[Senate Report 109-148]
[From the U.S. Government Publishing Office]



                                                       Calendar No. 240
109th Congress                                                   Report
                                 SENATE
 1st Session                                                    109-148

======================================================================



 
                     RURAL WATER SUPPLY ACT OF 2005

                                _______
                                

                October 19, 2005.--Ordered to be printed

                                _______
                                

   Mr. Domenici, from the Committee on Energy and Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 895]

    The Committee on Energy and Natural Resources, to which was 
referred the bill (S. 895) to direct the Secretary of the 
Interior to establish a rural water supply program in the 
Reclamation States to provide a clean, safe, affordable, and 
reliable water supply to rural residents, having considered the 
same, reports favorably thereon with an amendment and 
recommends that the bill, as amended, do pass.
    Strike out all after the enacting clause and insert in lieu 
thereof the following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Rural Water Supply 
Act of 2005''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:
Sec. 1. Short title; table of contents.

           TITLE I--RECLAMATION RURAL WATER SUPPLY ACT OF 2005

Sec. 101. Short title.
Sec. 102. Definitions.
Sec. 103. Rural water supply program.
Sec. 104. Rural water programs assessment.
Sec. 105. Appraisal investigations.
Sec. 106. Feasibility studies.
Sec. 107. Miscellaneous.
Sec. 108. Authorization of appropriations.

             TITLE II--TWENTY-FIRST CENTURY WATER WORKS ACT

Sec. 201. Short title.
Sec. 202. Definitions.
Sec. 203. Project eligibility.
Sec. 204. Loan guarantees.
Sec. 205. Operations, maintenance, and replacement costs.
Sec. 206. Title to newly constructed facilities.
Sec. 207. Water rights.
Sec. 208. Interagency coordination and cooperation.
Sec. 209. Authorization of appropriations.

          TITLE I--RECLAMATION RURAL WATER SUPPLY ACT OF 2005

SEC. 101. SHORT TITLE.

    This title may be cited as the ``Reclamation Rural Water Supply Act 
of 2005''.

SEC. 102. DEFINITIONS.

    In this title:
          (1) Construction.--The term ``construction'' means the 
        installation of new infrastructure and the upgrading of 
        existing facilities in locations in which the infrastructure or 
        facilities are associated with the infrastructure of a rural 
        water project recommended by the Secretary pursuant to this 
        title.
          (2) Federal reclamation law.--The term ``Federal reclamation 
        law'' means the Act of June 17, 1902 (32 Stat. 388, chapter 
        1093), and Acts supplemental to and amendatory of that Act (43 
        U.S.C. 371 et seq.).
          (3) Indian.--The term ``Indian'' means an individual who is a 
        member of an Indian tribe.
          (4) Indian tribe.--The term ``Indian tribe'' has the meaning 
        given the term in section 4 of the Indian Self-Determination 
        and Education Assistance Act (25 U.S.C. 450b).
          (5) Non-federal project entity.--The term ``non-Federal 
        project entity'' means a State, regional, or local authority, 
        Indian tribe or tribal organization, or other qualifying 
        entity, such as a water conservation district, water 
        conservancy district, or rural water district or association.
          (6) Operations, maintenance, and replacement costs.--
                  (A) In general.--The term ``operations, maintenance, 
                and replacement costs'' means all costs for the 
                operation of a rural water supply project that are 
                necessary for the safe, efficient, and contiued 
                functioning of the project to produce the benefits 
                described in a feasibility study.
                  (B) Inclusions.--The term ``operations, maintenance, 
                and replacement costs'' includes--
                          (i) repairs of a routine nature that maintain 
                        a rural water supply project in a well kept 
                        condition;
                          (ii) replacement of worn-out project 
                        elements; and
                          (iii) rehabilitation activities necessary to 
                        bring a deteriorated project back to the 
                        original condition of the project.
                  (C) Exclusion.--The term `` operations, maintenance, 
                and replacement costs'' does not include construction 
                costs.
          (7) Program.--The term ``Program'' means the rural water 
        supply program established under section 103.
          (8) Reclamation states.--The term ``Reclamation States'' 
        means the States and areas referred to in the first section of 
        the Act of June 17, 1902 (43 U.S.C. 391).
          (9) Rural water supply project.--
                  (A) In general.--The term ``rural water supply 
                project'' means a project that is designed to serve a 
                community or group of communities, each of which has a 
                population of not more than 50,000 inhabitants, which 
                may include Indian tribes and tribal organizations, 
                dispersed homesites, or rural areas with domestic, 
                industrial, municipal, and residential water.
                  (B) Inclusion.--The term ``rural water supply 
                project'' includes--
                          (i) incidental noncommercial livestock 
                        watering and noncommercial irrigation of 
                        vegetation and small gardens of less than 1 
                        acre; and
                          (ii) a project to improve rural water 
                        infrastructure, including--
                                  (I) pumps, pipes, wells, and other 
                                diversions;
                                  (II) storage tanks and small 
                                impoundments;
                                  (III) water treatment facilities for 
                                potable water supplies, including 
                                desalination facilities;
                                  (IV) equipment and management tools 
                                for water conservation, ground-water 
                                recovery, and water recycling; and
                                  (V) appurtenances.
                  (C) Exclusion.--The term ``rural water supply 
                project'' does not include--
                          (i) commercial irrigation; or
                          (ii) major impoundment structures.
          (10) Secretary.--The term ``Secretary'' means the Secretary 
        of the Interior.
          (11) Traibal organization.--The term ``tribal organization'' 
        means--
                  (A) the recognized governing body of an Indian tribe; 
                and
                  (B) any legally established organization of Indians 
                that is controlled, sanctioned, or chartered by the 
                governing body or democratically elected by the adult 
                members of the Indian community to be served by the 
                organization.

SEC. 103. RURAL WATER SUPPLY PROGRAM.

