Bureau of Reclamation Project Authorization and Financing

Bureau of Reclamation Project Authorization and Financing

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January 11, 2018
Bureau of Reclamation Project Authorization and Financing
The Bureau of Reclamation (Reclamation), an agency
Table 1. Major Sources of Reclamation Fund Revenue
within the Department of the Interior (DOI), is responsible
for the construction and maintenance of the majority of the
Year
large dams and water diversion structures in the 17
Source
Description
Auth.
conterminous U.S. states west of the Mississippi River.
Public Land Sales
95% of proceeds from public
1902
Along with the U.S. Army Corps of Engineers (Corps), it is
land sales in western states
one of the two principal federal agencies that own and
operate water resources facilities. Reclamation was created
Reclamation
100% of receipts
1902
by Congress in the Reclamation Act of 1902, which
Project
authorized the Secretary of the Interior to construct
Repayment
irrigation works in western states. Today, Reclamation
Reclamation
100% of proceeds
1902
manages hundreds of dams and diversion projects in the
Project Water
West. Reclamation facilities also provide flood control,
Contracts/Sales
recreation, and fish and wildlife benefits.
Reclamation
100% of proceeds
1938
Reclamation is an agency in transition. It has constructed
Project Power
few new projects in recent years and has been increasingly
Revenues
involved in other mission areas. Whether to facilitate new
Natural
40% of bonuses, royalties, and
1920
Reclamation project development—and, if so, how—has
Resource/Mineral
rentals from onshore public
been of interest to many in recent congresses. These issues
Royalties
lands
take on added significance due to Reclamation’s nexus with
state and local water project development in the West.
Source: Congressional Research Service.
This report summarizes the process for developing and
Not all Reclamation projects draw financing from the
funding new Reclamation projects, including recent
Reclamation Fund. Several projects (e.g., the Colorado
proposals to alter the agency’s process and role.
River Storage Project) have their revenues deposited into
separate funds in the Treasury that are set aside to finance
The Reclamation Fund and Reclamation
their operations in accordance with enacted legislation.
Project Financing
Additionally, some Reclamation programs and projects
The Reclamation Fund, a special fund in the U.S. Treasury,
have been funded from the General Fund of the Treasury.
is the primary means of funding Reclamation projects. It
was established in the Reclamation Act of 1902 and
Project Development and Cost Shares
receives receipts from several sources (see Table 1). It is
Reclamation’s role in project development has largely been
available for appropriation by Congress, typically in annual
limited to congressionally authorized, geographically
Energy and Water appropriations acts. The fund was
specific water storage projects. These projects typically are
originally conceived as a revolving fund, with receipts from
authorized for study by Congress and then authorized for
existing project repayments expected to fund new projects,
construction after studies are complete. For most projects,
without appropriation. Since 1914, Congress has required
the federal government initially funds 100% of the costs of
that the fund’s balances be accessed only with specific
study and construction and is repaid by beneficiaries (e.g.,
appropriations. Over time, Congress has directed additional
irrigation contractors, municipal governments) over a 40-50
receipts toward the Reclamation Fund, including 40% of
year term for their estimated share of the project’s costs.
onshore royalties from mineral and natural resource leasing
Some irrigation beneficiaries are not charged interest on
on federal public lands (authorized in 1920) and
their repayment, and some have their repayment obligations
Reclamation project power revenues (authorized in 1938).
reduced based on their ability to pay. Some project costs are
assigned as nonreimbursable because they are considered
The Reclamation Fund’s balance has increased in recent
“federal” in nature (e.g., fish and wildlife enhancements).
years, largely due to a spike in mineral and natural resource
As result, the amount repaid to the federal government may
royalties in several western states. For almost every year
be significantly less than the initial cost of construction, and
since FY1994, receipts going into the fund have exceeded
the federal subsidy for these projects varies widely.
appropriations made from it, and in most years, receipts
have more than doubled appropriations. Some have cited
Few new Reclamation projects have been built in recent
this incongruity as an argument for increased funding for
years, and some stakeholders have called for alterations to
new Reclamation projects. For more information, see CRS
the agency’s role in facilitating water project development.
In Focus IF10042, The Reclamation Fund.
They argue that Reclamation should build more water
storage projects to address water shortages in the West.
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link to page 2 Bureau of Reclamation Project Authorization and Financing
Others contend that Reclamation should focus on
support of new or expanded water storage projects. In
maintaining aging projects, facilitating development of
contrast to the traditional approach of 100% of costs funded
alternative water supplies, and/or transferring some of its
