To authorize the Secretary of the Interior to enter into contracts for the use of excess storage and conveyance capacity of the Fryingpan-Arkansas Project, Colorado, and for other purposes.

SECTION 1. FEASIBILITY STUDY.

    (a) Authorized.--Pursuant to Federal reclamation law (the Act of 
June 7, 1902, and all Acts amendatory thereof or supplementary 
thereto), the Secretary of the Interior is authorized to conduct a 
feasibility study to determine the most feasible method of meeting the 
present and future water supply and related storage requirements within 
the area served by the Fryingpan-Arkansas Project, including the 
potential enlargement of Fryingpan-Arkansas facilities. In conducting 
such study, the Secretary shall take into consideration the Preferred 
Storage Options Plan Report published September 21, 2000, by the 
Southeastern Colorado Water and Storage Needs Assessment Enterprise and 
Final PSOP Implementation Committee Report dated April 19, 2001 
(hereinafter referred to as the ``PSOP Reports''), the 
intergovernmental agreement dated May 27, 2004 among the City of 
Pueblo, the City of Aurora, the Southeastern Colorado Water Conservancy 
District, the City of Fountain, the City of Colorado Springs, the Board 
of Water Works of Pueblo, Colorado (hereinafter referred to as the 
``Regional IGA''), and the need to ensure compliance with the Arkansas 
River Compact as executed by the states of Colorado and Kansas on 
December 14, 1948 (hereinafter referred to as the ``Arkansas River 
Compact'').
    (b) Funding.--Before funds are expended for the study authorized by 
this section, the Southeastern Colorado Water Activity Enterprise shall 
first agree to participate in the feasibility study and to fund, at a 
minimum, 50 percent of the costs of such study. The Southeastern 
Colorado Water Activity Enterprise's share of the costs may be provided 
partly or wholly in the form of services directly related to the 
conduct of the study, as determined by the Secretary. Costs incurred 
prior to the enactment of this Act to develop the PSOP Reports may be 
credited toward such Enterprise's share of the costs of the feasibility 
study, as determined by the Secretary.
    (c) Study to Be Submitted.--The Secretary shall submit the 
feasibility study authorized by this section to the President and the 
President Pro Tempore of the Senate and the Speaker of the House of 
Representatives.
    (d) Further Authorization Required for Certain Expenditures.--No 
funds shall be expended for the construction of enlargements, or any 
other alternative identified in the feasibility study authorized by 
this section for which authority does not currently exist, without 
further authorization by Congress.
    (e) Authorization of Appropriations.--There is authorized to be 
appropriated $4,000,000 to conduct the feasibility study authorized by 
this section.

SEC. 2. SECRETARY AUTHORIZED TO ENTER INTO CONTRACTS FOR THE USE OF 
              EXCESS STORAGE AND CONVEYANCE CAPACITY OF THE FRYINGPAN-
              ARKANSAS PROJECT, COLORADO.

