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YoJ/..~/-'-VV"l: .1.0;UQ rftA ..v.. ....':I O':l~tt 1NUlAN An'A1K~ 001137 141 004 HEARING ON A-LP COST OVERRUNS, April 24,2004, TESTIMONY of the CITIZENS PROGRESSIVE ALLIANCE, before the SENATE APPROPRIATIONS COMMITTEE', SUBCOMMITTEE ON ENERGY AND WATER DEVELOPMENT Thi;lnk you for the opportunity to provide testimony on the Animas-La Plata project cost overruns. We will supplement these remarks with more detailed information in the coming weeks. The recent disclosure that the Animas-La Plata Project is already :P150,OOO,OOO over the originai cost estimates is not the real news. The real news is that the BOR knew the estimates to be bogus back in 1999 when they submitted them to Congress. Indeed, these cost estimates were commissioned not oy the BOR, but, in a callous and calculated misuse of the Indian Self- Determination Act, by the Ute trioes., the project's primary contractors and chief beneficiaries. Moreover, as internal documents show, these estimates underwent little or no govemmental review, and were ..ctually devoid of cost estimates for whole portions of the project. Some suspect these rascally "accounting errors. to be deliberate so as to convince the Congress and the public that the project really had been downsized, both in cost and size. Actually, the public costs of the project are much greater than have ever yet been reported, and the project has not really been downsized despite the PR to the. contrary. . First the costs: The BOR's policy has been to tailor the truth about the projec~s overall costs by focusing only on the construction costs, while totally ignoring all other costs, past and future. We ask that there be a true accounting. If done honestly, ooth the Congress and the public will be agog at the outcome. Here are a few of the hidden costs that need to be accounted for: 1. The interest on the public debt that the project will burden us with over the 100 year life of the project needs to be calculated and added as a project cost. The interest component alone will add billions of dollars to the true cost of this project. The taxpayers also have to repay all but a sliver of project construction costs. And those costs, too, for reasons outlined tallow, will reacn well into the biliions when all is said and done. 2. The construction cost estimates need to include estimated cost increases from Infiation. With a modest 3 percent rate of infiation over a 15 to 20 years construction phase present costs esUmates might increase by 50 percent from inflation. 3. The estimated costs should be calculated based on a range from high to low. PresenUy. the BOR prefers to give only a low-range cost estimate. They persist in the fanciful notion that their forecasting is precise and unsusceptible to unknowns and human error. Yet, the last three major BOR construction projects. the Dallas Creek end Dolores Projects, both in Colorado, and the Central Arizona Project have all been at leasl300 percent over original cost estimates. Recently, the project construction engineer admitted ALP was one of the most complicated projects ever. Cost sensitivity analysis is a must if we are to have any confidence in BOR cost projections, even those they admit to. 4. Adding to our concem over the final price tag is the fact that, while $100's of millions in federal tax dollars have already been spent on this project, ALP construction is only 3 to 4 percent completed according to a recent admission by the project construction engineer. Even if the project were to experience annual cost overruns of 10 percent annually, rather than last year's 50 percent jump, we are looking at well over another 100 percent increase in public costs, assuming a 15 to 20 vears construction Derlod. -Note: The Southern Ute and Ute M01Jntaln Uta trlbes are the chief beneficiaries of A..LP. receiving the lionl5 share of project water free of cost. These two small but very wealthy trlbes have a combined population of about 3000 people, counting man, woman and child. And despite clafms made by some in $Uppon of buildIng AlP, these tribes are not withoul water. In fact, they already control about 150,000 acre feet 01 water, most or II developed wilh federal asslslanca. This constitutes ~ the wat~r the entire state of Nevada is entitled to under the Colorado River Compact. Appfoximately 2,000,000 people live In Nevada.