APR 08, 1992

Memorandum

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

Attention: 100

From: Commissioner

Subject: Implementation of the Reclamation States Emergency Drought Relief Act

of 1991 (Act) - P.L. 102-250. (Drought)

Given the severe and extended drought conditions in the West, it is important that we

move quickly to implement those provisions ofthe subject Act (copy attached) which are

needed immediately, for example: section 101 (providing assistance to willing buy-ers and

sellers, participation in water banks); and section 102 (use of project and non-project

water both within and outside authorized service areas, use of Federal facilities and

contracts for temporary water supplies, storage and conveyance of non-project water

inside and outside project service areas for M&I, fish and wildlife and agricultural uses).

To the extent the Act’s provisions will be implemented through some form of contract,

this policy memorandum provides interim implementation guidance for administering the

contracting process in an expeditious manner (attached). This interim guidance is

effective immediately. The Assistant Commissioner - Resources Management (ACRM)

is in the process of developing additional interim guidance for implementing the Act,

which will be the subject of subsequent policy memoranda from this office.

Authority to promulgate rules and regulations is provided by section 302 of the Act. The

necessity for rules and regulations will be determined as we assess, based on input from

ACRM and your offices, issues associated with interpretation and imple-mentation of the

Act on a section-by-section basis.

Please advise ACRM of any activities which you contemplate undertaking to implement

the Act. The purpose of this is to ensure Reclamation-wide consistency in the interpretation and application of the legislation and to collect required data for the expenditures and accomplishments report to be included in the annual budget. Additionally, to

help us develop guidance that is workable and responsive to drought conditions, please

provide any thoughts you have on the above-mentioned contracting policies to W-6400,

with a copy to ACRM.
Each office should proceed as previously requested in assisting Governors’ offices. The

Act provides spending authority of $90 million in fiscal years 1992 through 1996. Since

no funds have been appropriated, you should continue your efforts in reviewing drought funding requirements and advise the Assistant Commissioner - Program,

Budget, and Liaison of workload and funding requirements for implementation of the

Act.

I am also attaching a copy of a memorandum from ACRM to me with an attached

preliminary analysis, in summary form, of each section of the Act. Comments and

suggestions concerning the preliminary analysis and subsequent guidance as it becomes

available should be directed to ACRM, with a copy to W-6500.

DENNIS B. UNDERWOOD

Attachments
April 7, 1992

Interim Contract Implementation Guidance

I. Service Contracts

1. Service would be provided pursuant to short-term (2-year maximum) contracts

which would normally be independent of existing contracts.

2. Regions should initially submit a representative basis of negotiation along with

a representative contract for approval by the Commissioner. Upon such approval, the

delegations of authority for water service contracts would be applicable.

3. As a minimum, the rate for project water must be “at least sufficient to recover all

Federal operation and maintenance costs and administrative costs, and an appro-priate

share of capital costs, including interest on such capital costs allocated to municipal and

industrial water,” except that project water delivered to non-project landholdings shall be

at full cost (as defined in section 202(3) of the RRA).

4. Water transfers involving purchases from willing sellers by willing buyers, with

storage in or conveyance through Federal Reclamation facilities, could be accom-plished

through a three-party contract among the seller, the buyer, and Reclamation, whereby

the buyer pays the seller for the water and pays Reclamation for the storage or

conveyance services. The same procedure could be implemented for water exchange

arrangements.

5. Contracts/Agreements may be executed to facilitate participation in water banks.

II. Repayment Contracts

1. Funds appropriated for construction, management and conservation activities

under Section 101(a) or for loans for purposes stated in section 103 will be covered

under a repayment contract. Terms of contracts should be as short as possible and in no

case may a contract under Section 103 exceed 15 years.

2. The Secretary must notify the Senate Committee on Energy and Natural

Resources and the House of Representatives Committee on Interior and Insular Affairs

in writing of any loans the Secretary intends to approve not less than 30 days prior to

granting final approval. Accordingly, draft letters to the chairman of each Committee

should accompany any loan proposal submitted by the Regional Director.

3. Section 103 provides that all loans approved by the Secretary, including those for

irrigation purposes, shall be at the interest rate determined by the Secretary of the

Treasury.
4. Except for matters explicitly covered in the Act, loan contracts and administrative

processing may generally follow the existing Small Reclamation Projects Act loan procedures. Any such request must demonstrate the contractor’s ability to fully repay the

loan within the term of the contract.

5. Following approval of a basis of negotiation, repayment contracts should be

processed under existing delegations of authority.

III. General Provisions.

1. All reimbursable costs incurred by the United States are to be repaid within the

term of the contract.

2. Contracts will be for the sole purpose of carrying out the provisions ofthe Act.

3. Applicable interest rates may be obtained from D-5440.

4. No water purchases pursuant to section 101(c) are to be made until specific

guidance to the contrary is issued.