To authorize the Secretary of the Interior to enter into contracts for the use of excess storage and conveyance capacity in certain east slope facilities of the Fryingpan-Arkansas Project, Colorado, and to conduct studies for the enlargement of Pueblo Dam and Reservoir and Sugar Loaf Dam and Turquoise Lake, Fryingpan-Arkansas Project, Colorado, and for other purposes.

SECTION 1. PURPOSES.

    (a) The purposes of this Act are the following:
            (1) To authorize the Secretary of the Interior to engage in 
        studies relating to enlarging Pueblo Dam and Reservoir and 
        Sugar Loaf Dam and Turquoise Lake, Fryingpan-Arkansas Project, 
        Colorado, as described in the Preferred Storage Options Plan 
        Report published September 21, 2000, by the Southeastern 
        Colorado Water and Storage Needs Assessment Enterprise and the 
        Final PSOP Implementation Committee Report dated April 19, 
        2001.
            (2) To authorize the Secretary to enter into contracts for 
        the use of excess storage and conveyance capacity of certain 
        east slope facilities of the Fryingpan-Arkansas Project, 
        Colorado, for municipal, water banking, and other purposes, as 
        described in the Preferred Storage Options Plan Report 
        published September 21, 2000, by the Southeastern Colorado 
        Water and Storage Needs Assessment Enterprise and Final PSOP 
        Implementation Committee Report dated April 19, 2001, by 
        amending the Act of August 16, 1962 (76 Stat. 389 et seq.).
    (b) Nothing in this Act is intended to--
            (1) impair or otherwise interfere with the project's 
        authorized purposes or existing contractual obligations of the 
        Secretary or project beneficiaries, including the renewal of 
        any such contracts;
            (2) increase diversions of project water from the natural 
        basin of the Colorado River;
            (3) increase diversions of nonproject water from the 
        natural basin of the Colorado River within Colorado into 
        another river basin for delivery or storage, except as provided 
        in this Act;
            (4) impair or otherwise interfere with Contract Nos. 
        00XX6C0049 and 0009D6C0048 between the Board of Water Works of 
        Pueblo, Colorado, and the United States, or the renewal of 
        Contract Nos. 00XX6C0049 and 0009D6C0048 pursuant to the 
        authority that provides the legal basis therefor; or
            (5) affect the interpretation or implementation of existing 
        law or legislation for any other congressionally authorized 
        water project.

SEC. 2. SECRETARY AUTHORIZED TO CONDUCT STUDIES FOR THE ENLARGEMENT OF 
              PUEBLO DAM AND SUGAR LOAF DAM.

    (a) The Secretary of the Interior is hereby authorized to engage in 
storage space studies, up to and including a feasibility study pursuant 
to section 8 of the Federal Water Project Recreation Act (16 U.S.C. 
4601-19) and section 9(a) of the Act of August 4, 1939 (Chapter 418; 43 
U.S.C. 485h(a)), as may be appropriate, relating to enlarging Pueblo 
Dam and Reservoir and Sugar Loaf Dam and Turquoise Lake, Fryingpan-
Arkansas Project, Colorado, including studies for the purpose of 
determining the potential costs, benefits, and environmental and 
recreational impacts of such enlargements and the use and operation 
thereof, as described in the Preferred Storage Options Plan Report 
published September 21, 2000, by the Southeastern Colorado Water and 
Storage Needs Assessment Enterprise and Final PSOP Implementation 
Committee Report dated April 19, 2001. Any report or reports submitted 
to the President and Congress prepared pursuant to this provision shall 
be considered to fulfill the requirements of section 9(a) of the Act of 
August 4, 1939 (Chapter 418; 43 U.S.C. 485h(a)), to the extent that 
section may be applicable.
    (b) Before funds are expended for the studies authorized by this 
section, the Southeastern Colorado Water Activity Enterprise shall 
agree to participate in the studies and to fund the costs of the 
studies. The Southeastern Colorado Water Activity Enterprise's funding 
of the costs may be provided partly or wholly in the form of services 
directly related to the conduct of the studies.

