43 U.S.C. § 485h — New projects; sale of water and electric power; lease of power privileges

(a) Findings of Secretary^*. The Secretary can't spend money on, or even submit cost estimates for, building a new project^*, a new division of a project^*, or new supplemental works, until investigating it and reporting findings to the President and Congress on: (1) whether the proposed construction is feasible to engineer; (2) its estimated cost; (3) the part of that cost fairly allocated to irrigation and probably repayable by water users; (4) the part fairly allocated to power and probably returnable to the United States as net power revenue; and (5) the part fairly allocated to municipal water supply or other miscellaneous purposes and probably returnable to the United States. If the Secretary finds the construction has engineering feasibility, and if the repayable and returnable allocations to irrigation, power, and municipal water supply or other purposes — together with any allocation to flood control or navigation made under subsection (b) — equal the total estimated construction cost as the Secretary determines it, the project is deemed authorized and the Secretary may undertake it. If all those allocations don't equal the total estimated cost, the project may be undertaken only after Congress provides for it by Act, once the Secretary has submitted the report and findings to the President and Congress.

(b) Allocation of part of cost to flood control or navigation. The Secretary may allocate to flood control or navigation whatever part of a new project's total estimated cost the Secretary finds proper. Items for such allocations, for projects proceeding under subsection (a), must be included in the Secretary's appropriation estimates, and the funds for those portions become available only if directly appropriated or allotted to the Department of the Interior. In making such an allocation, the Secretary must consult the Chief of Engineers and the Secretary of the Army, and may perform necessary investigations or studies under a cooperative agreement with the Secretary of the Army. Where such an allocation is made, the Secretary of the Interior operates the project for flood-control or navigation purposes, to the extent that allocation justifies.

(c) Furnishing water to municipalities; sale of electric power; lease of power privileges.
(1) The Secretary may contract to furnish water for municipal water supply or miscellaneous purposes. Any such contract must either: (A) require repayment to the United States, over up to forty years from when water is first delivered for the contracting party's use, with interest of up to 3½ percent a year if the Secretary decides interest is proper, of an appropriate share (as the Secretary determines) of construction costs allocated to municipal water supply or other miscellaneous purposes; or (B) run for up to forty years, at rates that, in the Secretary's judgment, will produce revenues at least sufficient to cover an appropriate share of yearly operation-and-maintenance cost and appropriate fixed charges the Secretary sets, paid each year in advance of that year's water delivery. Any sale of electric power, or lease of power privileges, that the Secretary makes while operating a project or division must likewise run for up to forty years, at rates meant to produce power revenue at least sufficient to cover an appropriate share of yearly operation-and-maintenance cost, interest of at least 3 percent a year on an appropriate share of the construction investment, and other fixed charges the Secretary sets. In such sales or leases, preference goes to municipalities and other public corporations or agencies, and to cooperatives and other nonprofit organizations financed in whole or part by loans under the Rural Electrification Act of 1936. This paragraph doesn't apply to provisions in existing lawful contracts for using a project's power and miscellaneous revenues to benefit its water users. This paragraph's provisions on power sales and power-privilege leases are an authorization in addition to, and alternative to, authority under other laws for particular projects, and reserve to the Secretary the exclusive authority to develop small conduit hydropower using Bureau of Reclamation facilities, and pumped-storage hydropower using only Bureau of Reclamation reservoirs. No contract relating to municipal water supply or miscellaneous purposes, or to electric power or power privileges, may be made if, in the Secretary's judgment, it would impair the project's efficiency for irrigation.

(2) When carrying out this subsection, the Secretary must first offer a lease of power privilege to the irrigation district or water users association operating the relevant transferred conduit, or receiving water from the relevant reserved conduit, and must set a reasonable time frame for that district or association to accept or reject a small conduit hydropower lease offer. If the district or association declines, the Secretary offers the lease to other parties in accordance with this subsection.

(3) The Bureau of Reclamation must apply its categorical-exclusion process under the National Environmental Policy Act of 1969 to small conduit hydropower development under this subsection, excluding the siting of associated transmission facilities on federal lands.

(4) The Bureau of Reclamation's Power Resources Office is the lead office for small conduit hydropower policy and procedure-setting under this subsection.

(5) Nothing in this subsection obligates the Western Area Power Administration, the Bonneville Power Administration, or the Southwestern Power Administration to purchase or market power produced by facilities covered here, and none of the costs of producing or delivering that power may be assigned to project purposes for inclusion in project rates.

(6) Nothing in this subsection alters or impedes how Bureau of Reclamation facilities deliver and manage water — water used for conduit hydropower generation is treated as incidental to using water for the project's original purposes. A lease of power privilege is made only when, in the Secretary's judgment, exercising it won't conflict with the purposes of the project or division involved, and won't create unmitigated financial or physical harm to it. The Secretary must notify and consult the irrigation district or water users association operating the transferred conduit before offering the lease, and must prescribe terms and conditions adequately protecting the planning, design, construction, operation, maintenance, and other interests of the United States and the project or division.

