Various water supply shortages and greater demand for water supply related to energy development projects have brought increased attention to disputes over the control of water resources across the country. For example, new applications of energy extraction technologies have increased oil and gas production from shale formations in various regions of the United States. One method of extraction, known as hydraulic fracturing, typically injects a pressurized freshwater-based liquid mixture into wells to fracture shale formations containing the oil or gas. In particular, the demand for water supply to develop energy in the northern plains states has raised controversy over water use in the Missouri River basin. Access to water for energy development purposes has created tension between federal and state interests when stakeholders seek access to freshwater from federal water projects. This issue has been of particular interest at Lake Sakakawea, a reservoir created by the federal Garrison Dam along the Missouri River in North Dakota. In recent years, the U.S. Army Corps of Engineers (Corps), which controls Lake Sakakawea and five other mainstem Missouri River reservoirs, has identified surplus water in these reservoirs and considered how it would contract with industrial and municipal users interested in the temporary use of this water. In 2012, the Corps announced plans to provide access to surplus water at Lake Sakakawea for municipal and industrial (M&I) use under surplus water agreements and ultimately to charge a fee for access to water stored at the project. State interests have opposed the Corps' plan, arguing that the Corps should not charge for access to water that would be available for state allocation if the river were flowing freely. According to this argument, the Corps' plan infringes on state authority to administer water rights. Although the federal government has fairly broad authority related to water resources management, water allocation has traditionally been a matter left to the states, which administer their own water rights systems. This dual exercise of authority over water resources has led to questions over the Corps' proposed actions at its Missouri River reservoirs. Using Lake Sakakawea as an example, this report analyzes the legal authority of the Corps to charge for stored surplus water. It examines the relevant constitutional and statutory authority of the Corps to operate federal water projects, including the Water Supply Act of 1958 (WSA) and the Flood Control Act of 1944 (1944 FCA). It also analyzes state authority over water within state boundaries and discusses the relationship between federal and state authority, including examples of congressional actions that have addressed competing federal and state roles regarding water resources. Federal water projects may be operated for a variety of authorized purposes, typically identified by Congress at the time of the project authorization. Project purposes may include navigation, flood control, hydropower, M&I use, irrigation, etc. The federal agency authorized to operate the project may do so for any purpose identified by the project legislation, or for any purpose otherwise generally authorized by law. Congress authorized the Corps to construct various federal water projects along the Missouri River, including the Garrison Dam/Lake Sakakawea Project in North Dakota, in the Flood Control Act of 1944. The Corps has operated Lake Sakakawea for its authorized purposes of flood control, navigation, irrigation, hydropower, M&I water supply, fish and wildlife, water quality, and recreation. The federal government has considered the impact of development of water resources in the region on a number of occasions. The original construction of the Garrison Dam resulted in the creation of Lake Sakakawea, which submerged a portion of the state's farmland and tribal lands. To compensate North Dakota for the loss of that land, Congress authorized the Garrison Diversion Unit, a project to provide irrigation, as well as M&I water supplies, to North Dakota. In 1986, following the report of a commission directed to review water needs in North Dakota and propose modifications to the Garrison Diversion Unit, Congress approved the commission's recommendations to scale back irrigation development and improve availability of water from the Missouri River for municipal, industrial, and rural supplies. The controversies associated with development of water diversion and distribution facilities ultimately were addressed in 2000, when Congress approved legislation providing additional funding for various M&I water projects. In response to current and future M&I needs, the Corps has issued a Final Surplus Water Report for Garrison Dam/Lake Sakakawea and has published draft reports for each of the other five mainstem reservoirs on the Missouri River. Noting its authority over projects on the mainstem of the Missouri River and over tributary projects with a dominant purpose of flood control, the Corps sought to determine whether and how much surplus water could be made available at Lake Sakakawea to meet M&I needs. The Corps has defined surplus water to include water stored in a Corps reservoir "that is not required because the authorized use for the water never developed or the need was reduced by changes that occurred since authorization or construction" or "water that would be more beneficially used as a municipal and industrial water than for the authorized purpose and which, when withdrawn, would not significantly affect authorized purposes over some specified time period." Courts have reiterated this definition, explaining that surplus water is a term that refers to "all water that can be made available from the reservoir without adversely affecting other lawful uses of the water." In other words, the lake contains a certain amount of water that is reserved for various authorized purposes. Any additional amounts of water held in the lake may be considered surplus, and the Corps may have authority to reallocate that water permanently or temporarily. Noting the rapid growth of demand for water from Lake Sakakawea, the Corps has concluded that "100,000 acre-feet of water can be identified as temporary surplus water, the use of which over the next 10 years would not significantly affect project purposes." However, the Corps has clarified that surplus water provided under the agreements may be used for M&I purposes but cannot be used for crop irrigation. The Corps has explained that its surplus water agreements would not affect existing uses of water because a condition of the agreements requires acquisition of the legal water rights, which the state cannot issue if they affect pre-existing legal rights, as discussed below. Under the Corps' proposal, interested parties would enter surplus water agreements with the agency, essentially contracting with the Corps for surplus water stored in Lake Sakakawea. The Corps would enter surplus water agreements with applicants for additional water supply for a term of five years, which would be renewable for an additional five-year term. The Corps surplus storage agreements provide access to project storage, but the Corps does not have authority to allocate water to water users. Thus, to use the water that is being stored, entities seeking to enter surplus storage agreements must secure water rights from the state under its water permit system. The Corps has announced that the pricing policy for the storage agreements will be developed through a formal rulemaking process, which will allow for public comment before any final regulations are implemented. The Corps expects the rulemaking process to last approximately 18 months. Until that time, new and existing users will not be charged for water withdrawn from Lake Sakakawea pursuant to surplus water contracts. The Corps has broad constitutional authority for its water projects. The Supreme Court historically has held that the Corps' authority derives from the Commerce Clause and the significant interest in promoting navigation throughout the nation's waterways. The breadth of this authority regarding various purposes of Corps' operations has been recognized repeatedly. In 1899, the Court explained that the states' control of the appropriation of their waters was subject to "the superior power of the General Government to secure the uninterrupted navigability of the all navigable streams within the limits of the United States." Citing this principle, the Court later held that a state could not enjoin the Corps from constructing a dam and reservoir, even if the water impounded within the reservoir was controlled by the state. The Court rejected the state's argument that the project would interfere "with the state's own program for water development and conservation … [which] must bow before the 'superior power' of Congress." The Court has indicated that the constitutional "authority is as broad as the needs of commerce." It has explained that maintaining the navigability of waterways is only one of the various purposes for which the government may claim authority over water. The Court has stated that if a particular project serves a purpose of navigation, "it is constitutionally irrelevant that other purposes may also be advanced." It has cited other valid purposes such as flood control, watershed development, and "recovery of the cost of improvements through utilization of power" as examples of the breadth of federal authority over waters. Thus, a state's authority over its waters is "subject to the power of Congress to control the waters for the purpose of commerce." Accordingly, if Congress authorizes the Corps to impound water at one of its projects for purposes related to commerce, the federal authority over the water supersedes the state's authority for those purposes. Notwithstanding this broad authority, Congress historically has deferred to states' authority regarding allocation, as discussed in later sections of this report. In addition to the Corps' general constitutional authority, Congress has provided statutory authority for specific actions by the Corps related to M&I water supplied at its projects. Under the WSA, the Corps may include permanent storage space at its projects for municipal and industrial use, even if such a purpose was not originally authorized. Under the 1944 FCA, the Corps may contract with other government or private parties for the temporary use of surplus water from its projects. In 1958, Congress recognized state primacy in developing M&I supplies, stating, 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.