SEC. 3. SECRETARY AUTHORIZED TO ENTER INTO CONTRACTS FOR THE USE OF 
              EXCESS STORAGE AND CONVEYANCE CAPACITY OF CERTAIN EAST 
              SLOPE FACILITIES OF THE FRYINGPAN-ARKANSAS PROJECT, 
              COLORADO.

    The Act of August 16, 1962 (76 Stat. 389), is amended by adding at 
the end the following:
    ``Sec. 8. (a) The Secretary is authorized to enter into contracts 
with any agency or entity, private or public, supplying water for 
municipal and other purposes within the project boundaries, for the use 
of excess water storage and conveyance capacity for nonproject water in 
certain east slope facilities, as described in the Preferred Storage 
Options Plan Report published September 21, 2000, by the Southeastern 
Colorado Water and Storage Needs Assessment Enterprise and Final PSOP 
Implementation Committee Report dated April 19, 2001, after 
consultation with the Board of Directors of the Southeastern Colorado 
Water Activity Enterprise: Provided, however, That such contracts shall 
not impair or otherwise interfere with--
            ``(1) the project's authorized purposes,
            ``(2) the ability of the project contractors to meet 
        existing Federal repayment obligations,
            ``(3) the storage allocations and limitations pursuant to 
        Contract No. 5-07-70-W0086, as amended, between the 
        Southeastern Colorado Water Conservancy District and the United 
        States, and the allocation principles adopted by the 
        Southeastern Colorado Water Conservancy District on November 
        29, 1979, and confirmed by the District Court of Pueblo County 
        in Civil Action No. 40487 by decree dated December 18, 1979, 
        including any subsequent modifications made by the District 
        that are confirmed by the District Court,
            ``(4) the yield of the project from its West Slope and East 
        Slope water rights, or
            ``(5) the capacity in Reclamation project facilities which 
        is needed to satisfy project purposes and contractual 
        obligations with a term exceeding one year existing at the time 
        of the execution of a contract under the authority of this 
        subsection.
    ``(b) The term of any contract executed pursuant to this section 
shall not exceed the remaining term of Contract No. 5-07-70-W0086, as 
amended, between the Southeastern Colorado Water Conservancy District 
and the United States. The Secretary shall renew any contract executed 
pursuant to this section at the end of the contract term on such 
conditions as the Secretary finds to be just and equitable. The term of 
such contract renewal shall be for a duration no less than the term 
granted the Southeastern Colorado Water Conservancy District under the 
contractual arrangement negotiated upon the expiration of Contract No. 
5-07-70-W0086.
    ``(c) To the extent water stored under the Project's Winter Water 
Storage Program spills from Pueblo Reservoir due to execution of a 
contract executed pursuant to this section, it will not be considered 
impairment or interference under subsection (a)(5) if the holders of 
such stored water are compensated by a credit for purchase of project 
water to replace such spilled water, such credit to be financed by a 
surcharge as described in subsection (d)(4) imposed on contracts 
executed pursuant to this section.
    ``(d) The Secretary shall not execute a contract pursuant to this 
section with any entity that has not signed an agreement with the 
Southeastern Colorado Water Activity Enterprise--
            ``(1) agreeing to reimburse an appropriate amount of the 
        Southeastern Colorado Water Activity Enterprise's 
        implementation and development costs, including such costs 
        reimbursed to the United States, incurred in determining and 
        making excess storage or conveyance capacity available for such 
        storage of nonproject water by municipal water providers within 
        the project boundaries,
            ``(2) agreeing to cooperate in a flow management program 
        designed to maintain target minimum flows of 100 c.f.s. on the 
        Arkansas River just below Pueblo Dam, as provided in the 
        Implementation Committee report dated April 19, 2001,
            ``(3) agreeing to participate in a long-term water quality 
        monitoring program as outlined in the Implementation Committee 
        report dated April 19, 2001, and
            ``(4) agreeing to pay any surcharges determined appropriate 
        and necessary by the Southeastern Colorado Water Activity 
        Enterprise Board of Directors, as described in the Preferred 
        Storage Options Plan Report published September 21, 2000, by 
        the Southeastern Colorado Water and Storage Needs Assessment 