    (a) In General.--The Secretary, in cooperation with non-Federal 
project entities and consistent with this title, shall establish and 
carry out a rural water supply program in Reclamation States to--
          (1) investigate and identify opportunities to ensure safe and 
        adequate rural water supply projects for domestic, municipal, 
        and industrial use in small communities and rural areas of the 
        Reclamation States;
          (2) plan the design and construction, through the conduct of 
        appraisal investigations and feasibility studies, of rural 
        water supply projects in Reclamation States; and
          (3) oversee, as appropriate, the construction of rural water 
        supply projects in Reclamation States that are recommended by 
        the Secretary in a feasibility report developed pursuant to 
        section 106 and subsequently authorized by Congress.
    (b) Non-Federal Project Entity.--Any activity carried out under 
this title shall be carried out in cooperation with a qualifying non-
Federal project entity, consistent with this title.
    (c) Eligibility Criteria.--Not later than 1 year after the date of 
enactment of this Act, the Secretary shall, consistent with this title, 
develop and publish in the Federal Register criteria for--
          (1) determining the eligibility of a rural community for 
        assistance under the Program; and
          (2) prioritizing requests for assistance under the Program.
    (d) Factors.--The criteria developed under subsection (c) shall 
take into account such factors as whether--
          (1) a rural water supply project--
                  (A) serves--
                          (i) rural areas and small communities; or
                          (ii) Indian tribes; or
                  (B) promotes and applies a regional or watershed 
                perspective to water resources management;
          (2) there is an urgent and compelling need for a rural water 
        supply project that would--
                  (A) improve the health or aesthetic quality of water;
                  (B) result in continuous, measurable, and significant 
                wager quality benefits; or
                  (C) address current or future water supply needs;
          (3) a rural water supply project helps meet applicable 
        requirements established by law; and
          (4) a rural water supply project is cost effective.
    (e) Inclusions.--The Secretary may include--
          (1) to the extent that connection provides a reliable water 
        supply, a connection to preexisting infrastructure (including 
        impoundments and conveyance channels) as part of a rural water 
        supply project; and
          (2) notwithstanding the limitation on population under 
        section 102(9)(A), a town or community with a population in 
        excess of 50,000 inhabitants in an area served by a rural water 
        supply project if, at the discretion of the Secretary, the town 
        or community is considered to be a critical partner in the 
        rural supply project.

SEC. 104. RURAL WATER PROGRAMS ASSESSMENT.

    (a) In General.--In consultation with the Secretary of Agriculture, 
the Administrator of the Environmental Protection Agency, the Director 
of the Indian Health Service, the Secretary of Housing and Urban 
Development, and the Secretary of the Army, the Secretary shall develop 
an assessment of--
          (1) the status of all rural water supply projects under the 
        jurisdiction of the Secretary authorized but not completed 
        prior to the date of enactment of this Act, including 
        appropriation amounts, the phase of development, total 
        anticipated costs, and obstacles to completion;
          (2) the current plan (including projected financial and 
        workforce requirements) for the completion of the projects 
        identified in paragraph (1) within the time frames established 
        under the provisions of law authorizing the projects or the 
        final engineering reports for the projects;
          (3) the demand for new rural water supply projects;
          (4) rural water programs within other agencies and a 
        description of the extent to which those programs provide 
        support for rural water supply projects and water treatment 
        programs in Reclamation States, including an assessment of the 
        requirements, funding levels, and conditions of eligibility for 
        the programs assessed;
          (5) the extent of the demand that the Secretary can meet with 
        the Program;
          (6) how the Program will complement authorities already 
        within the jurisdiction of the Secretary and the heads of the 
        agencies with whom the Secretary consults; and
          (7) improvements that can be made to coordinate and integrate 
        the authorities of the agencies with programs evaluated under 
        paragraph (4), including any recommendations to consolidate 
        some or all of the activities of the agencies with respect to 
        rural water supply.
    (b) Consultation With States.--Before finalizing the assessment 
developed under subsection (a), the Secretary shall solicit comments 
from States with identified rural water needs.
    (c) Report.--Not later than 2 years after the date of enactment of 
this Act, the Secretary shall submit to the Committee on Energy and 
Natural Resources of the Senate and the Committee on Resources of the 
House of Representatives a detailed report on the assessment conducted 
under subsection (a).

SEC. 105. APPRAISAL INVESTIGATIONS.

    (a) In General.--On request of a non-Federal project entity with 
respect to a proposed rural water supply project that meets the 
eligibility criteria published under section 103(c) and subject to the 
availability of appropriations, the Secretary may--
          (1) receive and review an appraisal investigation that is--
                  (A) developed by the non-Federal project entity, with 
                or without support from the Secretary; and
                  (B) submitted to the Secretary by the non-Federal 
                project entity;
          (2) conduct an appraisal investigation; or
          (3) provide a grant to, or enter into a cooperative agreement 
        with, the non-Fedeal project entity to conduct an appraisal 
        investigation, if the Secretary determines that--
                  (A) the non-Federal project entity is qualified to 
                complete the appraisal investigation in accordance with 
                the criteria published under section 103(c); and
                  (B) using the non-Federal project entity to conduct 
                the appraisal investigation is a cost-effective 
                alternative for completing the appraisal investigation.
    (b) Deadline.--An appraisal investigation conducted under 
subsection (a) shall be scheduled for completion not later than 2 years 
after the date on which the appraisal investigation is initiated.
    (c) Appraisal Report.--In accordance with subsection (f), after an 
appraisal investigation is submitted to the Secretary under section 
(a)(1) or completed under paragraph (2) or (3) of subsection (a), the 
Secretary shall prepare an appraisal report that--
          (1) considers--
                  (A) whether the project meets--
                          (i) the appraisal criteria developed under 
                        subsection (d); and
                          (ii) the eligibility criteria developed under 
                        section 103(c);
                  (B) whether viable water supplies and water rights 
                exist to supply the project, including all practicable 
                water sources such as lower quality waters, nonpotable 
                waters, and water reuse-based water supplies;
                  (C) whether the project has a positive effect on 
                public health and safety;
                  (D) whether the project will meet water demand, 
                including project future needs;
                  (E) the extent to which the project provides 
                environmental benefits, including source water 
                protection;
                  (F) whether the project applies a regional or 
                watershed perspective and promotes benefits in the 
                region in which the project is carried out;
                  (G) whether the project--
                          (i)(I) implements an integrated resources 
                        management approach; or
                          (II) enhances water management flexibility, 
                        including providing for--
                                  (aa) local control to manage water 
                                supplies under varying water supply 
                                conditions; and
                                  (bb) participation in water banking 
                                and markets for domestic and 
                                environmental purposes; and
                          (ii) promotes long-term protection of water 
                        supplies;
                  (H) preliminary cost estimates for the project; and
                  (I) whether the non-Federal project entity has the 
                capability to pay 100 percent of the costs associated 
                with the operations, maintenance, and replacement of 
                the facilities constructed or developed as part of the 
                rural water supply project; and
          (2) provides recommendations on whether a feasibility study 
        should be initiated under section 106(a).
    (d) Appraisal Criteria.--
          (1) In general.--Not later than 1 year after the date of 
        enactment of this Act, the Secretary shall promulgate criteria 
        (including appraisal factors listed under subsection (c)) 
        against which the appraisal investigations shall be assessed 
        for completeness and appropriateness for a feasibility study.
          (2) Inclusions.--To minimize the cost of a rural water supply 
        project to a non-Federal project entity, the Secretary shall 
        include in the criteria methods to scale the level of effort 
        needed to complete the appraisal investigation relative to the 
        total size and cost of the proposed rural water supply project.
    (e) Review of Appraisal Investigation.--
          (1) In general.--Not later than 90 cays after the date of 
        submission of an appraisal investigation under paragraph (1) or 
        (3) of subsection (a), the Secretary shall provide to the non-
        Federal entity that conducted the investigation a determination 
        of whether the investigation has included the information 
        necessary to determine whether the proposed rural water supply 
        project satisfies the criteria promulgated under subsection 
        (d).
          (2) No satisfaction of criteria.--If the Secretary determines 
        that the appraisal investigation submitted by a non-Federal 
        entity does not satisfy the criteria promulgated under 
        subsection (d), the Secretary shall inform the non-Federal 
        entity of the reasons why the appraisal investigation is 
        deficient.
          (3) Responsibility of secretary.--If an appraisal 
        investigation as first submitted by a non-Federal entity does 
        not provide all necessary information, as defined by the 
        Secretary, the Secretary shall have no obligation to conduct 
        further analysis until the non-Federal project entity 
        submitting the appraisal study conducts additional 
        investigation and resubmits the appraisal investigation under 
        this subsection.
    (f) Appraisal Report.--Once the Secretary has determined that an 
investigation provides the information necessary under subsection (e), 
the Secretary shall--
          (1) complete the appraisal report required under subsection 
        (c);
          (2) make available to the public, on request, the appraisal 
        report prepared under this title; and
          (3) promptly publish in the Federal Register a notice of the 
        availability of the results.
    (g) Costs.--
          (1) Federal share.--The Federal share of an appraisal 
        investigation conducted under subsection (a) shall be 100 
        percent of the total cost of the appraisal investigation, up to 
        $200,000.
          (2) Non-federal share.--
                  (A) In general.--Except as provided in subparagraph 
                (B), if the cost of conducting an appraisal 
                investigation is more than $200,000, the non-Federal 
                share of the costs in excess of $200,000 shall be 50 
                percent.
                  (B) Exception.--The Secretary may reduce the non-
                Federal share required under subparagraph (A) if the 
                Secretary determines that there is an overwhelming 
                Federal interest in the appraisal investigation.
                  (C) Form.--The non-Federal share under subparagraph 
                (A) may be in the form of any inkind services that the 
                Secretary determines would contribute substantially 
                toward the conduct and completion of the appraisal 
                investigation.
    (h) Consultation; Identification of Funding Sources.--In conducting 
an appraisal investigation under subsection (a)(2) the Secretary 
shall--
          (1) consult and cooperate with the non-Federal project entity 
        and appropriate State, tribal, regional, and local authorities;
          (2) consult with the heads of appropriate Federal agencies 
        to--
                  (A) ensure that the proposed rural water supply 
                project does not duplicate a project carried out under 
                the authority of the agency head; and
                  (B) if a duplicate project is being carried out, 
                identify the authority under which the duplicate 
                project is being carried out; and
          (3) identify what funding sources are available for the 
        proposed rural water supply project.