    The Act of August 16, 1962, as amended, (76 Stat. 389 et seq., as 
amended), is amended further by adding at the end the following new 
sections:
    ``Sec. 8. (a)(1) Except as provided in Section 9, and subject to 
the provisions of this Act and all other applicable Federal statutes, 
the Secretary is authorized to enter into contracts with any entity, 
private or public, (hereinafter referred to as `entity'), for the use 
of excess capacity in the Fryingpan-Arkansas Project for the purpose of 
diverting, storing, impounding, pumping, exchanging, or conveying 
nonproject water for irrigation, domestic, municipal and industrial, or 
any other beneficial purpose.
    ``(2) In entering into such contracts, the Secretary shall take 
into consideration the PSOP Reports, the Regional IGA and the need to 
ensure compliance with the Arkansas River Compact.
    ``(b) The Secretary is authorized to enter into contracts pursuant 
to this section provided that--
            ``(1) to the extent such contracts are with an entity that 
        does not have an allocation of Project carry over storage space 
        pursuant to the allocation principles adopted by the 
        Southeastern Colorado Water Conservancy District on November 
        29, 1979, and confirmed by the District Court of Pueblo County 
        in Civil Action No. 40487 by decree dated December 18, 1979, 
        including any subsequent modifications made by the District 
        that are confirmed by the District Court; the contracts shall 
        not impair or otherwise interfere with the ability of an entity 
        that does have an allocation of Project carry over storage 
        space to enter into contracts for the use of excess water 
        storage and conveyance capacity pursuant to this section 8; and
            ``(2) except as provided in section 9, before entering into 
        such a contract with an entity that will use water stored or 
        conveyed under such contract outside of the natural basin of 
        the Arkansas River within Colorado, the Secretary shall provide 
        the Southeastern Colorado Water Conservancy District a first 
        right of refusal, exercisable within 90 days, to enter into 
        contracts for the use of excess water storage and conveyance 
        capacity made available to the individual or entity that will 
        use water stored or conveyed under such contract outside of the 
        natural basin of the Arkansas River within Colorado; Provided, 
        in no event shall the Southeastern Colorado Water Conservancy 
        District enter into a sub-contract with an entity that will use 
        water stored or conveyed under such contract outside of the 
        natural basin of the Arkansas River.
    ``(c) Subject to the provisions of subsection (b), the Secretary 
may enter into contracts authorized by this section upon such terms and 
conditions as the Secretary may determine to be just and equitable. The 
term of any such contract shall be for such period, not to exceed 40 
years, as the Secretary deems appropriate. Upon expiration, such 
contracts may be renewed upon such terms and conditions as may be 
mutually agreeable to the Secretary and the contractor for the use of 
excess capacity.
    ``(d) All charges established pursuant to this section shall be 
just and equitable as to the rates paid by the those entities that 
receive project water from the Fryingpan-Arkansas Project facilities.
    ``(e) Prior to the execution of any contracts under this section, 
the Secretary shall execute an agreement with the Southeastern Colorado 
Water Activity Enterprise to provide guidelines for the terms to be 
contained in the contracts executed pursuant to this section. Such 
guidelines shall appropriately address impacts associated with water 
operations under the contracts, surcharges established by the 
Enterprise, reimbursement of costs incurred, and water quality 
monitoring, as identified by the Southeastern Colorado Water Activity 
Enterprise and the Secretary.
    ``Sec. 9. (a) The Secretary of the Interior may enter into new and 
renewal contracts with the City of Aurora, Colorado, or an enterprise 
of the City, for a term not to exceed the term referenced in Section 
8(c), for the use of excess capacity in the Fryingpan-Arkansas Project 
for the purpose of diverting, storing, impounding, pumping, exchanging, 
or conveying nonproject water for irrigation, domestic, municipal and 
industrial, or any other beneficial purpose. Such contracts shall be--
            ``(1) limited to waters appropriated from the Arkansas 
        River held by the City of Aurora, Colorado, or an enterprise of 
        the City that--
                    ``(A) are decreed water rights and owned by the 
                City of Aurora, Colorado, or an enterprise of the City 
                as of December 7, 2001;
                    ``(B) are water rights described in a Colorado 
                Water Court water rights application pending as of 
                December 7, 2001, or an amendment or re-filing thereof, 
                as long as such amendment or re-filing does not 
                increase the draft of water from the Arkansas Basin 
                that would have been available to City of Aurora, 
                Colorado, or an enterprise of the City under the 
                original application;
                    ``(C) result from water lease agreements existing 
                as of December 7, 2001, including any renewal or 
                replacement contract for no more than the existing 
                amount of water;
                    ``(D) result from interruptible supply agreements 
                or water bank transactions authorized under Colorado 
                law, and operating no more than five calendar years 
                during any period of ten consecutive calendar years; or
                    ``(E) is traded to, or exchanged with, the City of 
                Aurora, Colorado, or an enterprise of the City for one 
                of the foregoing items (A) through (C) as long as such 
                trade or exchange does not increase the draft of water 
                from the Arkansas River Basin that would have been 
                available to the City of Aurora, Colorado, or an 
                enterprise of the City under subparagraphs (A) through 