        Enterprise and the Final PSOP Implementation Committee reported 
        dated April 19, 2001.
All such charges established by the Southeastern Colorado Water 
Activity Enterprise shall be paid by the person or by the agency or 
entity, private or public, which contracts for the use of excess 
capacity, directly to the Southeastern Colorado Water Activity 
Enterprise, not to the Secretary, at such times and in such manner as 
the Southeastern Colorado Water Activity Enterprise may direct.
    ``Sec. 9. (a) The Secretary is authorized to enter into temporary 
contracts with any agency or entity, private or public, operating a 
water bank established pursuant to Colorado law, for use of facilities 
for the impounding, storage, and carriage of nonproject water for 
irrigation, domestic municipal, industrial, and other beneficial 
purposes.
    ``(b) No contract executed under the authority of subsection (a) 
shall impair or otherwise interfere with--
            ``(1) the project's authorized purposes,
            ``(2) the ability of the project contractors to meet 
        existing Federal repayment obligations,
            ``(3) the storage allocations and limitations pursuant to 
        contract No. 5-07-70-W0086, as amended, between the 
        Southeastern Colorado Water Conservancy District and the United 
        States, and the allocation principles adopted by the 
        Southeastern Colorado Water Conservancy District on November 
        29, 1979, and confirmed by the District Court of Pueblo County 
        in Civil Action No. 40487 by decree dated December 18, 1979, 
        including any subsequent modifications made by the District 
        that are confirmed by the District Court,
            ``(4) the yield of the project from its West Slope and East 
        Slope water rights, or
            ``(5) the capacity in Reclamation project facilities which 
        is needed to satisfy project purposes and contractual 
        obligations existing at the time of the execution of a contract 
        under the authority of this subsection.
    ``(c) The Secretary shall not execute a contract pursuant to this 
section with any entity that has not signed an agreement with the 
Southeastern Colorado Water Activity Enterprise agreeing to pay any 
surcharges determined appropriate and necessary by the Southeastern 
Colorado Water Activity Enterprise Board of Directors to finance an 
appropriate portion of an operations and maintenance reserve fund and 
any other terms determined appropriate and necessary by the 
Southeastern Colorado Water Activity Enterprise Board of Directors, 
which may include conditions requiring water available in the bank to 
be made available for use within the basin of the Arkansas River prior 
to making such water available for use in other river basins within 
Colorado and any necessary or desirable limitations upon the time, 
place, or type of use of waters made available through the water bank 
and the appropriate duration of water use resulting from water bank 
transactions.
    ``Sec. 10. All revenue generated pursuant to contracts executed 
under sections 8 and 9, except for those revenues generated pursuant to 
the surcharges described in section 8(d)(4) and 9(c), shall be credited 
first to a proportionate share of annual operations and maintenance 
costs and then to repayment of the project in the year the contract 
revenue is generated until such time as the costs of the project have 
been repaid: Provided, however, That the revenues so credited shall not 
be applied so as to reduce the amount of the current annual payments 
due to the Secretary from the project contractors or any other parties 
that are responsible for paying outstanding reimbursable construction 
costs. Once the costs of the project have been repaid, all revenue 
generated pursuant to contracts executed under sections 8 and 9, except 
for those revenues generated pursuant to the surcharges described in 
sections 8(d)(4) and 9(c), shall be credited first to annual operations 
and maintenance costs and then to the Reclamation fund, to be used 
exclusively for the purpose of financing extraordinary operations and 
maintenance, rehabilitation, and replacements of project facilities.
    ``Sec. 11. Nonproject water diverted, stored, impounded, pumped, or 
conveyed under a contract entered into pursuant to sections 8 and 9 
shall be exempt from any acreage limitation provisions of the Act of 
June 17, 1902 (32 Stat. 388), and Acts amendatory thereof and 
supplementary thereto including, but not limited to, the Reclamation 
Reform Act of 1982 (96 Stat. 1263; 43 U.S.C. 390aa-390zz-1) and from 
any farm unit size limitations established pursuant to section 4(c)(5) 
