D-5640

LND 9.0 JUN

MEMORANDUM

To: Regional Director, PN, MP, LC, UC, GP

Attention: 400

From: Donald R. Glaser

Acting Director, Program Analysis Office

Subject: Application ofthe Acreage Limitation Provisions in Districts Utilizing

Commingled Irrigation Water

By issuance ofthis westwide policy, we have completed planned corrective action 9.a

identified in the fiscal year 1993 Alternative Management Control Review (AMCR) of the

Reclamation Reform Act of 1982 (RRA) program. This corrective action was developed as a

result of an identified control weakness that stated, “No policy exists concerning the proper

application of the RRA provisions in districts that have commingling provisions in their

contracts.” The corrective action provided:

“The regional RRA coordinators reexamine this issue, and develop and

distribute a policy that allows either for a consistent application ofthe RRA

provisions to districts that commingle water or explains why, how and when

inconsistent application is acceptable.”

In addition, the Office ofInspector General (OIG) issued a report on June 20, 1991, that

highlighted the inconsistencies between regions on how the acreage limitation provisions were

applied in districts utilizing commingled water (Reclamation Reform Act Enforcement

Activities, Bureau of Reclamation [report number 91-I-929D. Reclamation concurred with the

resulting recommendation for the establishment of policies and procedures to ensure

consistent regional RRA enforcement including the Act’s acreage limitation and reporting

requirements in commingled water situations.

As the fiscal ye~ 1993 AMCR reported, Reclamation found that the primary inconsistency in

the application ofthe acreage limitation provisions in commingled districts centered on the

submittal ofthe certification and reporting forms. The purpose of this policy is to establish a

method that will provide for the consistent submittal of RRA certification and reporting forms

in districts using commingled irrigation water.
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Background

During 1989, a Commingling Analysis Team (Team) was formed to investigate the topic of

consistent submittal of RRA forms in commingling districts and submit their findings to the

RRA Task Force. The Team outlined several options based on the RRA, Solicitor’s opinions,

and the Acreage limitation Rules and Regulations. One of the options the Team analyzed for

resolution of the problem of inconsistent certification and reporting procedui~es was to develop

policy recognizing and validating the current commingling met1~od used in each region.

Selecting this option, referred to as “status quo,” was based on the premise that Section 225

ofthe RRA validates existing commingling provisions in contracts in force on October 1,

1981, and by extension, current certification procedures in commingling districts; even

though, such procedures did not predate the enactment ofthe RRA. (Note: Section 426.18(a)

ofthe Acreage Limitation .Rules and Regulations reflects the language of Section 225.)

The Team found that there were two general methods, individual and district-wide, in place

concerning the collection of certification and reporting forms in districts utilizing commingled

water. The “individual” method provides that each landholder is responsible for full reporting

of irrigable and irrigation land, and for the designation and selection of eligible and full-cost

lands to district officials forthe upcoming water year. With this responsibility, each

landholder is required to submit certification and reporting forms, in compliance with section

426.10 of the Acreage limitation Rules and Regulations.

The “district-wide” method of commingling concludes that certain lands were identified as

eligible to receive irrigation water prior to the RRA. The key difference in this method is

that rather than assuming that each landholder is receiving a proportional share of

Reclamation irrigation water in the amount delivered; some landholders only receive

Reclamation irrigation water, while others receive their irrigation water from other sources,

even though no actual difference exists in the commingled irrigation water delivered. This

method is being employed in at least one region. In that region, unlike the other regions,

RRA forms are currently not required from all landholders who hold more than 40-acres and

are subject to the acreage limitation requirements. As an example, in one district enough land

eligibility for Reclamation irrigation water is established for landholders in 40-acre and under

landholdings to account for all Reclamation irrigation water delivered to the district; therefore,

no landholder in the district is required to complete an RRA form to be eligible to receive

commingled water.

(It should be noted that there are other variations in the specific application of the acreage

limitation provisipns in commingled districts, but the two methods described above provide

the most distinguishable differences.)