(7) Nothing in this subsection alters or affects any existing agreements for developing conduit hydropower projects or dividing their revenue.

(8) Nothing in this subsection alters or affects any existing preliminary permit, license, or exemption the Federal Energy Regulatory Commission issued under Part I of the Federal Power Act, or any project with an application still pending before the Commission as of August 9, 2013.

(9) Definitions for this subsection: "Conduit" means any Bureau of Reclamation tunnel, canal, pipeline, aqueduct, flume, ditch, or similar built water conveyance operated mainly to distribute water for agricultural, municipal, or industrial use, not mainly to generate electricity. "Irrigation district" means any irrigation, water conservation or conservancy, or multicounty water conservation or conservancy district, or any separate public entity made up of two or more such districts jointly exercising their member districts' powers. "Reserved conduit" means a conduit in project works whose care, operation, and maintenance the Secretary — through the Commissioner of the Bureau of Reclamation — has reserved. "Transferred conduit" means a conduit in project works whose care, operation, and maintenance has been transferred to a legally organized water users association or irrigation district. "Small conduit hydropower" means a facility capable of producing 5 megawatts or less of electric capacity.

(d) Delivery of water for irrigation; repayment contract^* prerequisites. No water may be delivered for irrigating land on a new project, new division of a project, or supplemental works, until an organization^* satisfactory to the Secretary in form and powers has entered a repayment contract with the United States, satisfactory in form to the Secretary, providing, among other things:

(1) That the Secretary may fix a development period of up to ten years for each irrigation block^*, counted from the first calendar year water is delivered to that block's land; and that during the development period, water is delivered to that block's land at a per-acre-foot (or other) charge the Secretary fixes each year and that must be paid in advance. Where an irrigation block's land is mostly owned by the United States, the Secretary may fix a development period before signing the repayment contract, but then signing the contract becomes a condition of getting water after the development period closes. If the Secretary had fixed a development period shorter than ten years, and before repayment begins conditions arise that in the Secretary's judgment would have justified a longer period, the Secretary may amend the contract or notice to extend the development period to no more than ten years from its start — and may do the same by amendment where no development period was originally provided. If the Secretary had deferred payment of construction-charge installments under the Act of September 21, 1959, the Secretary may, before the due date of the first installment not reduced by that deferment, agree with the contracting organization to end the supplemental deferment contract, credit the construction payments made, and instead use the authority granted in this section. After the development period closes, any charges collected that the Secretary determines exceeded the cost of operation and maintenance during that period are credited to the project's construction cost, as the Secretary determines.

(2) That the part of construction costs the Secretary allocates to irrigation is included in the organization's general repayment obligation, and that the organization may vary how it distributes construction charges^* across its land based on the productivity of different land classes and the benefits construction brings them — but no such distribution relieves the organization, or any party or land within it, of the organization's general obligation to the United States.

(3) That the organization's general repayment obligation is spread in annual installments — however many and however large the Secretary fixes — over no more than 40 years (not counting any development period fixed under paragraph (1)), for each project contract unit^* or, if divided into irrigation blocks, for each block — or as close to that 40-year period as fits a variable-payment formula that, while based on full repayment within that period under average conditions, allows required annual payments to vary based on the organization's ability to pay.

(4) That the first annual installment for a project contract unit or irrigation block accrues, on a date the Secretary fixes, in the year after the development period's last year, or, if there is no development period, in the calendar year after the Secretary announces that construction is substantially complete or advanced enough to deliver water to substantially all the land to be irrigated in that unit or block; and that if no development period was fixed, water is delivered only on the toll-charge basis (described above for development periods) through and including the year of that announcement.

(e) Contracts to furnish water. Instead of entering a repayment contract under subsection (d) to cover irrigation's share of water-supply construction costs, the Secretary may instead, at the Secretary's discretion, enter short- or long-term contracts to furnish irrigation water. Each such contract runs for up to forty years, at rates that, in the Secretary's judgment, will produce revenues at least sufficient to cover an appropriate share of yearly operation-and-maintenance cost and appropriate fixed charges the Secretary sets, giving due consideration to irrigation's share of water-supply construction costs, and must require payment of those rates each year in advance of that year's water delivery. Where such contracts are used, the costs of any irrigation-water distribution works the United States builds for the new project, division, or supplemental works are still covered by a repayment contract entered under subsection (d).

(f) Public participation. At least sixty days before entering or amending any repayment contract, or any contract for delivering irrigation water (except a contract for surplus or interim irrigation water lasting one year or less), the Secretary must: (1) publish notice of the proposed contract or amendment in newspapers with general circulation in the affected area, make reasonable efforts to otherwise notify interested parties who might be affected, and provide information on who to contact with comments or inquiries; and (2) provide an opportunity to submit written data, views, and arguments, and consider all substantive comments received.