                (C);
            ``(2) are for water obtained by the City of Aurora, 
        Colorado, or an enterprise of the City from the Colorado River 
        consistent with section 12; or
            ``(3) take into consideration the need to ensure compliance 
        with the Arkansas River Compact as executed by the states of 
        Colorado and Kansas on December 14, 1948.
    ``(b) Prior to the execution of any renewal contract with the City 
of Aurora, the Secretary of the Interior shall execute an Agreement 
with the Southeastern Colorado Water Activity Enterprise, which 
agreement shall provide guidelines for the terms to be contained in a 
renewal contract executed pursuant to this section. Such guidelines 
shall appropriately address those impacts associated with water 
operations under the contracts, such as storage and convenience 
charges, surcharges established by the Enterprise, reimbursement of 
costs incurred, and water quality monitoring, as identified by the 
Southeastern Colorado Enterprise and the Secretary.
    ``(c) Any contract executed under the authority of subsection (a) 
or (b) shall be in compliance with the provisions of section 8(b)(1).
    ``(d) The Secretary shall establish such charges under this section 
9 in a manner consistent with the provisions of section 8(d).
    ``Sec. 10. (a) Nonproject water diverted, stored, impounded, 
pumped, exchanged, or conveyed under a contract entered into pursuant 
to section 8 or 9 shall be exempt from any acreage limitation 
provisions of the Act of June 17, 1902 (32 Stat. 388), and Acts 
amendatory thereof and supplementary thereto including, but not limited 
to, the Warren Act of 1911, the Reclamation Reform Act of 1982 (96 
Stat. 1263; 43 U.S.C. 390aa-zz-1) and from any farm unit size 
limitations established pursuant to section 4(c)(5) of the Act of 
August 11, 1939 (Chapter 717; 16 U.S.C. 59-2(c)(5)).
    ``(b) Notwithstanding subsection (a), if such nonproject water is 
commingled with project water in Reclamation project facilities, and 
the resulting commingled supply is used to irrigate lands in a project 
contractor's service area, then such commingled water shall bear the 
same acreage limitations or farm unit size limitations as the project 
water unless--
            ``(1) contract provisions are in effect which provide that 
        project or nonproject water, or both, will be accounted for on 
        a quantitative basis, that project water will not be delivered 
        to ineligible land, and that appropriate charges, as determined 
        by the Secretary, will be paid for the project water; and
            ``(2) the charges for the use of the excess capacity 
        include an appropriate interest component, as determined by the 
        Secretary.
    ``Sec. 11. (a) Excess water storage capacity of the Fryingpan-
Arkansas Project to divert, store, impound, pump, exchange, or convey 
nonproject water made available under contracts executed pursuant to 
the provisions of sections 8 and 9 shall not be utilized so as to 
increase diversion of nonproject water from the natural basin of the 
Colorado River within Colorado into another river basin for delivery or 
storage unless--
            ``(1) the diversion is the subject of a decree entered 
        prior to the effective date of this section for which no new 
        infrastructure or legal approvals are necessary to divert the 
        water out of the natural basin;
            ``(2) the diversion is the subject of an agreement in 
        existence on the date of the enactment of this section, 
        contemplating additional diversions diverted through or stored 
        in the facilities authorized by this Act, between the 
        beneficiary of such transbasin diversion and the water 
        conservation district, as defined under Colorado law, from 
        within whose boundaries the waters are proposed for diversion;
            ``(3) the diversion is the subject of an intergovernmental 
        agreement or other contractual arrangement executed after the 
        date of the enactment of this section, between the beneficiary 
        of such transbasin diversion and the water conservation 
        district, as defined under Colorado law, from within whose 
        boundaries the waters are proposed for diversion; or
            ``(4) the beneficiary of such transbasin diversion provides 
        compensatory storage or alternate water supply in an amount 
        equal to the quantity diverted out of the basin for the benefit 
        of the water conservation district, as defined under Colorado 
        law, from within whose boundaries the waters are proposed for 
        diversion.
    ``(b) Prior to executing any agreement, or arrangement or agreement 
for provision of compensatory storage or alternative water supply, that 
allows for increased diversions of nonproject water as described in 
subsection (a), the parties to such agreements or arrangements shall 
submit the agreement or arrangement to the Secretary, who, within 30 
days, shall submit such agreement or arrangement to the President Pro 
Tempore of the Senate and the Speaker of the House of Representatives 
for a period of not less than 60 days.
    ``(c) This section shall not be considered as precedent for any 
other Congressionally authorized project.''.

Summary: Authorizes the Secretary of the Interior to: (1) conduct a feasibility study to determine the most feasible method of meeting the present and future water supply and related storage requirements within the area served by the Fryingpan-Arkansas Project, Colorado, including the potential enlargement of Fryingpan-Arkansas facilities; and (2) enter into contracts with any entity, private or public for the use of excess capacity in such Project for the purpose of diverting, storing, impounding, pumping, exchanging, or conveying nonproject water for irrigation, domestic, municipal and industrial, or any other beneficial purpose; and (3) enter into new and renewal contracts with the City of Aurora, Colorado, or an enterprise of the City, for a specified term, for the use of excess capacity in such Project for the purpose of diverting, storing, impounding, pumping, exchanging, or conveying nonproject water for irrigation, domestic, municipal and industrial, or any other beneficial purpose.