Increasing pressures on the quantity and quality of available water supplies are raising interest in--and concern about--changing operations at Corps facilities to meet municipal and industrial (M&I) demands. Corps M&I reallocations at Lake Lanier (GA) are central to an ongoing tri-state conflict involving Alabama, Florida, and Georgia. Furthermore, the agency is studying whether to reallocate storage to M&I use at dams in numerous states (e.g., Colorado, Kentucky, and Georgia), and Corps data indicate that more reallocation requests are forthcoming. A reallocation embodies tradeoffs; shifting storage to M&I use from a currently authorized purpose (e.g., hydropower or navigation) changes the types of benefits produced by a dam and the stakeholders served. The federal role in M&I water supply development is constrained, with states and local entities having the prominent role. Congress recognized state primacy in developing M&I supplies in the Water Supply Act of 1958 (1958 WSA; P.L. 85-500; 72 Stat. 319; 43 U.S.C 390b) as follows: It is hereby declared to be the policy of the Congress to recognize the primary responsibilities of the States and local interests in developing water supplies for domestic, municipal, industrial, and other purposes and that the Federal Government should participate and cooperate with States and local interests in developing such water supplies in connection with the construction, maintenance, and operation of Federal navigation, flood control, irrigation, or multiple purpose projects. Therefore, although the federal government has made significant investments in water resources infrastructure, these investments primarily have been to support flood control, navigation, irrigation, multipurpose dams (including hydropower), and diversion facilities. The largest federal projects were constructed by the Department of the Interior's Bureau of Reclamation under the Reclamation Act of 1902 and subsequent project authorizations known as Reclamation Law, and by the Department of Defense's Army Corps of Engineers (hereafter referred to as the Corps) through myriad Rivers and Harbors, Flood Control, and Water Resources Development Act (WRDA) legislation. Since the 1960s, construction of large federal dams has slowed markedly, in response to their high cost, their ecological and social impacts, and the availability of appropriate sites. Reservoir planning in recent decades largely has focused on balancing competing objectives in operating existing reservoirs (as opposed to planning new projects), and in some cases on managing for new objectives. Congress authorizes the Corps to undertake construction of dams and other water resources infrastructure. Each dam and the reservoir it creates are operated in large measure to meet the project's authorized purposes and for compliance with federal laws. For each project (or set of projects in a basin), the principal purposes generally are laid out in the language authorizing project construction or in agency documents supporting the authorization, and in subsequent legislation specific to that project. Approximately 91 Corps reservoirs have M&I storage as a specifically authorized purpose (e.g., Lake Sakakawea, ND; Joe Pool Lake, TX). Congress, through general legislation, has included additional requirements (e.g., fish and wildlife protection and coordination) for all Corps facilities, and has given the Corps authority to provide some additional benefits from its projects, such as recreation. The 1958 WSA and Section 6 of the Flood Control Act of 1944 (58 Stat. 890, 33 U.S.C. 708) provide the Corps some general, but limited, authority to provide M&I water supply. The 1944 authority allows the Corps to provide surplus water at its facilities (i.e., water not assigned to a project purpose) for M&I use on a temporary basis. This report does not analyze the Corps' use of the 1944 authority because it is not likely to have a significant future role in the permanent reallocation of significant quantities of water for M&I purposes. Instead, this report focuses on how the 1958 WSA has been implemented by the Corps, and provides data on the 44 Corps reservoirs that have had all or some of their storage reallocated under the Corps' 1958 WSA discretionary authority. For a discussion of legal issues related to the 1958 WSA, see CRS Report R40714, Use of Federal Water Projects for Municipal and Industrial Water Supply: Legal Issues Related to the Water Supply Act of 1958 (43 U.S.C. SS 390b) , by Cynthia Brougher. In the 1958 WSA, Congress provided the Corps some general M&I water supply authority, but limited the agency's decision-making without congressional approval. Specifically, Section 301 of the 1958 WSA provides: Modifications of a reservoir project heretofore authorized, surveyed, planned, or constructed to include storage [for water supply] which would seriously affect the purposes for which the project was authorized, surveyed, planned, or constructed, or which would involve major structural or operational changes shall be made only upon the approval of Congress. That is, M&I water supply can be provided as long as it is accomplished incidental to operations for the authorized purposes. If provision of water supply seriously affects a facility's authorized purposes or would cause a major operational change, the reallocation requires congressional authorization. How to gauge whether an effect is serious or a change is major was not defined by Congress. After passage of the 1958 WSA, the Corps developed a guidance manual for implementing this authority (EM 1165-2-105). In March 1977, the Corps adopted as part of its manual the following provision for determining when a