up front by the federal government (to be repaid by
assets to local sponsors.
beneficiaries at varying levels), the WIIN Act authorized
federal support for a maximum of 50% of total costs (to be
New Mission Areas
repaid by beneficiaries) for certain approved federal water
Several areas have accounted for increasing portions of
storage projects, as well as a maximum of 25% federal
Reclamation’s funding and activities in recent years. These
support for approved nonfederal surface and groundwater
include Reclamation’s WaterSMART program, rural water
storage projects. For more information on these changes,
projects, and Indian water rights settlements. Reconciling
see CRS In Focus IF10626, Reclamation Water Storage
the priority of these programs with traditional Reclamation
Projects: Section 4007 of the Water Infrastructure
projects is a key challenge for Congress. These programs
Improvements for the Nation Act.
are discussed briefly below; for more information, see CRS
Report RL30478, Federally Supported Water Supply and
In the 115th Congress, H.R. 4419, H.R. 875, and Title VI of
Wastewater Treatment Programs and CRS Report R44148,
H.R. 23 all propose to institute a new process to facilitate
Indian Water Rights Settlements.
the study and authorization of Reclamation projects. They
would do so through an approach that is similar to a
WaterSMART Program
reporting process that was authorized for the Corps in the
Reclamation combines funding for multiple programs
Water Resources Reform and Development Act of 2014
promoting water conservation into the WaterSMART
(P.L. 113-121). Each bill would require annual reporting by
(Sustain and Manage American Resources for Tomorrow)
Reclamation to Congress on study proposals by nonfederal
program. The program is part of DOI’s focus on water
sponsors. Other provisions in these bills would generally
conservation, reuse, and planning, and it is notable for its
aim to limit the time and cost of Reclamation studies (and
departure from Reclamation’s traditional project-based
are also similar to those enacted for the Corps). Some argue
focus. The program includes funding to support water reuse
that the agencies are similar and warrant similar approaches
and recycling projects (the Title XVI program) and grants
to project development. Others believe that key differences
to increase water and energy efficiency, among other
between the two agencies warrant different approaches.
things. WaterSMART projects accounted for $59 million
(6%) of Reclamation’s FY2018 budget request.
H.R. 4419 also would authorize four new Reclamation
construction projects (see Table 2). Similar to recent Corps
Rural Water and Indian Water Rights Settlements
legislation, the bill would do this by referencing
The only new Reclamation construction projects to be
Administration studies of the individual projects. In contrast
authorized and funded in recent years have been those
to the Corps, those documents did not include a
intended to provide water supplies to selected rural areas
recommendation by the Administration for construction.
(rural water projects) and Indian tribes (Indian water rights
Also similar to recent Corps legislation, the bill proposes to
settlements). Reclamation’s FY2018 budget requested $46
offset new project authorizations by requiring Reclamation
million for six authorized rural water projects and $99
to recommend an equal amount of previously authorized
million to implement four Indian water rights settlements.
(but not appropriated) funding for de-authorization based
on various criteria. In contrast to the Corps’ de-
Congressional Interest in Reclamation
authorization process, which is ongoing in perpetuity, the
Projects
Reclamation process would be one-time only.
The relative lack of new Reclamation projects in recent
years is generally attributed to a combination of factors,
Table 2. H.R. 4419: Proposed Reclamation Projects
including new environmental protection requirements, prior
development or designations for potential water storage
Report
Federal Cost
projects, limited funds for construction, and a congressional
Project (State)
Date
($-millions)
moratorium on geographically specific authorizations and
Yakima River Basin Water
3/2/2012
$237.1
appropriations (i.e., earmarks). Some argue that new
Enhancement Project-Phase III*
models for studying, financing, and constructing
Reclamation projects will facilitate new project
Equus Beds Division of the
1/19/2010 $120.0
development. Some also have cited Reclamation (along
Wichita Project*
with the Corps) as an example of an agency that can benefit
Musselshell-Judith Rural Water
7/31/2015 $87.1
from congressional input in the form of earmarks. Selected
System
proposals in recent Congresses are discussed below.
Shasta Lake Water Resources
7/29/2015 $36.8
Recent Legislation
Investigation*
The most recent authorizing legislation for Reclamation
Source: Section 8 of H.R. 4419.
was enacted in December 2016 under Subtitle J of the
Water Infrastructure Improvements for the Nation Act
Notes: * indicates additions to existing Reclamation projects.
(WIIN Act; P.L. 114-322). The WIIN Act made several
changes to Reclamation authorities, including changes to
Charles V. Stern, Acting Section Research Manager
operational authorities for the Central Valley Project in
IF10806
California and a new authority (Section 4007) for federal
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Bureau of Reclamation Project Authorization and Financing

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