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[109th Congress Public Law 451]
[From the U.S. Government Printing Office]

[DOCID: f:publ451.109]

[[Page 120 STAT. 3345]]

Public Law 109-451
109th Congress

                                 An Act

 
 To authorize the Secretary of the Interior to carry out a rural water 
   supply program in the Reclamation States to provide a clean, safe, 
 affordable, and reliable water supply to rural residents. <<NOTE: Dec. 
                         22, 2006 -  [S. 895]>> 

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress <<NOTE: Rural Water Supply Act of 
2006.>> assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) <<NOTE: 43 USC 2401 note.>> Short Title.--This Act may be cited 
as the ``Rural Water Supply Act of 2006''.

    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.

           TITLE I--RECLAMATION RURAL WATER SUPPLY ACT OF 2006

Sec. 101. Short title.
Sec. 102. Definitions.
Sec. 103. Rural water supply program.
Sec. 104. Rural water programs assessment.
Sec. 105. Appraisal investigations.
Sec. 106. Feasibility studies.
Sec. 107. Miscellaneous.
Sec. 108. Reports.
Sec. 109. Authorization of appropriations.
Sec. 110. Termination of authority.

             TITLE II--TWENTY-FIRST CENTURY WATER WORKS ACT

Sec. 201. Short title.
Sec. 202. Definitions.
Sec. 203. Project eligibility.
Sec. 204. Loan guarantees.
Sec. 205. Defaults.
Sec. 206. Operations, maintenance, and replacement costs.
Sec. 207. Title to newly constructed facilities.
Sec. 208. Water rights.
Sec. 209. Interagency coordination and cooperation.
Sec. 210. Records; audits.
Sec. 211. Full faith and credit.
Sec. 212. Report.
Sec. 213. Effect on the reclamation laws.
Sec. 214. Authorization of appropriations.
Sec. 215. Termination of authority.

         TITLE III--REPORT ON TRANSFER OF RECLAMATION FACILITIES

Sec. 301. Report.

[[Page 120 STAT. 3346]]

     TITLE <<NOTE: Reclamation Rural Water Supply Act of 2006.>> I--
RECLAMATION RURAL WATER SUPPLY ACT OF 2006

SEC. 101. <<NOTE: 43 USC 2401 note.>> SHORT TITLE.

    This title may be cited as the ``Reclamation Rural Water Supply Act 
of 2006''.

SEC. 102. <<NOTE: 43 USC 2401.>> DEFINITIONS.

    In this title:
            (1) Construction.--The term ``construction'' means the 
        installation of infrastructure and the upgrading of existing 
        facilities in locations in which the infrastructure or 
        facilities are associated with the new infrastructure of a rural 
        water project recommended by the Secretary pursuant to this 
        title.
            (2) Federal reclamation law.--The term ``Federal reclamation 
        law'' means the Act of June 17, 1902 (32 Stat. 388, chapter 
        1093), and Acts supplemental to and amendatory of that Act (43 
        U.S.C. 371 et seq.).
            (3) Indian.--The term ``Indian'' means an individual who is 
        a member of an Indian tribe.
            (4) Indian tribe.--The term ``Indian tribe'' has the meaning 
        given the term in section 4 of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450b).
            (5) Non-federal project entity.--The term ``non-Federal 
        project entity'' means a State, regional, or local authority, 
        Indian tribe or tribal organization, or other qualifying entity, 
        such as a water conservation district, water conservancy 
        district, or rural water district or association.
            (6) Operations, maintenance, and replacement costs.--
                    (A) In general.--The term ``operations, maintenance, 
                and replacement costs'' means all costs for the 
                operation of a rural water supply project that are 
                necessary for the safe, efficient, and continued 
                functioning of the project to produce the benefits 
                described in a feasibility study.
                    (B) Inclusions.--The term ``operations, maintenance, 
                and replacement costs'' includes--
                          (i) repairs of a routine nature that maintain 
                      a rural water supply project in a well kept 
                      condition;
                          (ii) replacement of worn-out project elements; 
                      and
                          (iii) rehabilitation activities necessary to 
                      bring a deteriorated project back to the original 
                      condition of the project.
                    (C) Exclusion.--The term ``operations, maintenance, 
                and replacement costs'' does not include construction 
                costs.
            (7) Program.--The term ``Program'' means the rural water 
        supply program carried out under section 103.
            (8) Reclamation states.--The term ``Reclamation States'' 
        means the States and areas referred to in the first section of 
        the Act of June 17, 1902 (43 U.S.C. 391).
            (9) Rural water supply project.--
                    (A) In general.--The term ``rural water supply 
                project'' means a project that is designed to serve a 
                community or group of communities, each of which has a 
                population of not more than 50,000 inhabitants, which 
                may include Indian tribes and tribal organizations, 
                dispersed

[[Page 120 STAT. 3347]]

                homesites, or rural areas with domestic, industrial, 
                municipal, and residential water.
                    (B) Inclusion.--The term ``rural water supply 
                project'' includes--
                          (i) incidental noncommercial livestock 
                      watering and noncommercial irrigation of 
                      vegetation and small gardens of less than 1 acre; 
                      and
                          (ii) a project to improve rural water 
                      infrastructure, including--
                                    (I) pumps, pipes, wells, and other 
                                diversions;
                                    (II) storage tanks and small 
                                impoundments;
                                    (III) water treatment facilities for 
                                potable water supplies, including 
                                desalination facilities;
                                    (IV) equipment and management tools 
                                for water conservation, groundwater 
                                recovery, and water recycling; and
                                    (V) appurtenances.
                    (C) Exclusion.--The term ``rural water supply 
                project'' does not include--
                          (i) commercial irrigation; or
                          (ii) major impoundment structures.
            (10) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
            (11) Tribal organization.--The term ``tribal organization'' 
        means--
                    (A) the recognized governing body of an Indian 
                tribe; and
                    (B) any legally established organization of Indians 
                that is controlled, sanctioned, or chartered by the 
                governing body or democratically elected by the adult 
                members of the Indian community to be served by the 
                organization.

