SECTION 1. DEAUTHORIZATION OF THE BLUNT RESERVOIR FEATURE OF THE OAHE 
              IRRIGATION PROJECT, SOUTH DAKOTA; CONVEYANCE.

    (a) Definitions.--In this section:
            (1) Blunt reservoir feature.--The term ``Blunt Reservoir 
        feature'' means the Blunt Reservoir feature of the Oahe 
        Irrigation Project authorized by section 9 of the Act of 
        December 22, 1944 (58 Stat. 891, chapter 665), as part of the 
        Pick-Sloan Missouri River Basin Program.
            (2) Commission.--The term ``Commission'' means the 
        Commission of Schools and Public Lands of the State of South 
        Dakota.
            (3) Preferential leaseholder.--The term ``preferential 
        leaseholder'' means a leaseholder of a parcel of land who is--
                    (A) the person from whom the Secretary purchased 
                the parcel for use in connection with the Blunt 
                Reservoir feature;
                    (B) the original operator of the parcel at the time 
                of acquisition; or
                    (C) a descendant of a person described in 
                subparagraph (A) or (B).
            (4) Preferential lease parcel.--The term ``preferential 
        lease parcel'' means a parcel of land that--
                    (A) was purchased by the Secretary for use in 
                connection with the Blunt Reservoir feature; and
                    (B) is under lease to a preferential leaseholder as 
                of the date of enactment of this Act.
            (5) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior, acting through the Commissioner of 
        Reclamation.
    (b) Deauthorization.--The Blunt Reservoir feature is deauthorized.
    (c) Conveyance.--The Secretary shall convey all of the preferential 
lease parcels to the Commission, without consideration, on the 
condition that the Commission honor the purchase option provided to 
preferential leaseholders under subsection (d).
    (d) Purchase Option.--
            (1) In general.--A preferential leaseholder shall have an 
        option to purchase from the Commission the preferential lease 
        parcel that is the subject of the lease.
            (2) Terms.--A preferential leaseholder may elect to 
        purchase a parcel on 1 of the following terms:
                    (A) Cash purchase for the amount that is equal to--
                            (i) the value of the parcel determined 
                        under paragraph (4); minus
                            (ii) 10 percent of that value.
                    (B) Installment purchase, with 20 percent of the 
                value of the parcel determined under paragraph (4) to 
                be paid on the date of purchase and the remainder to be 
                paid over 30 years at 3 percent annual interest.
            (3) Option exercise period.--
                    (A) In general.--A preferential leaseholder shall 
                have until the date that is 10 years after the date of 
                the conveyance under subsection (c) to exercise the 
                option under paragraph (1).
                    (B) Continuation of leases.--Until the date 
                specified in subparagraph (A), a preferential 
                leaseholder shall be entitled to continue to lease from 
                the Commission, under the same terms and conditions as 
                under the lease as in effect as of the date of 
                conveyance, the parcel leased by the preferential 
                leaseholder.
            (4) Valuation.--
                    (A) In general.--The value of a preferential lease 
                parcel shall be determined to be, at the election of 
                the preferential leaseholder--
                            (i) the amount that is equal to 110 percent 
                        of the amount that is equal to--
                                    (I) the number of acres of the 
                                preferential lease parcel; multiplied 
                                by
                                    (II) the amount of the per-acre 
                                assessment of adjacent parcels made by 
                                the Director of Equalization of the 
                                county in which the preferential lease 
                                parcel is situated; or
                            (ii) the amount of a valuation of the 
                        preferential lease parcel for agricultural use 
                        made by an independent appraiser.
                    (B) Cost of appraisal.--If a preferential 
                leaseholder elects to use the method of valuation 
                described in subparagraph (A)(ii), the cost of the 
                valuation shall be paid by the preferential 
                leaseholder.
    (e) Conveyance of Nonpreferentially Leased Parcels.--The Secretary 
shall convey to the South Dakota Department of Game, Fish, and Parks 
the Blunt Reservoir parcels that are leased on a nonpreferential basis. 
These lands shall be used by the South Dakota Department of Game, Fish, 
and Parks for the purpose of mitigating the wildlife habitat that was 
lost as a result of the development of the Pick-Sloan project.
Deauthorizes the Blunt Reservoir feature of the Oahe Irrigation Project authorized as part of the Pick-Sloan Missouri River Basin Program. 
Directs the Secretary of the Interior, acting through the Commissioner of Reclamation, to convey all of the preferential lease parcels to the Commission of Schools and Public Lands of South Dakota, on the condition that the Commission honor the purchase option provided to preferential leaseholders under this Act. 
Requires a preferential leaseholder to have an option to purchase from the Commission the preferential lease parcel that is the subject of the lease.  Permits a preferential leaseholder to elect to purchase a parcel on one of the following terms:  (1) cash purchase for the amount that is equal to the value of the parcel minus ten percent of that value; or (2) installment purchase, with 20 percent of the value of the parcel to be paid on the purchase date and the remainder to be paid over 30 years at three percent annual interest.  Provides for such leaseholders to have until ten years after the date of the conveyance to exercise such option. 
Directs the Secretary, through the Commissioner, to convey to the South Dakota Department of Game, Fish, and Parks the Blunt Reservoir parcels that are leased on a nonpreferential basis to be used for the purpose of mitigating the wildlife habitat that was lost as a result of the development of the Pick-Sloan project.
A bill to deauthorize the Blunt Reservoir feature of the Oahe Irrigation Project, South Dakota, and direct the Secretary of the Interior to convey certain parcels of land acquired for the reservoir to the Commission of Schools and Public Lands of the State of South Dakota, on the condition that the current preferential leaseholders shall have an option to purchase the parcels from the Commission.