SEC. 106. FEASIBILITY STUDIES.

    (a) In General.--On completion of an appraisal report under section 
105(c) that recommends undertaking a feasibility study and subject to 
the availability of appropriations, the Secretary shall--
          (1) in cooperation with a non-Federal project entity, carry 
        out a study to determine the feasibility of the proposed rural 
        water supply project;
          (2) receive and review a feasibility study that is--
                  (A) developed by the non-Federal project entity, with 
                or without support from the Secretary; and
                  (B) submitted to the Secretary by the non-Federal 
                project entity; or
          (3) provide a study to, or enter into a cooperative agreement 
        with, a non-Federal project entity to conduct a feasibility 
        study, for submission to the Secretary, if the Secretary 
        determines that--
                  (A) the non-Federal entity is qualified to complete 
                the feasibility study in accordance with the criteria 
                promulgated under subsection (d), and
                  (B) using the non-Federal project entity to conduct 
                the feasibility study is a cost-effective alternative 
                for completing the appraisal investigation.
      (b) Review of Non-Federal Feasibility Studies.--
          (I) In general.--In conducting a review of a feasibility 
        study submitted under paragraph (2) or (3) of subsection (a), 
        the Secretary shall--
                  (A) in accordance with the feasibility factors 
                described in subsection (c) and the criteria 
                promulgated under subsection (d), assess the 
                completeness of the feasibility study; and
                  (B) if the Secretary determines that a feasibility 
                study is not complete, notify the non-Federal entity of 
                the determination.
          (2) Revisions.--If the Secretary determines under paragraph 
        (1)(B) that a feasibility study is not complete, the non-
        Federal entity shall pay any costs associated with revising the 
        feasibility study.
    (c) Feasibility Factors.--Feasibility studies authorized or 
reviewed under this title shall include an assessment of--
          (1) near- and long-term water demand in the area to be served 
        by the rural water supply project;
          (2) advancement of public health and safety of any existing 
        rural water supply project and other benefits of the proposed 
        rural water supply project;
          (3) alternative new water supplies in the study area, 
        including any opportunities to treat and use low-quality water, 
        nonpotable water, water reuse-based supplies, and brackish and 
        saline waters through innovative and economically viable 
        treatment technologies;
          (4) environmental quality and source water protection issues 
        rebated to the rural water supply project;
          (5) innovative opportunities for water conservation in the 
        study area to reduce water use and water system costs, 
        including--
                  (A) nonstructural approaches to reduce the need for 
                the project; and
                  (B) demonstration technologies;
          (6) the extent to which the project and alternatives take 
        advantage of economic incentives and the use of market-based 
        mechanisms;
          (7)(A) the construction costs and projected operations, 
        maintenance, and replacement costs of all alternatives; and
          (B) the economic feasibility and lowest cost method of 
        obtaining the desired results of each alternative, taking into 
        account the Federal cost-share;
          (8) the availability of guaranteed loans for a proposed rural 
        water supply project;
          (9) the financial capability of the non-Federal project 
        entity to pay the non-Federal project entity's proportionate 
        share of the design and construction costs and 100 percent of 
        operations, maintenance, and replacement costs, including the 
        allocation of costs to each non-Federal project entity in the 
        case of multiple entities;
          (10) whether the non-Federal project entity has developed an 
        operations, management, and replacement plan to assist the non-
        Federal project entity in establishing rates and fees for 
        beneficiaries of the rural water supply project that includes a 
        schedule identifying the annual operations, maintenance, and 
        replacement costs that should be allocated to each non-Federal 
        entity participating in the project;
          (11)(A) the non-Federal project entity administrative 
        organization that would implement construction, operations, 
        maintenance, and replacement activities; and
          (B) the fiscal, administrative, and operational controls to 
        be implemented to manage the project;
          (12) the extent to which assistance for rural water supply is 
        available under other Federal authorities;
          (13) the engineering, environmental, and economic activities 
        to be undertaken to carry out the proposed rural water supply 
        project;
          (14) the extent to which the project involves partnerships 
        with other State, local, or tribal government or Federal 
        entities; and
          (15) in the case of a project intended for Indian tribes and 
        tribal organizations, the extent to which the project addresses 
        the goal of economic selfl-sufficiency.
    (d) Feasibility Study Criteria.--
          (1) In general.--Not later than 18 months after the date of 
        enactment of this Act, the Secretary shall promulgate criteria 
        (including the feasibility factors listed under subsection (c)) 
        under which the feasibility studies shall be assessed for 
        completeness and appropriateness.
          (2) Inclusions.--The Secretary shall include in the criteria 
        promulgated under paragraph (1) methods to scale the level of 
        effort needed to complete the feasibility assessment relative 
        to the total size and cost of the proposed rural water supply 
        project and reduce total costs to non-Federal entities.
    (e) Feasibility Report.--
          (1) In general.--After completion of appropriate feasibility 
        studies for rural water supply projects that address the 
        factors described in subsection (c) and the criteria 
        promulgated under subsection (d), the Secretary shall--
                  (A) develop a feasibility report that includes--
                          (i) a recommendation of the Secretary on--
                                  (I) whether the rural water supply 
                                project should be authorized for 
                                construction; and
                                  (II) the appropriate non-Federal 
                                share of construction costs, which 
                                shall be--
                                          (aa) at least 25 percent of 
                                        the total construction costs; 
                                        and
                                          (bb) determined based on an 
                                        analysis of the capability-to-
                                        pay information considered 
                                        under subsections (c)(9) and 
                                        (f); and
                          (ii) if the Secretary recommends that the 
                        project should be authorized for construction--