SEC. 103. <<NOTE: 43 USC 2402.>> RURAL WATER SUPPLY PROGRAM.

    (a) In General.--The Secretary, in cooperation with non-Federal 
project entities and consistent with this title, may carry out a rural 
water supply program in Reclamation States to--
            (1) investigate and identify opportunities to ensure safe 
        and adequate rural water supply projects for domestic, 
        municipal, and industrial use in small communities and rural 
        areas of the Reclamation States;
            (2) plan the design and construction, through the conduct of 
        appraisal investigations and feasibility studies, of rural water 
        supply projects in Reclamation States; and
            (3) oversee, as appropriate, the construction of rural water 
        supply projects in Reclamation States that are recommended by 
        the Secretary in a feasibility report developed pursuant to 
        section 106 and subsequently authorized by Congress.

    (b) Non-Federal Project Entity.--Any activity carried out under this 
title shall be carried out in cooperation with a qualifying non-Federal 
project entity, consistent with this title.
    (c) Eligibility Criteria.--Not <<NOTE: Deadline. Federal Register, 
publication.>> later than 1 year after the date of enactment of this 
Act, the Secretary shall, consistent with this title, develop and 
publish in the Federal Register criteria for--
            (1) determining the eligibility of a rural community for 
        assistance under the Program; and
            (2) prioritizing requests for assistance under the Program.

[[Page 120 STAT. 3348]]

    (d) Factors.--The criteria developed under subsection (c) shall take 
into account such factors as whether--
            (1) a rural water supply project--
                    (A) serves--
                          (i) rural areas and small communities; or
                          (ii) Indian tribes; or
                    (B) promotes and applies a regional or watershed 
                perspective to water resources management;
            (2) there is an urgent and compelling need for a rural water 
        supply project that would--
                    (A) improve the health or aesthetic quality of 
                water;
                    (B) result in continuous, measurable, and 
                significant water quality benefits; or
                    (C) address current or future water supply needs;
            (3) a rural water supply project helps meet applicable 
        requirements established by law; and
            (4) a rural water supply project is cost effective.

    (e) Inclusions.--The Secretary may include--
            (1) to the extent that connection provides a reliable water 
        supply, a connection to pre-existing infrastructure (including 
        impoundments and conveyance channels) as part of a rural water 
        supply project; and
            (2) notwithstanding the limitation on population under 
        section 102(9)(A), a town or community with a population in 
        excess of 50,000 inhabitants in an area served by a rural water 
        supply project if, at the discretion of the Secretary, the town 
        or community is considered to be a critical partner in the rural 
        supply project.

SEC. 104. <<NOTE: 43 USC 2403.>> RURAL WATER PROGRAMS ASSESSMENT.

    (a) In General.--In consultation with the Secretary of Agriculture, 
the Administrator of the Environmental Protection Agency, the Director 
of the Indian Health Service, the Secretary of Housing and Urban 
Development, and the Secretary of the Army, the Secretary shall develop 
an assessment of--
            (1) the status of all rural water supply projects under the 
        jurisdiction of the Secretary authorized but not completed prior 
        to the date of enactment of this Act, including appropriation 
        amounts, the phase of development, total anticipated costs, and 
        obstacles to completion;
            (2) the current plan (including projected financial and 
        workforce requirements) for the completion of the projects 
        identified in paragraph (1) within the time frames established 
        under the provisions of law authorizing the projects or the 
        final engineering reports for the projects;
            (3) the demand for new rural water supply projects;
            (4) rural water programs within other agencies and a 
        description of the extent to which those programs provide 
        support for rural water supply projects and water treatment 
        programs in Reclamation States, including an assessment of the 
        requirements, funding levels, and conditions of eligibility for 
        the programs assessed;
            (5) the extent of the demand that the Secretary can meet 
        with the Program;
            (6) how the Program will complement authorities already 
        within the jurisdiction of the Secretary and the heads of the 
        agencies with whom the Secretary consults; and

[[Page 120 STAT. 3349]]

            (7) improvements that can be made to coordinate and 
        integrate the authorities of the agencies with programs 
        evaluated under paragraph (4), including any recommendations to 
        consolidate some or all of the activities of the agencies with 
        respect to rural water supply.

    (b) Consultation With States.--Before finalizing the assessment 
developed under subsection (a), the Secretary shall solicit comments 
from States with identified rural water needs.
    (c) Report.--Not later than 2 years after the date of enactment of 
this Act, the Secretary shall submit to the Committee on Energy and 
Natural Resources of the Senate and the Committee on Resources of the 
House of Representatives a detailed report on the assessment conducted 
under subsection (a).

SEC. 105. <<NOTE: 43 USC 2404.>> APPRAISAL INVESTIGATIONS.

    (a) In General.--On request of a non-Federal project entity with 
respect to a proposed rural water supply project that meets the 
eligibility criteria published under section 103(c) and subject to the 
availability of appropriations, the Secretary may--
            (1) receive and review an appraisal investigation that is--
                    (A) developed by the non-Federal project entity, 
                with or without support from the Secretary; and
                    (B) submitted to the Secretary by the non-Federal 
                project entity;
            (2) conduct an appraisal investigation; or
            (3) provide a grant to, or enter into a cooperative 
        agreement with, the non-Federal project entity to conduct an 
        appraisal investigation, if the Secretary determines that--
                    (A) the non-Federal project entity is qualified to 
                complete the appraisal investigation in accordance with 
                the criteria published under section 103(c); and
                    (B) using the non-Federal project entity to conduct 
                the appraisal investigation is a cost-effective 
                alternative for completing the appraisal investigation.