reallocation does not require congressional approval: Modifications of reservoir projects to allocate all or part of the storage serving any authorized purpose from such purpose to storage serving domestic, municipal, or industrial water supply purposes are considered insignificant if the total reallocation of storage that may be made for such water supply uses in the modified project is not greater than 15 per centum of total storage capacity allocated to all authorized purposes or 50,000 acre feet, whichever is less. Earlier guidance had not included numeric criteria. The questions of whether the Corps has regularly exceeded its discretionary authority and how many reservoirs have storage reallocated under this authority have received attention in the wake of a federal court decision related to Corps operations and reallocations at Lake Lanier (GA). Numerous lawsuits related to Lake Lanier were consolidated and transferred to the U.S. District Court for the Middle District of Florida in 2007. A July 17, 2009, court order addressed a fundamental question common to many of the cases: whether the Corps violated Section 301 of the 1958 WSA by not seeking congressional approval for changes made in Lake Lanier operations to provide M&I water supply. The court order largely agreed with Florida, Alabama, the Alabama Power Company, and the Southeastern Federal Power Customers. These litigants had contended that the Corps was obligated to seek congressional approval, because the provision of water supply required major operational changes that harmed authorized purposes. The court estimated that, since the mid-1970s, the Corps had reallocated more than 21% of Lake Lanier's usable storage without seeking congressional authorization; this reallocation represents roughly 260,000 acre-feet (AF). The court found that "de facto reallocations" started in the mid-1970s with operational changes that shifted storage from hydropower to M&I supply. Subsequently the Corps contracted with M&I water providers for storage space for withdrawals directly from the lake. The court found that the cumulative impacts of the Corps' actions exceeded its discretionary authority to reallocate. The court order and its effect on M&I water supply for communities in northern Georgia have raised questions about how the Corps has reallocated water at its other facilities. A total of 135 Corps reservoirs have roughly 11 million acre-feet (AF) of storage designated for M&I water. Most of the M&I water stored is authorized under project-specific authorities. However, 44 reservoirs derive all or part of their M&I storage authority from the 1958 WSA (see Table 1 for a list of the reservoirs). The 1958 WSA is the basis for less than 640,000 AF of the Corps' M&I storage. Table 1 shows that the Corps has reallocated more than 50,000 AF of storage space for M&I use at only one reservoir, Lake Texoma (TX/OK). The Corps has used its discretionary authority to perform four reallocations at Lake Texoma--one for 84,099 AF and three smaller reallocations, for a total of 103,003 AF. Other Texoma reallocations have been made with specific congressional approval. The 84,099 AF reallocation from hydropower to M&I use was approved in a 1985 Corps document that included a compensation arrangement for lost hydropower, which had been negotiated among Lake Texoma stakeholders. The Corps found that the reallocation would neither significantly harm the lake's authorized purposes (in part because of the compensation arrangement), nor require significant structural modifications. The Corps thus concluded that the transfer could be performed under the 1958 WSA without congressional approval, even though it exceeded the agency-established policy limiting reallocations without congressional approval to 50,000 AF. Table 1 shows that the Corps stayed below the 15% of usable storage criterion, except at Cowanesque Lake (PA), where reallocated water supply represents almost 30% of storage. The Cowanesque Lake case is unusual in that it represents a mix of project-specific reallocation direction from Congress and use of the Corps' discretionary authority under the 1958 WSA. The Cowanesque reallocation was mentioned in P.L. 99-88 , the Supplemental Appropriations Act of 1985, and was discussed as occurring under the Corps' 1958 WSA discretionary authority in the accompanying H.Rept. 99-236. As previously noted, the 1958 WSA indicates that the reallocation to water supply should not be made if it seriously affects authorized purposes or results in a major operational or structural change. The Corps is to evaluate these potential effects when studying whether to make or recommend to Congress a reallocation. Whether the studies used to support the reallocations shown in Table 1 sufficiently evaluated how an M&I reallocation may affect authorized purposes or may constitute a major operational change is a general concern raised by the 2009 court order's questioning of the Corps evaluations related to Lake Lanier operations. An evaluation of the sufficiency of Corps reallocation analyses is beyond the scope of this CRS report. Lake Lanier is not in Table 1 because the July 2009 court order found that the M&I uses exceeded the 1958 WSA authority. Similarly, Lake Cumberland (KY) is not included, although M&I withdrawals occur there, because these withdrawals have not been authorized. Enforcement action to stop the withdrawals at Lake Cumberland has not been taken. How many other unauthorized withdrawals and operational actions that support M&I uses occur at other Corps facilities is largely unknown; many Corps dams are decades old, often predating the 1958 WSA, and their operations have evolved incrementally over