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SECTION. 1. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER
ENVIRONMENT COOPERATION AGREEMENT; GRANT AUTHORITY.

(a) Amendment Authority.--Part 2 of subtitle D of title V of Public
Law 103-182 (22 U.S.C. 290m-290m-3) is amended by adding at the end the
following:

''SEC. 545. AUTHORITY TO AGREE TO CERTAIN AMENDMENTS TO THE BORDER
ENVIRONMENT COOPERATION AGREEMENT.

''The President may agree to amendments to the Cooperation
Agreement that--
''(1) enable the Bank to make grants and nonmarket rate loans
out of its paid-in capital resources with the approval of its
Board; and
''(2) amend the definition of 'border region' to include the
area in the United States that is within 100 kilometers of the
international boundary between the United States and Mexico, and
the area in Mexico that is within 300 kilometers of the
international boundary between the United States and Mexico.''.
(b) Grant Authority.--Part 2 of subtitle D of title V of Public Law
103-182 (22 U.S.C. 290m-290m-3), as amended by subsection (a), is
amended by adding at the end the following:

''SEC. 546. GRANTS OUT OF PAID-IN CAPITAL RESOURCES.

''(a) In General.--The President shall instruct the United States
Federal Government representatives on the Board of Directors of the
North American Development Bank to oppose any proposal where grants out
of the Bank's paid-in capital resources, except for grants from paid-in
capital authorized for the community adjustment and investment program
under the Bank's charter of 1993, would--
''(1) be made to a project that is not being financed, in part,
by loans; or
''(2) account for more than 50 percent of the financing of any
individual project.
''(b) Exception.--
''(1) General rule.--The requirements of subsection (a) shall
not apply in cases where--
''(A) the President determines there are exceptional
economic circumstances for making the grant and consults with
the Committee on Foreign Relations of the Senate and the
Committee on Financial Services of the House of
Representatives; or
''(B)(i) the grant is being made for a project that is so
small that obtaining a loan is impractical; and
''(ii) the grant does not exceed $250,000.
''(2) Limitation.--Not more than an aggregate of $5,000,000 in
grants may be made under this subsection.''.
(c) Clerical Amendment.--Section 1(b) of such public law is amended
in the table of contents by inserting after the item relating to
section 544 the following:
''Sec. 545. Authority to agree to certain amendments to the Border
Environment
Cooperation Agreement.
''Sec. 546. Grants out of paid-in capital resources.''.

SEC. 2. ANNUAL REPORT.

The Secretary of the Treasury shall submit annually to the
Committee on Financial Services of the House of Representatives and the
Committee on Foreign Relations of the Senate a written report on the
North American Development Bank, which addresses the following issues:
(1) The number and description of the projects that the North
American Development Bank has approved. The description shall
include the level of market-rate loans, non-market-rate loans, and
grants used in an approved project, and a description of whether an
approved project is located within 100 kilometers of the
international boundary between the United States and Mexico or
within 300 kilometers of the international boundary between the
United States and Mexico.
(2) The number and description of the approved projects in
which money has been dispersed.
(3) The number and description of the projects which have been
certified by the Border Environment Cooperation Commission, but yet
not financed by the North American Development Bank, and the
reasons that the projects have not yet been financed.
(4) The total of the paid-in capital, callable capital, and
retained earnings of the North American Development Bank, and the
uses of such amounts.
(5) A description of any efforts and discussions between the
United States and Mexican governments to expand the type of
projects which the North American Development Bank finances beyond
environmental projects.
(6) A description of any efforts and discussions between the
United States and Mexican governments to improve the effectiveness
of the North American Development Bank.
(7) The number and description of projects authorized under the
Water Conservation Investment Fund of the North American
Development Bank.

SEC. 3. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR
NADBANK PROJECTS WHICH FINANCE WATER CONSERVATION FOR
TEXAS IRRIGATORS AND AGRICULTURAL PRODUCERS IN THE LOWER
RIO GRANDE RIVER VALLEY.

(a) Findings.--The Congress finds that--
(1) Texas irrigators and agricultural producers are suffering
enormous hardships in the lower Rio Grande River valley because of
Mexico's failure to abide by the 1944 Water Treaty entered into by
the United States and Mexico;
(2) over the last 10 years, Mexico has accumulated a 1,500,000-
acre fee water debt to the United States which has resulted in a
very minimal and inadequate irrigation water supply in Texas;
(3) recent studies by Texas A&M University show that water
savings of 30 percent or more can be achieved by improvements in
irrigation system infrastructure such as canal lining and metering;
(4) on August 20, 2002, the Board of the North American
Development Bank agreed to the creation in the Bank of a Water
Conservation Investment Fund, as required by Minute 308 to the 1944
Water Treaty, which was an agreement signed by the United States
and Mexico on June 28, 2002; and
(5) the Water Conservation Investment Fund of the North
American Development Bank stated that up to $80,000,000 would be
available for grant financing of water conservation projects, which
grant funds would be divided equally between the United States and
Mexico.
(b) Sense of the Congress.--It is the sense of the Congress that--
(1) water conservation projects are eligible for funding from
the North American Development Bank under the Agreement Between the
Government of the United States of America and the Government of
the United Mexican States Concerning the Establishment of a Border
Environment Cooperation Commission and a North American Development
Bank; and
(2) the Board of the North American Development Bank should
support qualified water conservation projects which can assist
Texas irrigators and agricultural producers in the lower Rio Grande
River Valley.

SEC. 4. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR
NADBANK PROJECTS WHICH FINANCE WATER CONSERVATION IN THE
SOUTHERN CALIFORNIA AREA.