    (b) Deadline.--An appraisal investigation conducted under subsection 
(a) shall be scheduled for completion not later than 2 years after the 
date on which the appraisal investigation is initiated.
    (c) Appraisal Report.--In accordance with subsection (f), after an 
appraisal investigation is submitted to the Secretary under subsection 
(a)(1) or completed under paragraph (2) or (3) of subsection (a), the 
Secretary shall prepare an appraisal report that--
            (1) considers--
                    (A) whether the project meets--
                          (i) the appraisal criteria developed under 
                      subsection (d); and
                          (ii) the eligibility criteria developed under 
                      section 103(c);
                    (B) whether viable water supplies and water rights 
                exist to supply the project, including all practicable 
                water sources such as lower quality waters, nonpotable 
                waters, and water reuse-based water supplies;
                    (C) whether the project has a positive effect on 
                public health and safety;
                    (D) whether the project will meet water demand, 
                including projected future needs;

[[Page 120 STAT. 3350]]

                    (E) the extent to which the project provides 
                environmental benefits, including source water 
                protection;
                    (F) whether the project applies a regional or 
                watershed perspective and promotes benefits in the 
                region in which the project is carried out;
                    (G) whether the project--
                          (i)(I) implements an integrated resources 
                      management approach; or
                          (II) enhances water management flexibility, 
                      including providing for--
                                    (aa) local control to manage water 
                                supplies under varying water supply 
                                conditions; and
                                    (bb) participation in water banking 
                                and markets for domestic and 
                                environmental purposes; and
                          (ii) promotes long-term protection of water 
                      supplies;
                    (H) preliminary cost estimates for the project; and
                    (I) whether the non-Federal project entity has the 
                capability to pay 100 percent of the costs associated 
                with the operations, maintenance, and replacement of the 
                facilities constructed or developed as part of the rural 
                water supply project; and
            (2) provides recommendations on whether a feasibility study 
        should be initiated under section 106(a).

    (d) Appraisal Criteria.--
            (1) <<NOTE: Deadline.>> In general.--Not later than 1 year 
        after the date of enactment of this Act, the Secretary shall 
        promulgate criteria (including appraisal factors listed under 
        subsection (c)) against which the appraisal investigations shall 
        be assessed for completeness and appropriateness for a 
        feasibility study.
            (2) Inclusions.--To minimize the cost of a rural water 
        supply project to a non-Federal project entity, the Secretary 
        shall include in the criteria methods to scale the level of 
        effort needed to complete the appraisal investigation relative 
        to the total size and cost of the proposed rural water supply 
        project.

    (e) Review of Appraisal Investigation.--
            (1) <<NOTE: Deadline.>> In general.--Not later than 90 days 
        after the date of submission of an appraisal investigation under 
        paragraph (1) or (3) of subsection (a), the Secretary shall 
        provide to the non-Federal entity that conducted the 
        investigation a determination of whether the investigation has 
        included the information necessary to determine whether the 
        proposed rural water supply project satisfies the criteria 
        promulgated under subsection (d).
            (2) No satisfaction of criteria.--If the Secretary 
        determines that the appraisal investigation submitted by a non-
        Federal entity does not satisfy the criteria promulgated under 
        subsection (d), the Secretary shall inform the non-Federal 
        entity of the reasons why the appraisal investigation is 
        deficient.
            (3) Responsibility of secretary.--If an appraisal 
        investigation as first submitted by a non-Federal entity does 
        not provide all necessary information, as defined by the 
        Secretary, the Secretary shall have no obligation to conduct 
        further analysis until the non-Federal project entity submitting 
        the appraisal study conducts additional investigation and 
        resubmits the appraisal investigation under this subsection.

[[Page 120 STAT. 3351]]

    (f) Appraisal Report.--Once the Secretary has determined that an 
investigation provides the information necessary under subsection (e), 
the Secretary shall--
            (1) complete the appraisal report required under subsection 
        (c);
            (2) <<NOTE: Public information.>> make available to the 
        public, on request, the appraisal report prepared under this 
        title; and
            (3) <<NOTE: Federal Register, 
        publication. Notice.>> promptly publish in the Federal Register 
        a notice of the availability of the results.

    (g) Costs.--
            (1) Federal share.--The Federal share of an appraisal 
        investigation conducted under subsection (a) shall be 100 
        percent of the total cost of the appraisal investigation, up to 
        $200,000.
            (2) Non-federal share.--
                    (A) In general.--Except as provided in subparagraph 
                (B), if the cost of conducting an appraisal 
                investigation is more than $200,000, the non-Federal 
                share of the costs in excess of $200,000 shall be 50 
                percent.
                    (B) Exception.--The Secretary may reduce the non-
                Federal share required under subparagraph (A) if the 
                Secretary determines that there is an overwhelming 
                Federal interest in the appraisal investigation.
                    (C) Form.--The non-Federal share under subparagraph 
                (A) may be in the form of any in-kind services that the 
                Secretary determines would contribute substantially 
                toward the conduct and completion of the appraisal 
                investigation.