time. To date, the Corps' operation of Lake Lanier for M&I water supply has constituted the agency's most controversial provision of M&I water supply. The 2009 court order raised numerous concerns, including the possibility that previous reallocations at other Corps facilities could be disputed, and uncertainty about how future reallocation at Corps facilities will be evaluated and performed. Thus far, most Corps reallocations have taken place without the national attention or litigation of Lake Lanier, either using the Corps' delegated authority or through specific congressional legislative direction. As shown in Table 1 , existing reallocations under the 1958 WSA, with few exceptions, were within the numeric criteria that the Corps established for implementing its discretionary authority. Whether Congress agrees with the Corps' interpretation and use of its discretionary authority is a policy issue of increasing relevance as interest grows in M&I reallocation at federal facilities. Other issues raised by current use of the discretionary authority and reservoir operations include whether multiple reallocations in a single basin are to be treated separately or on a watershed basis, how much discretion the agency should have in making reallocation agreements with stakeholders, including financial charging and crediting arrangements, and how the agency should handle ongoing unauthorized withdrawals. Current policies on M&I reallocations at Corps facilities reflect numerous decisions and tradeoffs that may be reexamined as more reallocations are requested. For example, if reallocations to M&I are made, how is the transition to be carried out, given that stakeholders, such as recreation interests and hydropower customers, have developed around existing operations? How should the federal government charge for the M&I storage space provided? Should the federal government credit for return flows (i.e., water not consumed by M&I uses that is returned to a Corps reservoir)? M&I water supply at Corps facilities also is part of several broader water policy questions for Congress. For example, what is the appropriate federal role in municipal water supply? Should that role change if a community's existing water supply is reduced by potential climate change effects, such as extended drought? Do current water resources infrastructure operations, laws, divisions of responsibilities, and institutions reflect the national interest and present challenges? Addressing these questions is complicated by the wide range of opinions on the proper response and the difficulty of enacting any change to how federal facilities are operated, other than incremental change or project-specific measures, because of the many affected constituencies.

Summary:
Congress has limited the use of Army Corps of Engineers dams and reservoirs for municipal and industrial (M&I) water supply. Growing M&I demands have raised interest in--and concern about--changing current law and reservoir operations to give Corps facilities a greater role in M&I water storage. A reallocation of storage to M&I use from a currently authorized purpose (e.g., hydropower or navigation) changes the types of benefits produced by a facility and the stakeholders served. While Congress has specifically authorized 91 Corps multi-purpose facilities for M&I supply, it also has delegated to the Secretary of the Army constrained authority to reallocate storage to M&I water supply. In the Water Supply Act of 1958 (1958 WSA; P.L. 85-500), Congress provided that storage at Corps facilities could be allocated to M&I water supply without congressional approval if this reallocation did not seriously harm authorized project purposes or involve major structural or operational changes. Whether the Corps has regularly exceeded its discretion to reallocate is a concern raised in response to a July 2009 federal court order that found the Corps exceeded its discretion at Lake Lanier (GA). In order to guide its implementation of the discretionary authority to reallocate, the agency developed guidance on what may constitute a major change or serious harm to an authorized purpose. Since 1977 that guidance has included quantitative limits on reallocations conducted without congressional authorization. Issues for Congress include whether the Corps' interpretation of its discretionary authority is consistent with congressional intent and whether current law and policy are appropriate for current demands and constraints on water resources. CRS analysis of available data indicates that the Corps generally has not exceeded agency-established quantitative limits, with two exceptions in addition to Lake Lanier. One of the exceptions, Cowanesque Lake (PA), was made with the consent of Congress but conducted under the 1958 WSA authority. The other exception was a 1985 reallocation from hydropower to M&I use at Lake Texoma (TX/OK). The Corps found that a reallocation at Lake Texoma would neither require significant modification of the project, nor seriously harm authorized purposes (as the result of compensation being provided for lost hydropower). The Corps concluded that it could make the reallocation without congressional approval using its discretionary authority, in spite of the reallocation exceeding the agency-established quantitative limit. Whether this or other Corps reallocations and operational changes performed without congressional authorization (including those that have fallen within agency-established quantitative guidelines) have seriously harmed other project purposes or constituted a major operational change cannot be independently determined by available data, and is beyond the scope of the analysis herein.