                                  (I) what amount of grants, loan 
                                guarantees, or combination of grants 
                                and loan guarantees should be used to 
                                provide the Federal cost share;
                                  (II) a schedule that identifies the 
                                annual operations, maintenance, and 
                                replacement costs that should be 
                                allocated to each non-Federal entity 
                                participating in the rural water supply 
                                project; and
                                  (III) an assessment of the financial 
                                capability of each non-Federal entity 
                                participating in the rural water supply 
                                project to pay the allocated annual 
                                operation, maintenance, and replacement 
                                costs for the rural water supply 
                                project;
                  (B) submit the report to the Committee on Energy and 
                Natural Resources of the Senate and the Committee on 
                Resources of the House of Representatives;
                  (C) make the report publicly available, along with 
                associated study documents; and
                  (D) publish in the Federal Register a notice of the 
                availability of the results.
    (f) Capability-To-Pay.--
          (1) In general.--In evaluating a proposed rural water supply 
        project under this section, the Secretary shall--
                  (A) consider the financial capability of any non-
                Federal project entities participating in the rural 
                water supply project to pay 25 percent or more of the 
                capital construction costs of the rural water supply 
                project; and
                  (B) recommend an appropriate Federal share and non-
                Federal share of the capital construction costs, as 
                determined by the Secretary.
          (2) Factors.--In determining the financial capability of non-
        Federal project entities to pay for a rural water supply 
        project under paragraph (1), the Secretary shall evaluate 
        factors for the project area, relative to the State average, 
        including--
                  (A) per capita income;
                  (B) median household income;
                  (C) the poverty rate;
                  (D) the ability of the non-Federal project entity to 
                raise tax revenues or assess fees;
                  (E) the strength of the balance sheet of the non-
                Federal project entity; and
                  (F) the existing cost of water in the region.
          (3) Indian tribes.--In determining the capability-to-pay of 
        Indian tribe project beneficiaries, the Secretary may consider 
        deferring the collection of all or part of the non-Federal 
        construction costs apportioned to Indian tribe project 
        beneficiaries unless or until the Secretary determines that the 
        Indian tribe project beneficiaries should pay--
                  (A) the costs allocated to the beneficiaries; or
                  (B) an appropriate portion of the costs.
      (g) Cost-Sharing Requirement.--
          (1) In general.--Except as otherwise provided in this 
        subsection, the Federal share of the cost of a feasibility 
        study carried out under this section shall not exceed 50 
        percent of the study costs.
          (2) Form.--The non-Federal share under paragraph (1) may be 
        in the form of any in-kind services that the Secretary 
        determines would contribute substantially toward the conduct 
        and completion of the study.
          (3) Financial hardship.--The Secretary may increase the 
        Federal share of the costs of a feasibility study if the 
        Secretary determines, based on a demonstration of financial 
        hardship, that the non-Federal participant is unable to 
        contribute at least 50 percent of the costs of the study.
          (4) Larger communities.--In conducting a feasibility study of 
        a rural water supply system that includes a community with a 
        population in excess of 50,000 inhabitants, the Secretary may 
        require the non-Federal project entity to pay more than 50 
        percent of the costs of the study.
    (h) Consultation and Cooperation.--In addition to the non-Federal 
project entity, the Secretary shall consult and cooperate with 
appropriate Federal, State, tribal, regional, and local authorities 
during the conduct of each feasibility assessment and development of 
the feasibility report conducted under this title.

SEC. 107. MISCELLANEOUS.

    (a) Authority of Secretary.--The Secretary may enter into 
contracts, financial assistance agreements, and such other agreements, 
and promulgate such regulations, as are necessary to carry out this 
title.
    (b) Transfer of Projects.--Nothing in this title authorizes the 
transfer of pre-existing facilities or pre-existing components of any 
water system from Federal to private ownership or from private to 
Federal ownership.
    (c) Federal Reclamation Law.--Nothing in this title supersedes or 
amends any Federal law associated with a project, or portion of a 
project, constructed under Federal reclamation law.
    (d) Interagency Coordination.--The Secretary shall coordinate the 
Program carried out under this title with existing Federal and State 
rural water and wastewater programs to facilitate the most efficient 
and effective solution to meeting the water needs of the non-Federal 
project sponsors.
    (e) Multiple Indian Tribes.--in any case in which a contract is 
entered into with, or a grant is made, to an organization to perform 
services benefiting more than 1 Indian tribe under this title, the 
approval of each such Indian tribe shall be a prerequisite to entering 
into the contract or making the grant.
    (f) Ownership of Facilities.--Title to any facility planned, 
designed, and recommended for construction under this title shall be 
held by the non-Federal project entity.
    (g) Expedited Procedures.--If the Secretary determines that a 
community to be served by a proposed rural water supply project has 
urgent and compelling water needs, the Secretary shall, to the maximum 
extent practicable, expedite appraisal investigations and reports 
conducted under section 105 and feasibility studies and reports 
conducted under section 106.
    (h) Effect on State Water Law.--
          (1) In general.--Nothing in this title preempts or affects 
        State water law or an interstate compact governing water.
          (2) Compliance required.--The Secretary shall comply with 
        State water laws in carrying out this title.
    (i) No Additional Requirements.--Nothing in this title requires a 
feasibility study for, or imposes any other additional requirements 
with respect to, rural water supply projects or programs that are 
authorized before the date of enactment of this Act.

SEC. 108. AUTHORIZATION OF APPROPRIATIONS.

    (a) In General.--There is authorized to be appropriated to carry 
out this title $20,000,000 for the period of fiscal years 2006 through 
2015, to remain available until expended.
    (b) Rural Water Programs Assessment.--Of the amounts made available 
under subsection (a), not more than $1,000,000 may be made available to 
carry out section 104 for each of fiscal years 2006 and 2007.
    (c) Limitation.--No amounts made available under this section shall 
be used to pay construction costs associated with any rural water 
supply project.

