be evaluated further "to decide if we've got a problem. I'm absolutely, 100 percent confident that it will come in under ($139 million). All you'll have to do is implement the program."

Iverson said he felt Bonneville's underlying goal is to reduce outyear spending to below levels assumed in its wholesale power rate process.

"It's become very clear to me that it is not Bonneville's intent to spend $139 million" on fish and wildlife during the balance of the rate period, 2004-2006," Iverson said.

The Columbia River Inter-Tribal Fish Commission is pushing a plan to have earmarked for fish and wildlife as much as half of a proposed increase in BPA borrowing authority. Last week the Senate approved an appropriations bill amendment offered by Idaho's Sen. Larry Craig that would increase BPA's burrowing authority by $700 million -- from $3.75 billion to $4.45 billion.

According to NPCC public affairs chief Mark Walker, the majority of the increase is intended to upgrade BPA's transmission system. The Council has in the past gone on record as supporting the increase, as has the Northwest's congressional delegation.

CRITFC executive director Donald Sampson on Monday said that BPA's rate case for the 2002-2006 period assumed that $36 million would be spent annually on capital fish and wildlife projects. Bonneville has said that its current policy allows capitalization only for "facilities" whose costs exceed $1 million and that have a useful life of more than 15 years.

In order to change that policy and consider capitalization of non-facilities -- such as the land acquisitions -- the federal agency says it would have to give notice of the change in a rate case -- such as the safety net cost recovery adjustment clause process that it is now contemplating. BPA officials say the existing policy is rooted in Northwest Power Act language. The safety net CRAC process, however, would not likely be completed during the current fiscal year.

Sampson requested that the Council members join a tribal delegation that will be in the nation's capital next week to ask the Northwest congressional delegation to ensure that the proposed legislation include language that earmarks a portion of any expanded borrowing authority for fish and wildlife capital projects.

The newly constituted NPCC fish and wildlife committee will be in Washington, D.C., next week to brief congressional staff on a variety of issues from its developing mainstem program amendment to subbasin planning, Danielson said. The committee is made up of Chairman Ed Bartlett of Montana, Danielson, Larry Cassidy of Washington and Melinda Eden of Oregon. The power committee includes chairman Jim Kempton of Idaho, John Hines of Montana, Tom Karier of Washington and Gene Derfler of Oregon.

Bonneville's deputy fish and wildlife director, Bob Austin, said that if the agency is to consider capitalizing land acquisitions, it must be assured of "credit" both under the ESA and the power act. That would mean establishing an appropriate mechanism for crediting purchases that satisfy BiOp obligations and resolving a long-simmering dispute for awarding wildlife credits.

"The comment 'willing to consider' isn't good enough for me," Hines said. With the Council forced into a short time frame to produce a project priority, he said the Council needs to know if those planned 2003 land acquisitions, mostly wildlife habitat, can be capitalized, he said.

BPA's Therese Lamb said she was willing to dedicate the staff resources to negotiate the crediting issues.

On Monday, Lamb outlined a cost summary of the critical elements the agency says must get under way soon if the agency is to satisfy 2003 and 2005 check-ins related to the 2000 Federal Columbia River Power System biological opinions.

The total was $120 million, "which would leave $19 million additional for other projects," said Lamb, acting BPA vice president, Environment, Fish and Wildlife.

Washington Councilor Larry Cassidy said those figures would appear to give "short shrift" to Council program projects intended benefit non-listed resident fish, salmon and steelhead and wildlife. Bonneville has responsibilities as a federal "action" agency to take actions described in December 2000 U.S. Fish and Wildlife Service and NOAA Fisheries "biological opinions" that are intended to avoid jeopardizing the survival fish protected under the of Endangered Species Act. BPA markets power from the federal hydrosystem. The Northwest Power Act calls on BPA, through the Council program, to protect, mitigate and enhance fish and wildlife impacted by construction and operation of the federal hydrosystem. That includes non-listed species.

Lamb and Bill Maslen, BPA's technical lead in identifying those "critical elements," told the Council that many of the projects identified as "critical needs" are ongoing projects that answer both fish and wildlife goals.

Most of the projects on the critical needs list "existed prior to the biological opinion," Maslen said. "This does represent something much broader than the opinion." The $120 million figure is an overestimate of the amount required to satisfy critical needs, because a project's entire cost is included despite the fact that in many cases only a portion of the tasks within that project are BiOp related.

Marker said Thursday that BPA's BiOp critical elements list of projects "hasn't held up to scrutiny." The total is likely closer to $100 million.

But even taking the smaller amount "off the table" would limit the options for funding non-BiOp projects that are intended to benefit non-listed resident fish and wildlife, he said.

The Council has scheduled a special meeting for Feb. 13 to discuss the outcome of the provincial work group process, then make final decisions at its regularly scheduled meeting Feb. 18-20 meeting in Portland.

In a Jan. 24 letter to the Council Wright asked the Council to take on an additional task -- calculate how much the overall budget can be cut below $139 million for the balance of the current rate period -- 2004-2006. If BPA launches the safety net CRAC process soon, it would hope to have new rates in place by Oct. 1.

"In order to achieve that deadline the rates process must define cost levels by March 21, 2003," Wright wrote. "For that reason, I am asking the Council's guidance if it is feasible to lower the rate case estimate of average annual accrual expense spending for the Integrated Program to below $139 million for the out-years of this rate period, and if it is, by approximately how much."

He acknowledged that accomplishing the initial task, reprioritizing the 2003 program, was "an extraordinarily difficult exercise."

"That said, I want to assure you that it is BPA's intent to be consistent with the outcome of the Council's reprioritization process," Wright wrote. "My staff and I are committed to working through this process and to address issues that are of concern to us. Our near-term goal is to assure that after you make your recommendations there will be no surprises with respect to our actions."

Related Pages:
NWPPC: www.nwcouncil.org
BPA: www.bpa.gov/indexmain.shtml
CBFWA: www.cbfwa.org/Default.htm