    (h) Consultation; Identification of Funding Sources.--In conducting 
an appraisal investigation under subsection (a)(2), the Secretary 
shall--
            (1) consult and cooperate with the non-Federal project 
        entity and appropriate State, tribal, regional, and local 
        authorities;
            (2) consult with the heads of appropriate Federal agencies 
        to--
                    (A) ensure that the proposed rural water supply 
                project does not duplicate a project carried out under 
                the authority of the agency head; and
                    (B) if a duplicate project is being carried out, 
                identify the authority under which the duplicate project 
                is being carried out; and
            (3) identify what funding sources are available for the 
        proposed rural water supply project.

SEC. 106. <<NOTE: 43 USC 2405.>> FEASIBILITY STUDIES.

    (a) In General.--On completion of an appraisal report under section 
105(c) that recommends undertaking a feasibility study and subject to 
the availability of appropriations, the Secretary shall--
            (1) in cooperation with a non-Federal project entity, carry 
        out a study to determine the feasibility of the proposed rural 
        water supply project;
            (2) receive and review a feasibility study that is--
                    (A) developed by the non-Federal project entity, 
                with or without support from the Secretary; and

[[Page 120 STAT. 3352]]

                    (B) submitted to the Secretary by the non-Federal 
                project entity; or
            (3)(A) <<NOTE: Grants. Contracts.>> provide a grant to, or 
        enter into a cooperative agreement with, a non-Federal project 
        entity to conduct a feasibility study, for submission to the 
        Secretary, if the Secretary determines that--
                    (i) the non-Federal entity is qualified to complete 
                the feasibility study in accordance with the criteria 
                promulgated under subsection (d); and
                    (ii) using the non-Federal project entity to conduct 
                the feasibility study is a cost-effective alternative 
                for completing the appraisal investigation; or
            (B) if the Secretary determines not to provide a grant to, 
        or enter into a cooperative agreement with, a non-Federal 
        project entity under subparagraph (A), provide to the non-
        Federal project entity notice of the determination, including an 
        explanation of the reason for the determination.

    (b) Review of Non-Federal Feasibility Studies.--
            (1) In general.--In conducting a review of a feasibility 
        study submitted under paragraph (2) or (3) of subsection (a), 
        the Secretary shall--
                    (A) in accordance with the feasibility factors 
                described in subsection (c) and the criteria promulgated 
                under subsection (d), assess the completeness of the 
                feasibility study; and
                    (B) <<NOTE: Notification.>> if the Secretary 
                determines that a feasibility study is not complete, 
                notify the non-Federal entity of the determination.
            (2) Revisions.--If the Secretary determines under paragraph 
        (1)(B) that a feasibility study is not complete, the non-Federal 
        entity shall pay any costs associated with revising the 
        feasibility study.

    (c) Feasibility Factors.--Feasibility studies authorized or reviewed 
under this title shall include an assessment of--
            (1) near- and long-term water demand in the area to be 
        served by the rural water supply project;
            (2) advancement of public health and safety of any existing 
        rural water supply project and other benefits of the proposed 
        rural water supply project;
            (3) alternative new water supplies in the study area, 
        including any opportunities to treat and use low-quality water, 
        nonpotable water, water reuse-based supplies, and brackish and 
        saline waters through innovative and economically viable 
        treatment technologies;
            (4) environmental quality and source water protection issues 
        related to the rural water supply project;
            (5) innovative opportunities for water conservation in the 
        study area to reduce water use and water system costs, 
        including--
                    (A) nonstructural approaches to reduce the need for 
                the project; and
                    (B) demonstration technologies;
            (6) the extent to which the project and alternatives take 
        advantage of economic incentives and the use of market-based 
        mechanisms;
            (7)(A) the construction costs and projected operations, 
        maintenance, and replacement costs of all alternatives; and

[[Page 120 STAT. 3353]]

            (B) the economic feasibility and lowest cost method of 
        obtaining the desired results of each alternative, taking into 
        account the Federal cost-share;
            (8) the availability of guaranteed loans for a proposed 
        rural water supply project;
            (9) the financial capability of the non-Federal project 
        entity to pay the non-Federal project entity's proportionate 
        share of the design and construction costs and 100 percent of 
        operations, maintenance, and replacement costs, including the 
        allocation of costs to each non-Federal project entity in the 
        case of multiple entities;
            (10) whether the non-Federal project entity has developed an 
        operations, management, and replacement plan to assist the non-
        Federal project entity in establishing rates and fees for 
        beneficiaries of the rural water supply project that includes a 
        schedule identifying the annual operations, maintenance, and 
        replacement costs that should be allocated to each non-Federal 
        entity participating in the project;
            (11)(A) the non-Federal project entity administrative 
        organization that would implement construction, operations, 
        maintenance, and replacement activities; and
            (B) the fiscal, administrative, and operational controls to 
        be implemented to manage the project;
            (12) the extent to which assistance for rural water supply 
        is available under other Federal authorities;
            (13) the engineering, environmental, and economic activities 
        to be undertaken to carry out the proposed rural water supply 
        project;
            (14) the extent to which the project involves partnerships 
        with other State, local, or tribal governments or Federal 
        entities; and
            (15) in the case of a project intended for Indian tribes and 
        tribal organizations, the extent to which the project addresses 
        the goal of economic self-sufficiency.

    (d) Feasibility Study Criteria.--
            (1) <<NOTE: Deadline.>> In general.--Not later than 18 
        months after the date of enactment of this Act, the Secretary 
        shall promulgate criteria (including the feasibility factors 
        listed under subsection (c)) under which the feasibility studies 
        shall be assessed for completeness and appropriateness.
            (2) Inclusions.--The Secretary shall include in the criteria 
        promulgated under paragraph (1) methods to scale the level of 
        effort needed to complete the feasibility assessment relative to 
        the total size and cost of the proposed rural water supply 
        project and reduce total costs to non-Federal entities.