It is the sense of the Congress that the Board of the North
American Development Bank should support--
(1) the development of qualified water conservation projects in
southern California and other eligible areas in the 4 United States
border States, including the conjunctive use and storage of surface
and ground water, delivery system conservation, the re-regulation
of reservoirs, improved irrigation practices, wastewater
reclamation, regional water management modeling, operational and
optimization studies to improve water conservation, and cross-
border water exchanges consistent with treaties; and
(2) new water supply research and projects along the Mexico
border in southern California and other eligible areas in the 4
United States border States to desalinate ocean seawater and
brackish surface and groundwater, and dispose of or manage the
brines resulting from desalination.

SEC. 5. SENSE OF THE CONGRESS RELATING TO UNITED STATES SUPPORT FOR
NADBANK PROJECTS FOR WHICH FINANCE WATER CONSERVATION FOR
IRRIGATORS AND AGRICULTURAL PRODUCERS IN THE SOUTHWEST
UNITED STATES.

(a) Findings.--The Congress finds as follows:
(1) Irrigators and agricultural producers are suffering
enormous hardships in the southwest United States. The border
States of California, Arizona, New Mexico, and Texas are suffering
from one of the worst droughts in history. In Arizona, this is the
second driest period in recorded history and the worst since 1904.
(2) In spite of decades of water conservation in the southwest
United States, irrigated agriculture uses more than 60 percent of
surface and ground water.
(3) The most inadequate water supplies in the United States are
in the Southwest, including the lower Colorado River basin and the
Great Plains River basins south of the Platte River. In these
areas, 70 percent of the water taken from the stream is not
returned.
(4) The amount of water being pumped out of groundwater sources
in many areas is greater than the amount being replenished, thus
depleting the groundwater supply.
(5) On August 20, 2002, the Board of the North American
Development Bank agreed to the creation in the bank of a Water
Conservation Investment Fund.
(6) The Water Conservation Investment Fund of the North
American Development Bank stated that up to $80,000,000 would be
available for grant financing of water conservation projects, which
grant funds would be divided equally between the United States and
Mexico.
(b) Sense of the Congress.--It is the sense of the Congress that--
(1) water conservation projects are eligible for funding from
the North American Development Bank under the Agreement Between the
Government of the United States of America and the Government of
the United Mexican States Concerning the Establishment of a Border
Environment Cooperation Commission and a North American Development
Bank;
(2) the Board of the North American Development Bank should
support qualified water conservation projects that can assist
irrigators and agricultural producers; and
(3) the Board of the North American Development Bank should
take into consideration the needs of all of the border states
before approving funding for water projects, and strive to fund
water conservation projects in each of the border states.

SEC. 6. SENSE OF THE CONGRESS REGARDING FINANCING OF PROJECTS.

(a) In General.--It is the sense of the Congress that the Board of
the North American Development Bank should support the financing of
projects, on both sides of the international boundary between the
United States and Mexico, that address coastal issues and the problem
of pollution in both countries having an environmental impact along the
Pacific Ocean and Gulf of Mexico shores of the United States and
Mexico.
(b) Air Pollution.--It is the sense of the Congress that the Board
of the North American Development Bank should support the financing of
projects, on both sides of the international boundary between the
United States and Mexico, which address air pollution.

Speaker of the House of Representatives.

Vice President of the United States and
President of the Senate.
(Sec. 1) Amends the North American Free Trade Agreement Implementation Act to authorize the President to agree to amendments to the Border Environment Cooperation Agreement (the November 1993 Agreement Between the Government of the United States of America and the Government of the United Mexican States Concerning the Establishment of a Border Environment Cooperation Commission and a North American Development Bank) that: (1) enable the North American Development Bank to make grants and non-market rate loans out of its paid-in capital resources with the approval of its Board of Directors for qualified water conservation projects; and (2) amend the definition of "border region" as it relates to such projects to include specified areas in the United States and Mexico that are within 300 kilometers of the international boundary between the two countries.

(Sec. 2) Directs the Secretary of the Treasury to report annually to certain congressional committees on the North American Development Bank, addressing specified issues. Directs the President to instruct the U.S. representative on the Board of Directors of the North American Development Bank to oppose, with exceptions, any proposal where grants out of paid-in capital resources would: (1) be made to a project that is not being financed, in part, by loans; or (2) account for more than 50 percent of any individual project. (Sec. 3) Expresses the sense of Congress that: (1) water conservation projects are eligible for funding from the Bank under the Cooperation Agreement; and (2) the Board of Directors of the Bank should support qualified water conservation projects which can assist Texas irrigators and agricultural producers in the lower Rio Grande River Valley. (Sec. 4) Expresses the sense of Congress that the Bank should support: (1) the development of qualified water conservation projects in southern California and other eligible areas in the four U.S. border States (California, Arizona, New Mexico, and Texas), including the conjunctive use and storage of surface water and groundwater, delivery system conservation, the re-regulation of reservoirs, improved irrigation practices, wastewater reclamation, regional water management modeling, operational and optimization studies to improve water conservation, and cross-border water exchanges consistent with treaties; and (2) new water supply research and projects along the Mexico border in southern California and other eligible areas in the four U.S. border States to desalinate ocean seawater and brackish surface water and groundwater, and dispose of or manage the brines resulting from desalination. (Sec. 5) Expresses the sense of Congress that the Bank Board should: (1) take into consideration the needs of all of the border states before approving funding for water conservation projects; and (2) strive to fund such projects in each of such states. (Sec. 6) Expresses the sense of Congress that the Bank Board should support the financing of projects, on both sides of the international boundary between the United States and Mexico, which address: (1) coastal issues and the problem of pollution in both countries having an environmental impact along their Pacific Ocean and Gulf of Mexico shores; and (2) air pollution.