of the Act of August 11, 1939 (Chapter 717; 16 U.S.C. 590z-2(c)(5)): 
Provided, however, That in the event such nonproject water is 
commingled with project water in Reclamation project facilities, and 
the resulting commingled supply is used to irrigate lands in a project 
contractor's service area, then such commingled water shall bear the 
same acreage limitations or farm unit size limitations as the project 
water unless--
            ``(1) contract provisions are in effect which provide that 
        project or nonproject water, or both, will be accounted for on 
        a quantitative basis, that project water will not be delivered 
        to ineligible land, and that appropriate charges, as determined 
        by the Secretary, will be paid for the project water, and
            ``(2) the charges for the use of the excess capacity 
        include an appropriate interest component, as determined by the 
        Secretary.
    ``Sec. 12. Excess water storage capacity in certain east slope 
facilities to divert, store, impound, pump, or convey nonproject water 
made available under contracts executed pursuant to the provisions of 
section 8 shall not be utilized so as to increase diversion of 
nonproject water from the natural basins of the Colorado or Arkansas 
Rivers within Colorado into another river basin for delivery or storage 
unless--
            ``(1) the diversion is the subject of a decree entered 
        prior to the effective date of this section for which no new 
        infrastructure is necessary to divert the water out of the 
        natural basin, or
            ``(2) the diversion is the subject of an existing 
        agreement, contemplating additional diversions diverted through 
        or stored in the facilities authorized by this Act, between the 
        beneficiary of such transbasin diversion and either the water 
        conservation district, as defined under Colorado law, from 
        within whose boundaries the waters are proposed for diversion 
        or, in the absence thereof, a water conservancy district, as 
        defined under Colorado law, that is a project contractor and 
        from within whose boundaries the waters are proposed for 
        diversion,
            ``(3) the diversion is the subject of a future 
        intergovernmental agreement or other contractual arrangement 
        between the beneficiary of such transbasin diversion and either 
        the water conservation district, as defined under Colorado law, 
        from within whose boundaries the waters are proposed for 
        diversion or, in the absence thereof, a water conservancy 
        district, as defined under Colorado law, that is a project 
        contractor and from within whose boundaries the waters are 
        proposed for diversion, or
            ``(4) the beneficiary of such transbasin diversion provides 
        compensatory storage or alternate water supply in an amount 
        equal to the quantity diverted out of the basin for the benefit 
        of either the water conservation district, as defined under 
        Colorado law, from within whose boundaries the waters are 
        proposed for diversion or, in the absence thereof, a water 
        conservancy district, as defined under Colorado law, that is a 
        project contractor and from within whose boundaries the waters 
        are proposed for diversion.''.

Summary: Authorizes the Secretary of the Interior to conduct storage space studies relating to enlarging Pueblo Dam and Reservoir and Sugar Loaf Dam and Turquoise Lake, Fryingpan-Arkansas Project, Colorado, including a feasibility study and studies for determining the potential costs, benefits, and environmental and recreational impacts and use and operation of such enlargements. Provides that, before funding is expended for such studies, the Southeastern Colorado Water Activity Enterprise shall agree to participate in the studies and to fund such studies' costs. Authorizes the Secretary to enter into contracts with public or private entities supplying water within Project boundaries, for the use of excess water storage and conveyance capacity for nonproject water in certain east slope facilities. Authorizes the Secretary to enter into temporary contracts with any public or private entities operating a water bank for use of facilities for the impounding, storage, and carriage of nonproject water for irrigation, domestic municipal, industrial, and other beneficial purposes. Requires revenues from such contracts to be credited first to annual operations and maintenance costs, then to repayment of the project, and, once project costs have been repaid, to the Reclamation Fund for use exclusively for financing extraordinary operations and maintenance, rehabilitation, and replacements of project facilities.