    (e) Feasibility Report.--
            (1) In general.--After completion of appropriate feasibility 
        studies for rural water supply projects that address the factors 
        described in subsection (c) and the criteria promulgated under 
        subsection (d), the Secretary shall--
                    (A) develop a feasibility report that includes--
                          (i) a recommendation of the Secretary on--
                                    (I) whether the rural water supply 
                                project should be authorized for 
                                construction; and
                                    (II) the appropriate non-Federal 
                                share of construction costs, which shall 
                                be--

[[Page 120 STAT. 3354]]

                                            (aa) at least 25 percent of 
                                        the total construction costs; 
                                        and
                                            (bb) determined based on an 
                                        analysis of the capability-to-
                                        pay information considered under 
                                        subsections (c)(9) and (f); and
                          (ii) if the Secretary recommends that the 
                      project should be authorized for construction--
                                    (I) what amount of grants, loan 
                                guarantees, or combination of grants and 
                                loan guarantees should be used to 
                                provide the Federal cost share;
                                    (II) a schedule that identifies the 
                                annual operations, maintenance, and 
                                replacement costs that should be 
                                allocated to each non-Federal entity 
                                participating in the rural water supply 
                                project; and
                                    (III) an assessment of the financial 
                                capability of each non-Federal entity 
                                participating in the rural water supply 
                                project to pay the allocated annual 
                                operation, maintenance, and replacement 
                                costs for the rural water supply 
                                project;
                    (B) submit the report to the Committee on Energy and 
                Natural Resources of the Senate and the Committee on 
                Resources of the House of Representatives;
                    (C) make the report publicly available, along with 
                associated study documents; and
                    (D) <<NOTE: Federal Register, 
                publication. Notice.>> publish in the Federal Register a 
                notice of the availability of the results.

    (f) Capability-To-Pay.--
            (1) In general.--In evaluating a proposed rural water supply 
        project under this section, the Secretary shall--
                    (A) consider the financial capability of any non-
                Federal project entities participating in the rural 
                water supply project to pay 25 percent or more of the 
                capital construction costs of the rural water supply 
                project; and
                    (B) recommend an appropriate Federal share and non-
                Federal share of the capital construction costs, as 
                determined by the Secretary.
            (2) Factors.--In determining the financial capability of 
        non-Federal project entities to pay for a rural water supply 
        project under paragraph (1), the Secretary shall evaluate 
        factors for the project area, relative to the State average, 
        including--
                    (A) per capita income;
                    (B) median household income;
                    (C) the poverty rate;
                    (D) the ability of the non-Federal project entity to 
                raise tax revenues or assess fees;
                    (E) the strength of the balance sheet of the non-
                Federal project entity; and
                    (F) the existing cost of water in the region.
            (3) Indian tribes.--In determining the capability-to-pay of 
        Indian tribe project beneficiaries, the Secretary may consider 
        deferring the collection of all or part of the non-Federal 
        construction costs apportioned to Indian tribe project 
        beneficiaries unless or until the Secretary determines that the 
        Indian tribe project beneficiaries should pay--
                    (A) the costs allocated to the beneficiaries; or
                    (B) an appropriate portion of the costs.

[[Page 120 STAT. 3355]]

    (g) Cost-Sharing Requirement.--
            (1) In general.--Except as otherwise provided in this 
        subsection, the Federal share of the cost of a feasibility study 
        carried out under this section shall not exceed 50 percent of 
        the study costs.
            (2) Form.--The non-Federal share under paragraph (1) may be 
        in the form of any in-kind services that the Secretary 
        determines would contribute substantially toward the conduct and 
        completion of the study.
            (3) Financial hardship.--The Secretary may increase the 
        Federal share of the costs of a feasibility study if the 
        Secretary determines, based on a demonstration of financial 
        hardship, that the non-Federal participant is unable to 
        contribute at least 50 percent of the costs of the study.
            (4) Larger communities.--In conducting a feasibility study 
        of a rural water supply system that includes a community with a 
        population in excess of 50,000 inhabitants, the Secretary may 
        require the non-Federal project entity to pay more than 50 
        percent of the costs of the study.

    (h) Consultation and Cooperation.--In addition to the non-Federal 
project entity, the Secretary shall consult and cooperate with 
appropriate Federal, State, tribal, regional, and local authorities 
during the conduct of each feasibility assessment and development of the 
feasibility report conducted under this title.

SEC. 107. <<NOTE: 43 USC 2406.>> MISCELLANEOUS.

    (a) Authority of Secretary.--The Secretary may enter into contracts, 
financial assistance agreements, and such other agreements, and 
promulgate such regulations, as are necessary to carry out this title.
    (b) Transfer of Projects.--Nothing in this title authorizes the 
transfer of pre-existing facilities or pre-existing components of any 
water system from Federal to private ownership or from private to 
Federal ownership.
    (c) Federal Reclamation Law.--Nothing in this title supersedes or 
amends any Federal law associated with a project, or portion of a 
project, constructed under Federal reclamation law.
    (d) Interagency Coordination.--The Secretary shall coordinate the 
Program carried out under this title with existing Federal and State 
rural water and wastewater programs to facilitate the most efficient and 
effective solution to meeting the water needs of the non-Federal project 
sponsors.
    (e) Multiple Indian Tribes.--In any case in which a contract is 
entered into with, or a grant is made, to an organization to perform 
services benefitting more than 1 Indian tribe under this title, the 
approval of each such Indian tribe shall be a prerequisite to entering 
into the contract or making the grant.
    (f) Ownership of Facilities.--Title to any facility planned, 
designed, and recommended for construction under this title shall be 
held by the non-Federal project entity.
    (g) Expedited Procedures.--If the Secretary determines that a 
community to be served by a proposed rural water supply project has 
urgent and compelling water needs, the Secretary shall, to the maximum 
extent practicable, expedite appraisal investigations and reports 
conducted under section 105 and feasibility studies and reports 
conducted under section 106.
    (h) Effect on State Water Law.--

[[Page 120 STAT. 3356]]

            (1) In general.--Nothing in this title preempts or affects 
        State water law or an interstate compact governing water.
            (2) Compliance required.--The Secretary shall comply with 
        State water laws in carrying out this title.

