Federal water projects operated by the U.S. Army Corps of Engineers (Corps) and the U.S. Bureau of Reclamation (Reclamation) may be operated for a variety of authorized purposes, which are identified by Congress at the time each project is authorized. If applicable under these project-specific authorities, the Corps and Reclamation may provide storage for water supply at a given project. Additionally, the Corps and Reclamation have general authority under the Water Supply Act of 1958 (WSA) to include water storage for municipal and industrial (M&I) use as a project purpose for new and existing projects. The WSA requires congressional approval of water storage if water supply storage would seriously affect the original project purposes or involve a major operational change for the project. Although the WSA requires congressional approval for some modifications of federal water projects, the issue of what modifications may be made without approval has not been defined. This ambiguity has become a particular issue when severe drought raises the competition for water supply, and is an especially contentious issue in eastern riparian states where all users are affected by any drought. Increasing pressures on the quantity and quality of available water supplies are raising interest in—and concern about—changing operations at federal facilities to meet M&I demands. For example, the Corps 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. The tradeoffs inherent in such reallocations may garner controversy because a shift from a currently authorized purpose (e.g., hydropower, navigation, flood control) to M&I use changes the types of benefits produced by a dam and the stakeholders served. This issue is also at the center of litigation related to the Corps' operation of Lake Lanier in the Apalachicola-Chattahoochee-Flint River Basin (ACF). Two federal appellate courts have examined questions related to water allocation at Lake Lanier, and each reached a different result. First, the issue was the subject of a 2008 decision by the U.S. Court of Appeals for the D.C. Circuit, Southeastern Federal Power Customers v. Geren . Then, in 2011, the U.S. Court of Appeals for the 11 th Circuit considered consolidated cases challenging related issues ( In re Tri-State Water Rights Litigation). Using the context of the Corps' reallocation of water in Lake Lanier, this report specifically analyzes the reallocation issues under the WSA, including the various legal challenges to the Corps' actions and outcomes of the litigation. It also analyzes data regarding the Corps' reallocations under the WSA in various projects and legislative options for Congress. Although the WSA provides authority to Reclamation as well, the application of the WSA to Reclamation is beyond the scope of the report. Although Congress has authorized federal agencies to operate projects for water supply storage in some cases, the federal role in M&I water supply development generally is constrained. Instead, Congress has recognized states and local entities as having the prominent role: 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. Accordingly, the federal government's investments in water resources infrastructure have focused more heavily on other water resource missions such as flood control, navigation, irrigation, and hydropower. When Congress authorizes a federal role, it may do so through project-specific legislation or through generally applicable statutes. Each type of authority is distinct such that the Corps' general authority is supplemental to any legal authority provided in project authorization legislation. The Corps has indicated that it will examine its existing authority for a particular project as well as its general authority when evaluating requests for water supply storage at its facilities. Congress generally authorizes the Corps to undertake construction of dams and other water resources infrastructure through project-specific legislation. Each dam, and the reservoir it creates, is operated in large measure to meet the project's authorized purposes and for compliance with applicable federal laws. Project authority often is included in myriad water resources legislation, for example, Rivers and Harbors acts, Flood Control acts, and Water Resources Development acts. Under these authorizations, Congress may identify authorized purposes directly. That is, for each project (or set of projects in a basin), Congress may identify the principal purposes in the language authorizing project construction or may adopt and incorporate supporting agency documents identifying project purposes. This type of authorization often is referred to as project-specific authority because congressional approval is limited only to the operation of a particular project and cannot be applied to other projects. In total, 133 Corps multi-purpose reservoirs in 26 states have 11.1 million acre-feet of storage space for M&I purposes. It is notable that construction of large federal dams has slowed markedly since the 1960s 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. In addition to project-specific authority for M&I water supply, Congress has enacted some generally applicable legislation that authorizes the Corps to provide water supply for M&I use at any of its facilities. Because this type of authority does not differ on a project by project basis, it often is referred to as general authority. Legislation that provides general authority may be limited to temporary reallocations, or it may provide for permanent reallocations of M&I water supply. For example, section 6 of the Flood Control Act of 1944 provides the Corps some general, but limited, authority to enter contracts for the sale of surplus water from Corps reservoirs for temporary M&I use. Reliance on general authority often raises questions as to whether the provision of M&I use pursuant to that authority was contemplated by Congress, particularly if the Corps' exercise of its authority would reallocate storage permanently without specific consideration by Congress. This report focuses on the Corps' implementation of permanent M&I allocations under the WSA and how courts have applied the WSA to the Corps' actions regarding M&I use, rather than on the Corps' use of temporary (or emergency) water supply authorities. Congress enacted the WSA to provide federal assistance to state and local interests for the development of water supplies for municipal and industrial use. The WSA authorized the Corps to include water storage in new and existing reservoir projects to meet M&I water needs. The WSA provides that "storage may be included in any reservoir project surveyed, planned, constructed or to be planned, surveyed and/or constructed by the Corps of Engineers or the Bureau of Reclamation to impound water for present or anticipated future demand or need for municipal or industrial water." Additionally, the WSA states that "the cost of any construction or modification authorized under the provisions of [the above] section shall be determined on the basis that all authorized purposes served by the project shall share equitably in the benefits of multiple purpose construction.... " Although the WSA provides broad authority to the Corps to provide storage space dedicated to M&I use, Congress placed limitations on the Corps' authority to modify existing projects to include such storage. Specifically, if a modification would (1) "seriously affect the purposes for which the project was authorized, surveyed, planned, or constructed," or (2) "involve major structural or operational changes," the modification must be approved by Congress. Significantly, however, Congress did not define "seriously affect" or "major structural or operational changes" under the WSA. As a result, the Corps generally has acted at its discretion to determine whether the modification may occur without congressional approval. One example of this legal ambiguity has been raised in the context of Lake Lanier, a reservoir operated by the Corps on the Chattahoochee River in Georgia, which is discussed later in this report. After passage of the WSA, the Corps developed a guidance manual for implementing this authority. In 1977, the Corps adopted as part of its manual the following provision for guiding when a reallocation was to be considered insignificant, thus not requiring 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. This guidance did not state that reallocations above those amounts automatically were deemed significant or major reallocations. However, as discussed later in this report, the Corps issued a legal memorandum in 2012 explaining that it would rely on "actual operational changes and impacts" rather than an amount or percentage of storage when evaluating its authority under the WSA. A total of 134 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 WSA (see Table 1 for a list of the reservoirs). The WSA is the basis for less than 640,000 AF in reallocations to M&I of Corps 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).