             TITLE II--TWENTY-FIRST CENTURY WATER WORKS ACT

SEC. 201. SHORT TITLE.

    This title may be cited as the ``Twenty-First Century Water Works 
Act''.

SEC. 202. DEFINITIONS.

    In this title:
          (1) Indian tribe.--The term ``Indian tribe'' has the meaning 
        given the term in section 4 of the Indian Self-Determination 
        and Education Assistance Act (25 U.S.C. 450b).
          (2) Lender.--The term ``lender'' means any non-Federal 
        qualified institutional buyer (as defined in section 
        230.144A(a) of title 17, Code of Federal Regulation (or any 
        successor regulation), known as Rule 144A(a) of the Securities 
        and Exchange Commission and issued under the Securities Act of 
        1933 (15 U.S.C. 77a et seq.)).
          (3) Loan guarantee.--The term ``loan guarantee'' has the 
        meaning given the term ``loan guarantee'' in section 502 of the 
        Federal Credit Reform Act of 1990 (2 U.S.C. 661a).
          (4) Non-federal borrower.--The term ``non-Federal borrower'' 
        means--
                  (A) a State (including a department, agency, or 
                political subdivision of a State); or
                  (B) a conservancy district, irrigation district, 
                canal company, water users' association, Indian tribe, 
                an agency created by interstate compact, or any other 
                entity that has the capacity to contract with the 
                United States under Federal reclamation law.
          (5) Obligation.--The term ``obligation'' means a loan or 
        other debt obligation that is guaranteed under this section.
          (6) Project.--The term ``project'' means--
                  (A) a rural water supply project (as defined in 
                section 102(9)); or
                  (B) an extraordinary operation and maintenance 
                activity for, or the rehabilitation of, a facility--
                          (i) that is authorized by Federal reclamation 
                        law and constructed by the United States under 
                        such law; or
                          (ii) in connection with which there is a 
                        repayment or water service contract executed by 
                        the United States under Federal reclamation 
                        law.
          (7) Secretary.--The term ``Secretary'' means the Secretary of 
        the Interior.

SEC. 203. PROJECT ELIGIBILITY.

    (a) Eligibility Criteria.--
          (1) In general.--The Secretary shall develop and publish in 
        the Federal Register criteria for determining the eligibility 
        of a project for financial assistance under 204.
          (2) Inclusions.--Eligibility criteria shall include--
                  (A) submission of an application by the lender to the 
                Secretary;
                  (B) demonstration of the creditworthiness of the 
                project, including a determination by the Secretary 
                that any financing for the project has appropriate 
                security features to ensure repayment;
                  (C) demonstration by the non-Federal borrower, to the 
                satisfaction of the Secretary, of the ability of the 
                non-Federal borrower to repay the project financing 
                from user fees or other dedicated revenue sources;
                  (D) demonstration by the non-Federal borrower, to the 
                satisfaction of the Secretary, of the ability of the 
                non-Federal borrower to pay all operations, 
                maintenance, and replacement costs of the project 
                facilities; and
                  (E) such other criteria as the Secretary determines 
                to be appropriate.
    (b) Waiver.--The Secretary may waive any of the criteria in 
subsection (a)(2) that the Secretary determines to be duplicative or 
rendered unnecessary because of action already taken by the United 
States.
    (c) Projects Previously Authorized.--A project that was authorized 
for construction under Federal reclamation laws prior to the date of 
enactment of this Act shall be eligible for assistance under this 
title, subject to the criteria established by the Secretary under 
subsection (a).
    (d) Criteria for Rural Water Supply Projects.--A rural water supply 
project that is determined to be feasible under section 106 is eligible 
for a loan guarantee under section 204.

SEC. 204. LOAN GUARANTEES.

    (a) Authority.--Subject to the availability of appropriations, the 
Secretary may make available to lenders for a project meeting the 
eligibility criteria established in section 203 loan guarantees to 
supplement private-sector or lender financing for the project.
    (b) Terms and Limitations.--
          (1) In general.--Loan guarantees under this section for a 
        project shall be on such terms and conditions and contain such 
        covenants, representations, warranties, and requirements as the 
        Secretary determines to be appropriate to protect the financial 
        interests of the United States.
          (2) Amount.--Loan guarantees by the Secretary shall not 
        exceed an amount equal to 90 percent of the costs of the 
        project that is the subject of the loan guarantee, as estimated 
        at the time at which the loan guarantee is issued.
          (3) Interest rate.--An obligation shall bear interest at a 
        rate that does not exceed a level that the Secretary determines 
        to be appropriate, taking into account the prevailing rate of 
        interest in the private sector for similar loans and risks.
          (4) Amortization.--A loan guarantee under this section shall 
        provide for complete amortization of the loan guarantee within 
        not more than 40 years.
          (5) Nonsubordination.--An obligation shall be subject to the 
        condition that the obligation is not subordinate to other 
        financing.
    (c) Prepayment and Refinancing.--Any prepayment or refinancing 
terms on a loan guarantee shall be negotiated between the non-Federal 
borrower and the lender with the consent of the Secretary.

SEC. 205. DEFAULTS.

    (a) Payments by Secretary.--
          (1) In general.--If a borrower defaults on the obligation, 
        the holder of the loan guarantee shall have the right to demand 
        payment of the unpaid amount from the Secretary.
          (2) Payment required.--By such date as may be specified in 
        the loan guarantee or related agreements, the Secretary shall 
        pay to the holder of the loan guarantee the unpaid interest on, 
        and unpaid principal of, the obligation with respect to which 
        the borrower has defaulted, unless the Secretary finds that 
        there was not default by the borrower in the payment of 
        interest or principal or that the default has been remedied.
          (3) Forbearance.--Nothing in this subsection precludes any 
        forbearance by the holder of the obligation for the benefit of 
        the non-Federal borrower that may be agreed on by the parties 
        to the obligation and approved by the Secretary.
    (b) Subrogation.--
          (1) In general.--If the Secretary makes a payment under 
        subsection (a), the Secretary shall be subrogated to the rights 
        of the recipient of the payment as specified in the loan 
        guarantee or related agreements, including, as appropriate, the 
        authority (notwithstanding any other provision of law) to--
                  (A) complete, maintain, operate, lease, or otherwise 
                dispose of any property acquired pursuant to the loan 
                guarantee or related agreements; or
                  (B) permit the non-Federal borrower, pursuant to an 
                agreement with the Secretary, to continue to pursue the 
                purposes of the project if the Secretary determines the 
                purposes to be in the public interest.
          (2) Superiority of rights.--The rights of the Secretary, with 
        respect to any property acquired pursuant to a loan guarantee 
        or related agreement, shall be superior to the rights of any 
        other person with respect to the property.
    (c) Payment of Principal and Interest by Secretary.--With respect 
to any obligation guaranteed under this section, the Secretary may 
enter into a contract to pay, and pay, holders of the obligation, for 
and on behalf of the non-Federal borrower, from funds appropriated for 
that purpose, the principal and interest payments that become due and 
payable on the unpaid balance of the obligation if the Secretary finds 
that--
          (1)(A) the non-Federal borrower is unable to meet the 
        payments and is not in default;
          (B) it is in the public interest to permit the non-Federal 
        borrower to continue to pursue the purposes of the project; and
          (C) the probable net benefit to the Federal Government in 
        paying the principal and interest will be greater than that 
        which would result in the event of a default;
          (2) the amount of the payment that the Secretary is 
        authorized to pay shall be no greater than the amount of 
        principal and interest that the non-Federal borrower is 
        obligated to pay under the agreement being guaranteed; and
          (3) the borrower agrees to reimburse the Secretary for the 
        payment (including interest) on terms and conditions that are 
        satisfactory to the Secretary.
    (d) Action by Attorney General.--
          (1) Notification.--If the non-Federal borrower defaults on an 
        obligation, the Secretary shall notify the Attorney General of 
        the default.
          (2) Recovery.--On notification, the Attorney General shall 
        take such action as is appropriate to recover the unpaid 
        principal and interest due from--
                  (A) such assets of the defaulting non-Federal 
                borrower as are associated with the obligation; or
                  (B) any other security pledged to secure the 
                obligation.