    (i) No Additional Requirements.--Nothing in this title requires a 
feasibility study for, or imposes any other additional requirements with 
respect to, rural water supply projects or programs that are authorized 
before the date of enactment of this Act.

SEC. 108. <<NOTE: 43 USC 2407.>> REPORTS.

    Beginning in fiscal year 2007, and each fiscal year thereafter 
through fiscal year 2012, the Secretary shall submit to the Committee on 
Energy and Natural Resources of the Senate and the Committee on 
Resources of the House of Representatives an annual report that 
describes the number and type of full-time equivalent positions in the 
Department of the Interior and the amount of overhead costs of the 
Department of the Interior that are allocated to carrying out this title 
for the applicable fiscal year.

SEC. 109. <<NOTE: 43 USC 2408.>> AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There is authorized to be appropriated to carry out 
this title $15,000,000 for each of fiscal years 2007 through 2016, to 
remain available until expended.
    (b) Rural Water Programs Assessment.--Of the amounts made available 
under subsection (a), not more than $1,000,000 may be made available to 
carry out section 104 for each of fiscal years 2007 and 2008.
    (c) Construction Costs.--No amounts made available under this 
section shall be used to pay construction costs associated with any 
rural water supply project.

SEC. 110. TERMINATION OF AUTHORITY.

    The authority of the Secretary to carry out this title terminates on 
September 30, 2016.

 TITLE <<NOTE: Twenty-First Century Water Works Act.>> II--TWENTY-FIRST 
CENTURY WATER WORKS ACT

SEC. 201. <<NOTE: 43 USC 2401 note.>> SHORT TITLE.

    This title may be cited as the ``Twenty-First Century Water Works 
Act''.

SEC. 202. <<NOTE: 43 USC 2421.>> DEFINITIONS.

    In this title:
            (1) Indian tribe.--The term ``Indian tribe'' has the meaning 
        given the term in section 4 of the Indian Self-Determination and 
        Education Assistance Act (25 U.S.C. 450b).
            (2) Lender.--The term ``lender'' means--
                    (A) a non-Federal qualified institutional buyer (as 
                defined in section 230.144A(a) of title 17, Code of 
                Federal Regulation (or any successor regulation), known 
                as Rule 144A(a) of the Securities and Exchange 
                Commission and issued under the Securities Act of 1933 
                (15 U.S.C. 77a et seq.)); or

[[Page 120 STAT. 3357]]

                    (B) a clean renewable energy bond lender (as defined 
                in section 54(j)(2) of the Internal Revenue Code of 1986 
                (as in effect on the date of enactment of this Act)).
            (3) Loan guarantee.--The term ``loan guarantee'' has the 
        meaning given the term ``loan guarantee'' in section 502 of the 
        Federal Credit Reform Act of 1990 (2 U.S.C. 661a).
            (4) Non-federal borrower.--The term ``non-Federal borrower'' 
        means--
                    (A) a State (including a department, agency, or 
                political subdivision of a State); or
                    (B) a conservancy district, irrigation district, 
                canal company, water users' association, Indian tribe, 
                an agency created by interstate compact, or any other 
                entity that has the capacity to contract with the United 
                States under Federal reclamation law.
            (5) Obligation.--The term ``obligation'' means a loan or 
        other debt obligation that is guaranteed under this section.
            (6) Project.--The term ``project'' means--
                    (A) a rural water supply project (as defined in 
                section 102(9));
                    (B) an extraordinary operation and maintenance 
                activity for, or the rehabilitation or replacement of, a 
                facility--
                          (i) that is authorized by Federal reclamation 
                      law and constructed by the United States under 
                      such law; or
                          (ii) in connection with which there is a 
                      repayment or water service contract executed by 
                      the United States under Federal reclamation law; 
                      or
                    (C) an improvement to water infrastructure directly 
                associated with a reclamation project that, based on a 
                determination of the Secretary--
                          (i) improves water management; and
                          (ii) fulfills other Federal goals.
            (7) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.

SEC. 203. <<NOTE: 43 USC 2422.>> PROJECT ELIGIBILITY.

    (a) Eligibility Criteria.--
            (1) <<NOTE: Federal Register, publication.>> In general.--
        The Secretary shall develop and publish in the Federal Register 
        criteria for determining the eligibility of a project for 
        financial assistance under section 204.
            (2) Inclusions.--Eligibility criteria shall include--
                    (A) submission of an application by the lender to 
                the Secretary;
                    (B) demonstration of the creditworthiness of the 
                project, including a determination by the Secretary that 
                any financing for the project has appropriate security 
                features to ensure repayment;
                    (C) demonstration by the non-Federal borrower, to 
                the satisfaction of the Secretary, of the ability of the 
                non-Federal borrower to repay the project financing from 
                user fees or other dedicated revenue sources;
                    (D) demonstration by the non-Federal borrower, to 
                the satisfaction of the Secretary, of the ability of the 
                non-Federal borrower to pay all operations, maintenance, 
                and replacement costs of the project facilities; and

[[Page 120 STAT. 3358]]

                    (E) such other criteria as the Secretary determines 
                to be appropriate.