As a result ofthe selection ofthe status quo option, the findings made by the Team remain

unchanged. Since 1989 each region has continued to exercise its commingling arrangements

differently. However, no policy was ever issued that explicitly justified the acceptability of

the two general methods. Thus, the findings of the QIG and AMCR reports.
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An advantage to the continuation ofthe status quo option is that each district utilizing

commingled water could proceed with their current RRA administration and enforcement

activities and Reclamation would not have to try to get such districts to agree to changes to

their contracts or commingling agreements. The disadvantage experienced when preserving

the “status quo” option is the continued inconsistency among the districts with their collection

of certification and reporting forms from landholders and thus, application ofthe acreage

limitation provisions.

Specifications

Section 426.10(d)(1) requires “full disclosure of irrigable and irrigation land owned and leased

in all districts,” and the annual requirement for the receipt of Reclamation irrigation water is

the filing of a completed certification or reporting form. Therefore, as stated in Section

426.10(e), any land that receives Reclamation irrigation water must be identified on the

appropriate certification and reporting forms.

Section 426.18(b) ofthe Acreage limitation Rules and Regulations provides how Federal

Reclamation law and the subject rules will be applied in commingled districts. In general,

where the facilities utilized to commingle water are built either with or without funds

provided by the Federal government, the acreage limitation provisions are applicable to

landholders who receive Reclamation irrigation water.

In those districts utilizing the “district-wide” method, the difficulty encountered in applying

the acreage limitation provisions is tracking excess and full-cost lands when landholding

changes occur without the submittal of certification and reporting forms. This difficulty

directly affects the establishment ofthe eligibility for specific parcels ofland. With the

absence of certification and reporting forms to support the eligibility ofirrigable and irrigation

lands, it would be necessary to conclude that all such land receiving irrigation water in

districts subject to the acreage limitation provisions, not only are receiving non-Reclamation

irrigation water, but are in fact “excess” lands. Accordingly, such land would have to be sold

to an eligible buyer at an approved price if it were to be eligible to receive Reclamation

irrigation water in the future. It would be difficult for Reclamation to enforce this

determination; therefore, the submittal ofthe RRA forms is a critical program requirement

even if the landholder determines that all irrigation water received is from non-Reclamation

sources.

Policy Statement

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Because of current contract provisions and commingling agreements, the consistent

application of the acreage limitation provisions in districts utilizing commingling will only be

reached over time as contracts and commingling agreements are renewed and amended for

other purposes. As districts currently utilizing the “district-wide” method begin to use the

“individual method,” the capability for tracking excess and full-cost lands will be strengthened

since such land will be identified on the appropriate RRA forms. The tracking of lands
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receiving commingled water within the district will continue to be the responsibility ofthe

district that initially contracted with the United States for repayment ofthe project. This

responsibility coincides with the RRA forms collection activity.

Current contract relationships and commingling agreements in force, as of the date of this

memorandum, will be honored until such time as a change is encountered. Whenever a

contract or commingling agreement is initiated, renewed, or amended, it will include standard

language addressing the application ofthe acreage limitation p~visions in commingled

districts, if applicable. Accordingly, the contracts will require full disclosure on RRA forms

of all irrigable and irrigation lands that are capable of receiving Reclamation irrigation water.

Eventually, all land located in districts subject to the acreage limitation provisions will be

compelled to comply with Section 426.10 ofthe Acreage Limitation Rules and Regulations.

Within districts that are required to identify lands receiving Reclamation irrigation water and

non-Reclamation irrigation water, those lands that are not declared on RRA forms will be

considered as ineligible lands until such time as the landholder submits RRA forms that

indicate otherwise.

It will be each district’s responsibility to ensure that sufficient non-Reclamation irrigation

water is available to irrigate the following situations if the land in question is to be irrigated:

(1) those lands for which RRA forms are not submitted, (2) excess land, and (3) any full-cost

land for which the full-cost rate is not to be paid. Each district will be responsible for

identifying those lands receiving the non-Reclamation irrigation water, the amount of

irrigation water delivered to those lands during the just completed water year, and the total

supply of non-Reclamation irrigation water available by December 31 of each water year, if

applicable. Ifsufficient quantities of non-Reclamation irrigation water are determined to not

have been available during the water year, full-cost must be remitted to Reclamation for

eligible lands that received irrigation water and are subject to the full-cost rate, as warranted,

and Reclamation must be immediately notified of any additional deficiencies.