SEC. 206. OPERATIONS, MAINTENANCE, AND REPLACEMENT COSTS.

    (a) In General.--The non-Federal share of operations, maintenance, 
and replacement costs for a project receiving Federal assistance under 
this title shall be 100 percent.
    (b) Plan.--On request of the non-Federal borrower, the Secretary 
may assist in the development of an operation, maintenance, and 
replacement plan to provide the necessary framework to assist the non-
Federal borrower in establishing rates and fees for project 
beneficiaries.

SEC. 207. TITLE TO NEWLY CONSTRUCTED FACILITIES.

    (a) New Projects and Facilities.--All new projects or facilities 
constructed in accordance with this title shall remain under the 
jurisdiction and control of the non-Federal borrower subject to the 
terms of the repayment agreement.
    (b) Existing Projects and Facilities.--Nothing in this title 
affects the title of--
          (1) reclamation projects authorized prior to the date of 
        enactment of this Act;
          (2) works supplemental to existing reclamation projects; or
          (3) works constructed to rehabilitate existing reclamation 
        projects.

SEC. 208. WATER RIGHTS.

    (a) In General.--Nothing in this title preempts or affects State 
water law or an interstate compact governing water.
    (b) Compliance Required.--The Secretary shall comply with State 
water laws in carrying out this title. Nothing in this title affects or 
preempts State water law or an interstate compact governing water.

SEC. 209. INTERAGENCY COORDINATION AND COOPERATION.

    (a) Consultation.--The Secretary shall consult with the Secretary 
of Agriculture before promulgating criteria with respect to financial 
appraisal functions and loan guarantee administration for activities 
carried out under this title.
    (b) Memorandum of Agreement.--The Secretary and the Secretary of 
Agriculture may enter into a memorandum of agreement providing for 
Department of Agriculture financial appraisal functions and loan 
guarantee administration for activities carried out under this title.

SEC. 210. RECORDS; AUDITS.

    (a) In General.--A recipient of a loan guarantee shall keep such 
records and other pertinent documents as the Secretary shall prescribe 
by regulation, including such records as the Secretary may require to 
facilitate an effective audit.
    (b) Access.--The Secretary and the Comptroller General of the 
United States, or their duly authorized representatives, shall have 
access, for the purpose of audit, to the records and other pertinent 
documents.

SEC. 211. FULL FAITH AND CREDIT.

    The full faith and credit of the United States is pledged to the 
payment of all guarantees issued under this section with respect to 
principal and interest.

SEC. 212. AUTHORIZATION OF APPROPRIATIONS.

    There are authorized to be appropriated such sums as are necessary 
to carry out this title, to remain available until expended.

                         PURPOSE OF THE MEASURE

    The purpose of S. 895 is to direct the Secretary of the 
Interior to assess the rural water supply programs within the 
Federal Government, to establish a rural water supply program 
in the Reclamation States and to establish a loan guarantee 
program for certain purposes in the Reclamation States.

                          BACKGROUND AND NEED

    Millions of Americans live without safe and reliable 
drinking water supplies. Lack of adequate drinking water is 
especially prevalent in rural America which, in many cases, is 
unable to afford the capital outlays for new water 
infrastructure or to upgrade deteriorating infrastructure. A 
1995 needs assessment conducted by the United States Department 
of Agriculture's Rural Development State Offices found over one 
million people in the United States had no water piped into 
their homes, and more than 2.4 million had critical drinking 
water needs. According to a 2001 Environmental Protection 
Agency (EPA) survey of capital improvement needs for public 
water systems, total funding needs for small systems serving 
populations of 3,300 or less will be $31.2 billion over 20 
years (1999-2018). The EPA determined that, on average, over 10 
percent of rural communities in the 17 Reclamation States have 
contaminated water supplies. The Indian Health Service 
estimates that approximately 20,000 households in American 
Indian Communities and Alaska Native Villages lack potable 
water supplies. Additionally, compliance with water quality 
requirements derived from the Federal Clean Water and Safe 
Drinking Water Acts has proven especially onerous and expensive 
for rural communities required to invest in water supply and 
wastewater infrastructure.
    Over the past 30 years, Congress has authorized and amended 
various programs to assist communities in addressing their 
water and wastewater problems. In 1995, the General Accounting 
Office reported that eight Federal agencies had 17 programs 
designed specifically for rural areas to construct or improve 
water and wastewater facilities. Water and wastewater programs 
are primarily found within the Bureau of Reclamation 
(hereinafter ``Bureau''), Department of Agriculture, Department 
of Commerce, Department of Housing and Urban Development, the 
Army Corps of Engineers and the Environmental Protection 
Agency. These programs differ in purpose, scope, eligibility 
criteria, and assistance provided.
    Unlike rural water supply programs within other agencies 
that have standing program authorization, the Bureau undertakes 
individual rural water supply projects at the express direction 
of Congress. Because rural water projects undertaken by the 
Bureau do not have clear eligibility and lack programmatic 
criteria, communities that do not meet criteria for other, 
authorized programs often approach Congress with proposals for 
water supply projects. Since the early 1980's, Congress has 
directed the Bureau to develop ten independently authorized 
single-purpose municipal and industrial water supply projects 
for rural communities throughout the Western United States. The 
Federal cost share, typically between 75 percent and 85 
percent, of these projects tends to be much larger than 
programs administered by other agencies. Some have raised 
concerns that these projects could overwhelm the Bureau's 
resources particularly when the Bureau's budget is limited to 
approximately $800 million annually. For example, the Lewis and 
Clark project has an estimated Federal cost of $214 million and 
the Mni Wiconi Project has an estimated cost of $417 million.
    During the 108th Congress, Commissioner Keys testified that 
the Bureau has no general authority to plan, design, and 
construct rural water projects, and therefore has a limited 
ability to set priorities or promulgate criteria for project 
development and, as a result, to budget accordingly for these 
projects. For this reason, there is no predictable funding as 
it must be secured annually through the appropriations process. 
As a result, a backlog of authorized but uncompleted rural 
water supply projects remains. Outstanding construction 
authorization totals approximately $2.3 billion.
    Because the Bureau does not have an authorized rural water 
program, small communities seeking to address long-term water 
needs are unable to seek assistance from the Bureau. Rural 
communities must wait for Congress to direct the Bureau to 
proceed with appraisal and feasibility studies for a water 
supply project. To expedite the process, rural communities 
frequently undertake project studies independently which later 
become the basis for Bureau project authorizations. Because the 
Bureau was uninvolved in this process, some of these projects 
are not prepared according to Federal engineering and planning 
standards and do not provide the best alternative for a water 
supply project. The Bureau has expressed interest in becoming 
involved during the planning stages for rural water supply 
projects and establishing a Bureau ``rural water program with 
adequate controls and guidelines.''