    (b) Waiver.--The Secretary may waive any of the criteria in 
subsection (a)(2) that the Secretary determines to be duplicative or 
rendered unnecessary because of an action already taken by the United 
States.
    (c) Projects Previously Authorized.--A project that was authorized 
for construction under Federal reclamation laws prior to the date of 
enactment of this Act shall be eligible for assistance under this title, 
subject to the criteria established by the Secretary under subsection 
(a).
    (d) Criteria for Rural Water Supply Projects.--A rural water supply 
project that is determined to be feasible under section 106 is eligible 
for a loan guarantee under section 204.

SEC. 204. <<NOTE: 43 USC 2423.>> LOAN GUARANTEES.

    (a) Authority.--Subject to the availability of appropriations, the 
Secretary may make available to lenders for a project meeting the 
eligibility criteria established in section 203 loan guarantees to 
supplement private-sector or lender financing for the project.
    (b) Terms and Limitations.--
            (1) In general.--Loan guarantees under this section for a 
        project shall be on such terms and conditions and contain such 
        covenants, representations, warranties, and requirements as the 
        Secretary determines to be appropriate to protect the financial 
        interests of the United States.
            (2) Amount.--Loan guarantees by the Secretary shall not 
        exceed an amount equal to 90 percent of the cost of the project 
        that is the subject of the loan guarantee, as estimated at the 
        time at which the loan guarantee is issued.
            (3) Interest rate.--An obligation shall bear interest at a 
        rate that does not exceed a level that the Secretary determines 
        to be appropriate, taking into account the prevailing rate of 
        interest in the private sector for similar loans and risks.
            (4) Amortization.--A loan guarantee under this section shall 
        provide for complete amortization of the loan guarantee within 
        not more than 40 years.
            (5) Nonsubordination.--An obligation shall be subject to the 
        condition that the obligation is not subordinate to other 
        financing.

    (c) Prepayment and Refinancing.--Any prepayment or refinancing terms 
on a loan guarantee shall be negotiated between the non-Federal borrower 
and the lender with the consent of the Secretary.

SEC. 205. <<NOTE: 43 USC 2424.>> DEFAULTS.

    (a) Payments by Secretary.--
            (1) In general.--If a borrower defaults on the obligation, 
        the holder of the loan guarantee shall have the right to demand 
        payment of the unpaid amount from the Secretary.
            (2) Payment required.--By such date as may be specified in 
        the loan guarantee or related agreements, the Secretary shall 
        pay to the holder of the loan guarantee the unpaid interest on, 
        and unpaid principal of, the obligation with respect to which 
        the borrower has defaulted, unless the Secretary finds that 
        there was not default by the borrower in the payment of interest 
        or principal or that the default has been remedied.

[[Page 120 STAT. 3359]]

            (3) Forbearance.--Nothing in this subsection precludes any 
        forbearance by the holder of the obligation for the benefit of 
        the non-Federal borrower that may be agreed on by the parties to 
        the obligation and approved by the Secretary.

    (b) Subrogation.--
            (1) In general.--If the Secretary makes a payment under 
        subsection (a), the Secretary shall be subrogated to the rights 
        of the recipient of the payment as specified in the loan 
        guarantee or related agreements, including, as appropriate, the 
        authority (notwithstanding any other provision of law) to--
                    (A) complete, maintain, operate, lease, or otherwise 
                dispose of any property acquired pursuant to the loan 
                guarantee or related agreements; or
                    (B) permit the non-Federal borrower, pursuant to an 
                agreement with the Secretary, to continue to pursue the 
                purposes of the project if the Secretary determines the 
                purposes to be in the public interest.
            (2) Superiority of rights.--The rights of the Secretary, 
        with respect to any property acquired pursuant to a loan 
        guarantee or related agreement, shall be superior to the rights 
        of any other person with respect to the property.

    (c) Payment of Principal and Interest by Secretary.--With respect to 
any obligation guaranteed under this section, the Secretary may enter 
into a contract to pay, and pay, holders of the obligation, for and on 
behalf of the non-Federal borrower, from funds appropriated for that 
purpose, the principal and interest payments that become due and payable 
on the unpaid balance of the obligation if the Secretary finds that--
            (1)(A) the non-Federal borrower is unable to meet the 
        payments and is not in default;
            (B) it is in the public interest to permit the non-Federal 
        borrower to continue to pursue the purposes of the project; and
            (C) the probable net benefit to the Federal Government in 
        paying the principal and interest will be greater than that 
        which would result in the event of a default;
            (2) the amount of the payment that the Secretary is 
        authorized to pay shall be no greater than the amount of 
        principal and interest that the non-Federal borrower is 
        obligated to pay under the agreement being guaranteed; and
            (3) the borrower agrees to reimburse the Secretary for the 
        payment (including interest) on terms and conditions that are 
        satisfactory to the Secretary.

    (d) Action by Attorney General.--
            (1) Notification.--If the non-Federal borrower defaults on 
        an obligation, the Secretary shall notify the Attorney General 
        of the default.
            (2) Recovery.--On notification, the Attorney General shall 
        take such action as is appropriate to recover the unpaid 
        principal and interest due from--
                    (A) such assets of the defaulting non-Federal 
                borrower as are associated with the obligation; or
                    (B) any other security pledged to secure the 
                obligation.

[[Page 120 STAT. 3360]]

SEC. 206. <<NOTE: 43 USC 2425.>> OPERATIONS, MAINTENANCE, AND 
            REPLACEMENT COSTS.