Contract/Commin~lin~ Agreement Considerations

When an entity submits a proposal to establish a commingling procedure through a contract

or commingling agreement, the acreage limitation topics listed below must be addressed by

Reclamation to ensure consistency.

• Require that all irrigation and irrigable lands are included on RRA certification and

reportingforms, and the district summary form provided to Reclamation.

• Require the Contractor to report annually, by an agreed upon date not to exceed

December 31, on all actual Reclamation irrigation water deliveries that were made

during the water year; included would be the availability of non-Reclamation irrigation

water and to which lands such water was delivered.
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• Identify the quantity of Reclamation irrigation water that will be furnished to the

Contractor for delivery to eligible lands; in some cases this may need to be estimated.

• Ensure that lands which receive Reclamation irrigation water commingled with nonReclamation irrigation water have paid, when applicable, the commingling fee as

required by section 426.18(b)(ii) ofthe Acreage Limitation Rules and Regulations, or

if not, that all provisions ofthe RRA have been met with regard to such land.

Additional commingling language may be needed for use in commingling agreements to more

specifically identify the commingling situation. That language will be developed, when

necessary, in addition to the standard commingling considerations previously provided.

This policy intends to provide for maintaining the current methods of application of the

acreage limitation provisions in districts utilizing commingling through contractual

relationships and commingling agreements in force until such time as renegotiation or an

amendment is proposed. At that time, contracts currently utilizing the “district-wide method”

or variation ofsuch are to be revised to use the “individual method.” All variations to the

two general methods described in this memorandum are also included in the actions to be

taken.

An attachment is included that lists all districts currently subject to the acreage limitation

provisions and their commingling status for each region. This list will provide a baseline

from which to begin the transformation toward consistency with regard to application of the

acreage limitation provisions in such districts. Only those districts whose current method is

listed as “District-wide” will be allowed to utilize that method. This allowance will terminate

when the contract or commingling agreement with that district is renewed, amended, or

discontinued.

The effective date ofthis policy will be January 1, 1995. Contracts staff in regional and area

offices should be provided a copy ofthis memorandum. Any questions relating to this

subject may be directed to Gene Munson at (303) 236-1061, extension 246.

Attachment
LIST OF DISTRICTS UTILIZING COMMINGLED WATER

Pacific Northwest Region

District

Medford Irrigation District

Rogue River Valley Irrigation District

Talent Irrigation District

Method of RRA Forms Collection

Individual

Individual

Individual

Method ofRRA Forms Collection

Anderson-Cottonwood Irrigation District

Arvin-Edison Water Storage District

Banta-Carbona Irrigation District

Colusa Drain Mutual Water Company

Colusa Irrigation Company

Ducor Irrigation District

Fresno Irrigation District

Fresno Slough Water District

Glenn-Colusa Irrigation District

Gravely Ford Water District

Hills Valley Irrigation District

James Irrigation District

Kern-Tulare Water District

Lower Tule River Irrigation District

Maxwell Irrigation District

Meridian Farms Water Company

Natomas Central Mutual Water Company

Pelger Mutual Water Company

Pixley Irrigation District

Pleasant Grove-Verona Mutual Water Company

Porterville Irrigation District

Princeton-Codora-Glenn Irrigation District

Provident Irrigation District

Rag Gulch WatersDistrict

Reclamation District No. 1004

Reclamation District No. 108

Reclamation District No. 1606

Roberts Ditch Irrigation Company

District-wide

(all)

District

Mid-Pacific Region

1 of 3
Sartain Mutual Water Company

Sutter Mutual Water company

Swinford Tract Irrigation Company

Tisdale Irrigation & Drainage Company

Tranquillity Irrigation District

Tn-Valley Water District

Tulare Irrigation District

West Stanislaus Irrigation District

West Side Water District

County of Tulare (Master Contractor):