                          LEGISLATIVE HISTORY

    S. 895 was introduced on April 25, 2005, by Senator 
Domenici for himself and Senator Bingaman and referred to the 
Committee on Energy and Natural Resources. Senators Bennett, 
Bingaman, Burns, Dorgan, Feinstein, Johnson, Kyl, Murkowski, 
and Salazar are co-sponsors. The full committee held a hearing 
on S. 895 on May 11, 2005. S. Hrg. 109-105. At the business 
meeting on September 28, 2005, the Committee on Energy and 
Natural Resources ordered S. 895 favorably reported with an 
amendment in the nature of a substitute.
    During the 108th Congress, three similar measures were 
introduced. S. 1085 was introduced by Senator Bingaman on May 
20, 2003. This measure was co-sponsored by Senators Baucus, 
Daschle, Dorgan, and Johnson. S. 1732 was introduced by Senator 
Domenici on October 15, 2003 and S. 2218 was also introduced by 
Senator Domenici on behalf of the administration on March 22, 
2004. All three bills were referred to the Committee on Energy 
and Natural Resources. The Subcommittee on Water and Power held 
a hearing on all three bills on April 25, 2004. S. Hrg. 108-
539.

                        COMMITTEE RECOMMENDATION

    The Senate Committee on Energy and Natural Resources, in an 
open business meeting on September 28, 2005, by unanimous voice 
vote of a quorum present, recommends that the Senate pass S. 
895, if amended as described herein.

                          COMMITTEE AMENDMENT

    During consideration of S. 895, the Committee adopted an 
amendment in the nature of a substitute which addresses 
concerns raised during the committee hearing and in written 
submissions.
    The first change adds a provision directing the Secretary 
of the Interior, in collaboration with the heads of agencies 
that administer rural water programs, to provide an assessment 
of how the program authorized by this Act will complement the 
authorities within other programs and to suggest improvements 
that can be made to better coordinate with the other programs. 
The second addition directs the Secretary of the Interior to 
solicit comment from States with rural water supply needs 
before finalizing the aforementioned assessment. The third 
addition provides that, if the Secretary of the Interior 
determines that a community to be served by a rural water 
supply project has urgent and compelling water needs, the 
Secretary of the Interior shall expedite the appraisal and 
feasibility study process to the maximum extent practicable. 
The fourth change was the addition of a provision that details 
the obligations of the Secretary of the Interior in the event 
that the non-Federal borrower defaults on a loan guaranteed by 
the Federal Government. The fifth change states that the 
Secretary of the Interior shall consult with the Secretary of 
Agriculture before promulgating criteria with respect to 
financial appraisal functions and loan guarantee administration 
and may enter into a memorandum of agreement with the Secretary 
of Agriculture, providing that the Secretary of Agriculture 
will perform appraisal functions and loan guarantee 
administration. The sixth change was the addition of section 
210 which requires recipients of loan guarantees to keep 
financial records as determined by the Secretary of the 
Interior and provides that the Secretary of the Interior shall 
have access to those records. The final change was the addition 
of section 211 which states that all loans guaranteed under 
this Act shall have the full faith and credit of the United 
States.