    (a) In General.--The non-Federal share of operations, maintenance, 
and replacement costs for a project receiving Federal assistance under 
this title shall be 100 percent.
    (b) Plan.--On request of the non-Federal borrower, the Secretary may 
assist in the development of an operation, maintenance, and replacement 
plan to provide the necessary framework to assist the non-Federal 
borrower in establishing rates and fees for project beneficiaries.

SEC. 207. <<NOTE: 43 USC 2426.>> TITLE TO NEWLY CONSTRUCTED FACILITIES.

    (a) New Projects and Facilities.--All new projects or facilities 
constructed in accordance with this title shall remain under the 
jurisdiction and control of the non-Federal borrower subject to the 
terms of the repayment agreement.
    (b) Existing Projects and Facilities.--Nothing in this title affects 
the title of--
            (1) reclamation projects authorized prior to the date of 
        enactment of this Act;
            (2) works supplemental to existing reclamation projects; or
            (3) works constructed to rehabilitate existing reclamation 
        projects.

SEC. 208. <<NOTE: 43 USC 2427.>> WATER RIGHTS.

    (a) In General.--Nothing in this title preempts or affects State 
water law or an interstate compact governing water.
    (b) Compliance Required.--The Secretary shall comply with State 
water laws in carrying out this title. Nothing in this title affects or 
preempts State water law or an interstate compact governing water.

SEC. 209. <<NOTE: 43 USC 2428.>> INTERAGENCY COORDINATION AND 
            COOPERATION.

    (a) Consultation.--The Secretary shall consult with the Secretary of 
Agriculture before promulgating criteria with respect to financial 
appraisal functions and loan guarantee administration for activities 
carried out under this title.
    (b) Memorandum of Agreement.--The Secretary and the Secretary of 
Agriculture shall enter into a memorandum of agreement providing for 
Department of Agriculture financial appraisal functions and loan 
guarantee administration for activities carried out under this title.

SEC. 210. <<NOTE: 43 USC 2429.>> RECORDS; AUDITS.

    (a) <<NOTE: Regulations.>> In General.--A recipient of a loan 
guarantee shall keep such records and other pertinent documents as the 
Secretary shall prescribe by regulation, including such records as the 
Secretary may require to facilitate an effective audit.

    (b) Access.--The Secretary and the Comptroller General of the United 
States, or their duly authorized representatives, shall have access, for 
the purpose of audit, to the records and other pertinent documents.

SEC. 211. <<NOTE: 43 USC 2430.>> FULL FAITH AND CREDIT.

    The full faith and credit of the United States is pledged to the 
payment of all guarantees issued under this section with respect to 
principal and interest.

[[Page 120 STAT. 3361]]

SEC. 212. <<NOTE: 43 USC 2431.>> REPORT.

    Not later than 1 year after the date on which the eligibility 
criteria are published in the Federal Register under section 203(a), and 
every 2 years thereafter, the Secretary shall submit to the Committee on 
Energy and Natural Resources of the Senate and the Committee on 
Resources of the House of Representatives a report that describes the 
implementation of the loan guarantee program under section 204.

SEC. 213. <<NOTE: 43 USC 2432.>> EFFECT ON THE RECLAMATION LAWS.

    (a) Reclamation Projects.--Nothing in this title supersedes or 
amends any Federal law associated with a project, or a portion of a 
project, constructed under the reclamation laws.
    (b) No New or Supplemental Benefits.--Any assistance provided under 
this title shall not--
            (1) be considered to be a new or supplemental benefit for 
        purposes of the Reclamation Reform Act of 1982 (43 U.S.C. 390aa 
        et seq.); or
            (2) affect any contract in existence on the date of 
        enactment of this Act that is executed under the reclamation 
        laws.

SEC. 214. <<NOTE: 43 USC 2433.>> AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as are necessary 
to carry out this title, to remain available until expended.

SEC. 215. <<NOTE: 43 USC 2434.>> TERMINATION OF AUTHORITY.

    (a) In General.--Subject to subsection (b), the authority of the 
Secretary to carry out this title terminates on the date that is 10 
years after the date of enactment of this Act.
    (b) Exception.--The termination of authority under subsection (a) 
shall have no effect on--
            (1) any loans guaranteed by the United States under this 
        title; or
            (2) the administration of any loan guaranteed under this 
        title before the effective date of the termination of authority.

         TITLE III--REPORT ON TRANSFER OF RECLAMATION FACILITIES

SEC. 301. REPORT.

    (a) In General.--Not later than 180 days after the date of enactment 
of this Act, the Secretary shall submit to the Committee on Energy and 
Natural Resources of the Senate and the Committee on Resources of the 
House of Representatives a report that describes any impediments and 
activities that significantly delay the ability of the Secretary to 
complete timely transfers of title to reclamation facilities to 
qualified non-Federal entities under laws authorizing the transfers.

[[Page 120 STAT. 3362]]

    (b) Consultation.--In preparing the report under subsection (a), the 
Secretary shall consult with any appropriate non-Federal parties, 
including reclamation water and power customers.

    Approved December 22, 2006.

LEGISLATIVE HISTORY--S. 895:
---------------------------------------------------------------------------

SENATE REPORTS: No. 109-148 (Comm. on Energy and Natural Resources).
CONGRESSIONAL RECORD:
                                                        Vol. 151 (2005):
                                    Nov. 16, considered and passed 
                                        Senate.
                                                        Vol. 152 (2006):
                                    Dec. 6, considered and passed House, 
                                        amended.
                                    Dec. 8, Senate concurred in House 
                                        amendment.

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