Alpaugh Irrigation District

Atwell Island Water District

Individual Contractors

Marchini Farms

Melvin Hughes

Lower Colorado Region

District Method of RRA forms Collection

Central Arizona Irrigation and Drainage District Individual

Maricopa-Stanfield Irrigation and Drainage District Individual

Upper Colorado Region

District Method of RRA Forms Collection

Bostwick Park Water Conservancy District Individual

Bridger Valley Water Conservancy District (all)

Central Utah Water Conservancy District

Collbran Conservancy District

Crawford Water Conservancy District

Dolores Water Conservancy District

Emery Water Conservancy District

Florida Water Conservancy District

Hammond Conservancy District

Middle Rio Grande Conservancy District

North Fork Water Conservancy District

Preston, Riverdale, and Mink Creek Canal Company

2 of 3
Provo River Water Users Association

Silt Water Conservancy District

Tri-County Water Conservancy District

Uintah Water Conservancy District

Uncompahgre Valley Water Users Association

Weber Basin Water Conservancy District

Great Plains Region

District Method of RRA Forms Collection

Central Nebraska Public Power and Irrigation District Individual

Southeastern Colorado Water Conservancy District Individual

3 of 3
Attachment 2

United States Department of the Interior

BUREAU OF RECLAMATION

WASHINGTON, D.Q 20240

0-410 APR 191985

Hemoranduwu I

To: Regional Director, Sacramento, California

Attention: HP—400

From: x~auissioner

Sut~ject: Certification and Reporting Requirements for Irrigation Land —

Sacramento RI ver Contractors

This memorandum sets forth policy regarding reporting requirements for Sacramento

River water right contractors who con~uingle project and nonproject water.

Since all-the land classified as irrigable within these districts falls within

the definition of irrigation land under the acreage limitation rules and regulations, reporting or certification forms must be completed in order for the land

to be eligible to receive project water. However, because the districts have a

nonproject water supply, they are only obligated to have sufficient eligible

acreage to utilize their project water supply.

For those landholders who do not report, their land will be ineligible for project water. With the approval of the Secretary, they ~iayregain their eligibilSty by completing the required forms provided they can establish that their land

would have been otherwise eligible for project water at the time they acquired

it. However, we should caution that it may become extremely difficult to male

this determination if the land has been bought and sold several times In the

intervening years. Furthermore, the costs borne by the United States in helping

reach such a determination will be charged to the petitioner.

I

cc: Assistant Solicitor — Water and Power

m mzx

w~ TO:
Attachment 3

Subject: Sample Commingling Contract Article

Water Acquired by the Contractor Other Than

from the United States

Water or water rights now owned or hereafter acquired by the Contractor other than from the

*

United States and project water furnished pursuant to the terms ofthis contract may be

simultaneously transported through the same distribution facilities of the Contractor.

1. Provided. That where the facilities utilized for commingling project water and

nonproject water were constructed without funds made available pursuant to Federal

reclamation law, the provisions of Federal reclamation law will be applicable only to the

landholders of lands which receive project ‘vater: ~ That the eligibility ofland to

receive project water can only be established through the certification and reporting

requirements as specified in the Acreage Limitation Rules and Regulations (43 CFR Part 426):

Provided further. That the water requirements of eligible lands can be established and the

quantity of project water to be utilized is less than or equal to the quantity necessary to

irrigate eligible lands: Provided further, That land that is not established as eligible through

the submittal of certification forms will remain ineligible to receive project water until such

time that certification forms indicating such land was not held in excess of established

ownership entitlements on a westwide basis since January 1, 1995, are submitted to

Reclamation.

2. Provided, That where the facilities utilized for commingling project water and

nonproject water were constructed with funds made available pursuant to Federal reclamation

law the nonproject water will be subject to Federal reclamation law: Provided further, That if

the district collects and pays to the United States an incremental fee, as established by

Reclamation, which reasonably reflects an appropriate share ofthe cost to the Federal

1 of 2
Government, including interest, ofstoring or delivering the nonproject water, the nonproject

water will not be subject to Federal reclamation law.

