S. 895

One Hundred Ninth Congress

of the

United States of America

AT THE SECOND SESSION

Begun and held at the City of Washington on Tuesday,

the third day of January, two thousand and six

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.

Be it enacted by the Senate and House of Representatives of

the United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

(a) 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.
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TITLE I—RECLAMATION RURAL WATER

SUPPLY ACT OF 2006

SEC. 101. SHORT TITLE.

This title may be cited as the ‘‘Reclamation Rural Water Supply

Act of 2006’’.

SEC. 102. 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
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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. 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 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.
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(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. 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
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(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. 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;
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(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) 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) 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 nonFederal 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.
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(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) make available to the public, on request, the appraisal

report prepared under this title; and

(3) 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 nonFederal 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. 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
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(B) submitted to the Secretary by the non-Federal

project entity; or

(3)(A) 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 nonFederal 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) 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 nonFederal 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
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(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) 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—
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(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) 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 nonFederal 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.
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(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 nonFederal 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. 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.—
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(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. 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. 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 II—TWENTY-FIRST CENTURY

WATER WORKS ACT

SEC. 201. SHORT TITLE.

This title may be cited as the ‘‘Twenty-First Century Water

Works Act’’.

SEC. 202. 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
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(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. PROJECT ELIGIBILITY.

(a) ELIGIBILITY CRITERIA.—

(1) 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 nonFederal 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 nonFederal borrower to pay all operations, maintenance, and

replacement costs of the project facilities; and
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(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. 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. 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.
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(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.
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SEC. 206. 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. 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. 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. 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. RECORDS; AUDITS.

(a) 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. 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.
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SEC. 212. 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. 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. 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. 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.
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(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.

Speaker of the House of Representatives.

Vice President of the United States and

President of the Senate.