‘S

2 of 2
To:

From:

Subject:

Attachment 4

United States Department ofthe Inte

BUREAU OF RECLAMATION

Washington. D.C. 20240

JUL 20 1994

MEMORANDUM

OFfICiAl.

(:3~ ~

ior JUL25 494

1.

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L’(V’J. COPY 7~

LIAS7i

fl~E •I 5~:nej

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c~’C3.fl~

Director, Office of Program Analysis ~flOJ~CT

Director, Office of Operations

Director, Office of Policy and External ~ffairs

Regional Director. PN, HP, LC UC,(GP —

Attention: ioo, 400

JL

Contracts

Daniel Commissioner P. Beard

and Repayment

tL&L

Policy ($4

Introduction

The Bureau of Reclamation’s (Reclamation) past contracting

practices have concentrated on defining repayment terms and on

providing long—term assurances of water supplies, to water users.

As a corollary, Reclamation has not historically reserved for

itself the flexibility to improve the management of existing

projects, shift water supplies to meet growing demands for

municipal and environmental uses, or address contemporary

resource management needs. This has• placed the United States in

a disadvantageous position to respond to changing public values.

One of my primary objectives is to ensure that Reclamation’s

future contracting and repayment policies and procedures are in

accord with our goal of being a premier water resources

management agency. Flexibility contained in future contracts

will be oriented to assist in achieving the Bureau’s multiple

objectives. Toward this end, we need to revise our policies and

procedures to ensure that Reclamation has considerably more

flexibility and discretion in the management of the water, land,

and power resources associated with our projects than has

historically been the case. Detailed guidance for implementing

the policids set forth in this memorandum will follow as soon as

possible. It is also of paramount importance that we keep

emerging water needs, environmental concerns, and sound business

practices at the forefront of our consi~derations.

Alternatives to Contracts

Reclamation can maximize its discretion and flexibility by

seeking alternatives to contracts whenever practical. Thus1 if

formal contractual arrangements for the recovery of reimbursable

W—6400
— Ia

project costs or to protect the interests of the United States

are not required, we will utilize less formal operating

agreements, letters of intent, and other less restrictive

documents to memorialize the terms and conditions of an

agreement. Such instruments must be approved in adVance, with

concurrence by the Solicitor and the Assistant Secretary — Water

and Science, by the Commissioner. Requests for approval—to use

these instruments should be addressed to the Program Analysis

Office, which will promptly process such requasts and obtain

concurrence and comments from other organizational components as

appropriate.

Aareement on Contract Terms

In order to avoid unnecessary litigation, we must ensure that the

parties to the contract share the same understanding of contract

terms. Therefore, where a party to a contract is engaged in

litiga~tion over the meaning of specific contract terms or otherwise has expressed disagreement with the Bureau of Reclamation’s

understanding of terms, the Bureau should not enter into a new

contract containing those same terms. In such situations, the

Bureau should insist that the parties resolve differences before

entering into a new contract, and set out with specificity the

meaning of the terms for the purpose of the new contract.

New or Renewal Contracts

With the foregoing precepts in mind, the following policies shall

henceforth govern the negotiation and administration of new.

repayment contracts and new water service contracts including

renewals, under the authority of Reclamation law, including, but

not limited to: the Reclamation Project Act of 1939, the Water

Supply Act of 1958, the Warren Act, the Small Reclamation

Projects Act, and the Safety of Dams Act.

1. Contracts will ensure that the Federal investment and

Reclamation’s administrative costs are recovered in an effective

and businesslike manner. When negotiating these aspects of a

contract, consideration needs to be given to the full extent of

Reclamation’s •cost recovery objectives and policies, and to all

sources of repayment for a given project, not just to the narrow

issues presented by a given contract.

2. Contracts will provide for the appropriate balancing of

all water uses, including new water demands, recreation, instream

flow needs, ~nhancement of fish and wildlife habitat and

resources, and water quality. Contracts will be drafted in a

manner that will permit and encourage water transfers to occur

and aid in our objective of providing water to a broader spectrum

of water uses.

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3. Contracts will be written to avoid or eliminate nonessential explanatory recitals and other restatements of past

agreements, accomplishments, or rights of parties other than the

United States.

4. Contracts will promote improved water management and

conservation and require water conservation plans (with -.

implementation schedules) pursuant to the authority of section

210 of the Reclamation Reform Act of 1982 (RRA), as amended.

5. Pricing and rate—setting provisions~ will promote efficient

use of project water supplies. Our pricing policy is to

recognize market prices and/or the value of water in specific

situations.. We will rely less on cost-based or replacement costbased methods of pricing and setting rates. In addition1

wherever possible, we will eliminate or avoid using take—or—pay

provisions, which tend to encourage excessive or unnecessary use

of water.

6. Contracts will provide for reasonable beneficial use

determinations by Reclamation and require that the inappropriate

or wasteful use of water be eliminated. Contracts should also.

provide for suitable and effective enforcement actions in the

event there is inappropriate or wasteful use of water.

7. Contracts will be written for the shortest possible term

consistent with good business practices and effective water

management. The working presumption is that this period is 25

years or less. Contractors might be offered a “menu” of

possibilities from which they could select the most suitable

terms. Rather than offering a 25 year contract for a specific

quantity of water, the contractor could be offered a 5, 10, 15,

or 20 year contract, with different quantities and repayment

terms for each contract. Another possibility might be to avoid

long term “dropdead” contracts, and develop short—term contracts

of 10 years that could be renewed annually, providing the user

with a more .or less permanent 10 year contract. Under this

approach, when the Government decided that it no longer desired

to renew, the user would have 10 years to make other

arrangements.

8. Contract negotiations will be in strict compliance with

the RRA, the accompanying rules and regulations, and applicable

policy, including the requirement to announce negotiations in

advance, and will be conducted in a manner that provides

opportunities for the public to observe and provide meaningful

input.

9. Subject to delegation of authority and approval of a basis

of negotiation, each Regional Director will be responsible and

accountable for conducting contract negotiations and drafting

proposed contracts -

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10. Meetings held prior to the approval of the basis of

negot~.ation for the purpose of gathering and exchanging factual

informati6h will be clearly identified as such and conducted in a

manner that would not prejudice the pending approval of the basis

of negoti~tion or the contract negotiations.

Amendatorv Contracts

We will negotiate contract amendments to achieve as many of the

preceding policy objectives as are applica~le to a given

situation as a condition of agreeing to the additional benefits

sought by the water user. If Reclamation cannot obtain

sufficient concessions of value to the United States to justify

providing additional benefits to the water user, then we will

exercise our option of simply not agreeing to contract

amendments.

Repayment Contracts

Repayment contracts, although having a fixed repayment period,

have implications lasting far beyond the original contract term.

After payou~of construction costs, water users often pay only

O&M costs. O&M costs alone are not sufficient to maintain the.:

services that are provided; replacement costs are major

additional costs that have not always been collected. Thus, for

paid—out repayment contracts, I want us to remedy the existing

situations and avoid future situations where water users pay only

a part of the costs associated with providing project benefits

after payout of construction costs. There are at least three

options available to address this problem: (1) charge for

replacement costs, (2) levy a charge that is commensurate with

the value of water, or (3) transfer title of the facilities to

the water users. Water users must be encouraged to assume

greater responsibility for all costs and to recognize the public

values associated with Reclamation projects. I expect to see

improved cost recovery that in turn will result in water prices

that more nearly reflect market value and will encourage water

conservation.

Preparation of Policies and Procedures

I am assigning the Director, Office of Program Analysis, in

consultation with the Office of the Solicitor, the Director,

Office of Yperations, and the Regional Directors, to develop new

policy guidance and procedures, and standardized contract

provisions,~ to ensure the implementation of the above principles,

and to analyze and recommend means for dealing with existing.

repayment contracts. Also, I am assigning the Director, Office

of Program Analysis, to review Reclamation’s beneficial use

determinations. Your interest in and support for these important

activities is appreciated.

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