                      SECTION-BY-SECTION ANALYSIS

    Section 101 provides the short title, the ``Rural Water 
Supply Act of 2005.''
    Section 102 defines the terms used in title I of this Act.
    Section 103 subsection (a) directs the Secretary to carry 
out a rural water supply program in the Reclamation States to 
provide water to small communities for domestic, municipal and 
industrial use.
    Subsection (b) provides that any activity carried out under 
this title shall be in cooperation with a qualifying non-
Federal entity.
    Subsection (c) directs the Secretary, not later than 1 year 
after the date of enactment of this Act, to promulgate criteria 
for eligibility under the program.
    Subsection (d) provides factors that the Secretary shall 
consider when promulgating criteria under subsection (c).
    Subsection (e) provides that the Secretary may include a 
connection to preexisting infrastructure if it provides a 
reliable water supply and may consider a community in excess of 
50,000 inhabitants as part of a project if the Secretary 
determines the community is a critical partner.
    Section 104 subsection (a) directs the Secretary, in 
collaboration with the heads of agencies that administer rural 
water supply programs, to assess the status of all authorized 
but uncompleted rural water supply projects under the 
jurisdiction of the Secretary, the demand for rural water 
supply projects, the demand for rural water projects that the 
Secretary can meet with the authority provided under this 
title, how the authority provided under this Act will 
compliment existing rural water supply programs and 
improvements that can be made to coordinate rural water supply 
programs within the federal government.
    Subsection (b) directs the Secretary to consult with States 
with identified rural water needs before finalizing the 
assessment under subsection (a).
    Subsection (c) directs the Secretary to report on the 
assessment conducted under subsection (a).
    Section 105 subsection (a) directs the Secretary, upon 
request of a non-Federal project entity to either: accept an 
appraisal investigation developed and submitted by a non-
Federal project entity; conduct an appraisal investigation; or 
provide a grant or enter into a cooperative agreement with a 
non-Federal project entity to conduct an appraisal 
investigation. It is the intent of the Committee that when the 
Secretary undertakes an appraisal study pursuant to section 105 
subsection (a), the Secretary shall comply with section 208 of 
the Energy and Water Development Appropriations Act, 2003 Act 
(Public Law 108-7; 117 Stat. 11) and that the Secretary will 
also ensure that appraisal level work is performed by qualified 
entities with demonstrated competence and qualifications.
    Subsection (b) requires an appraisal investigation be 
completed not later than 2 years after it is initiated.
    Subsection (c) directs the Secretary to prepare an 
appraisal report based on the investigation.
    Subsection (d) directs the Secretary to promulgate 
appraisal criteria for appraisal investigations.
    Subsection (e) directs the Secretary to assess for 
completeness any appraisal investigation that not performed by 
the Secretary.
    Subsection (f) directs the Secretary to develop an 
appraisal report if all necessary information is provided under 
subsection (e)
    Subsection (g) sets forth the Federal cost share of 
appraisal investigations.
    Subsection (h) directs the Secretary to consult with 
appropriate entities in conducting appraisal investigations.
    Section 106 subsection (a) provides that, if the appraisal 
report completed under section 105(a) recommends undertaking a 
feasibility study, the Secretary shall: conduct a feasibility 
study, accept a feasibility study developed and submitted by a 
non-Federal project entity, or provide a grant or enter into a 
cooperative agreement with a non-Federal project entity to 
conduct a feasibility study. It is the intent of the Committee 
that when the Secretary undertakes a feasibility study pursuant 
to section 106 subsection (a), the Secretary shall comply with 
section 208 of the Energy and Water Development Appropriations 
Act, 2003 Act (Public Law 108-7; 117 Stat. 11) and that the 
Secretary will also ensure that feasibility level work is 
performed by qualified entities with demonstrated competence 
and qualifications.
    Subsection (b) directs the Secretary to assess for 
completeness any feasibility study not performed by the 
Secretary.
    Subsection (c) sets forth criteria to be considered by the 
Secretary.
    Subsection (d) directs the Secretary to promulgate 
feasibility criteria to be used for assessing feasibility 
studies.
    Subsection (e) directs the Secretary to prepare a 
feasibility report if the criteria under subsection (c) and 
subsection (d) are addressed and make a recommendation if the 
project should be authorized for construction.
    Subsection (f) directs the Secretary to assess a non-
Federal project entity's financial capability to pay at least 
25 percent of rural water supply construction costs and 
recommend an appropriate Federal and non-Federal cost share.
    Subsection (g) requires that the Federal share of any 
feasibility study carried out under this section shall not 
exceed 50 percent.
    Subsection (h) directs the Secretary to consult with 
appropriate entities while conducting a feasibility assessment 
and developing a feasibility report
    Section 107 subsection (a) authorizes the Secretary to 
enter into such agreements and promulgate such regulations as 
necessary to carry out this title.
    Subsection (b) states that this title does not authorize 
the transfer of pre-existing facilities or components from 
private to Federal ownership or from Federal to private 
ownership.
    Subsection (c) states that this title does not affect any 
Federal law associated with a project, or portion of a project 
constructed under Federal reclamation law.
    Subsection (d) directs the Secretary to coordinate with 
existing Federal and State rural water and wastewater programs 
to most effectively meet the needs of non-Federal project 
sponsors.
    Subsection (e) states that the approval of every tribe is 
required before a contract or grant is made to an organization 
to perform services benefiting more than one Indian tribe.
    Subsection (f) states that any facility planned, designed 
and recommended for construction under this title shall be held 
by the non-Federal project entity.
    Subsection (g) directs the Secretary to expedite appraisal 
investigations and reports and feasibility investigations and 
reports if a community has an urgent and compelling water need.
    Subsection (h) states that this title has no effect on 
State water law or an interstate compact governing water and 
the Secretary shall comply with State water law in carrying out 
this title.
    Subsection (i) states that nothing in this title requires a 
feasibility study, or imposes any other additional requirements 
for rural water supply projects or programs authorized before 
the date of enactment of this Act.
    Section 108 subsection (a) authorizes $20,000,000 to be 
appropriated for this title for fiscal years 2006 through 2015
    Subsection (b) requires that not more than $1 million shall 
be made available to carry out section 104 for fiscal years 
2006 and 2007.
    Subsection (c) prohibits the use of any funds provided 
under this section from being used for construction costs.
    Section 201 provides the short title, ``Twenty-First 
Century Water Works Act.''
    Section 202 defines the terms used in title II of this Act.
    Section 203 subsection (a) directs the Secretary to 
promulgate criteria for eligibility of a project for financial 
assistance under section 204 and provides inclusions.
    Subsection (b) provides that the Secretary may waive any 
criteria under subsection (a) that the Secretary determines 
unnecessary.
    Subsection (c) states that, subject to the criteria 
developed under subsection (a), any project authorized under 
Federal reclamation law prior to the date of enactment of this 
Act shall be eligible for assistance under this title.
    Subsection (d) states that any rural water supply project 
determined to be feasible under section 106 is eligible for a 
loan guarantee under section 204.
    Section 204 subsection (a) provides that, subject to the 
availability of appropriations and the eligibility criteria 
established in section 203, the Secretary may make available 
loan guarantees to lenders.
    Subsection (b) states that loan guarantees made available 
under this section be on such conditions the Secretary 
determines appropriate, shall not exceed 90 percent of the cost 
of the project that is the subject of the loan guarantee, shall 
provide for amortization of the loan guarantee within not more 
than 40 years, and shall not be subordinate to other financing.
    Subsection (c) states that any prepayment or refinancing of 
a loan guarantee shall be between the non-Federal borrower and 
the lender with the consent of the Secretary.
    Section 205 subsection (a) sets forth the obligations of 
the Secretary in the event that the non-Federal borrower 
defaults.
    Subsection (b) states that, if the Secretary makes a 
payment under subsection (a), the Secretary shall be subrogated 
to the rights to the recipient of the payment as specified in 
the loan guarantee or related agreements.
    Subsection (c) provides that, under specified 
circumstances, the Secretary may enter into a contract to pay, 
and pay, holders of the obligation, on behalf of the non-
Federal borrower, from funds appropriated for that purpose, 
principal and interest payments associated with the obligation.
    Section (d) requires that the Secretary inform the Attorney 
General if the non-Federal borrower defaults on an obligation 
and directs the Attorney General to take such action as 
necessary to recover unpaid principal and interest from the 
non-Federal borrower.
    Section 206 subsection (a) requires that the non-Federal 
borrower be responsible for 100 percent of operations and 
maintenance costs.
    Subsection (b) states that the Secretary may assist the 
non-Federal borrower in developing an operations and 
maintenance plan.
    Section 207 subsection (a) provides that all facilities 
constructed under this title shall remain under the control of 
the non-Federal borrower subject to the terms of the repayment 
contract.
    Subsection (b) provides that nothing in this title affects 
the title of any reclamation projects authorized prior to the 
date of enactment of this Act or works associated with existing 
reclamation projects.
    Section 208 provides that nothing in this title affects or 
preempts State water law or an interstate compact governing 
water and provides that the Secretary shall comply with State 
water laws in carrying out this title.
    Section 209 provides that the Secretary shall consult with 
the Secretary of Agriculture prior to promulgating criteria 
with respect to financial appraisal functions and program 
administration and the Secretary may enter into a memorandum of 
agreement with the Secretary of Agriculture to have the 
Secretary of Agriculture provide those services.
    Section 210 provides that the recipient of a loan guarantee 
shall keep records as required by the Secretary and shall make 
the records available to the Secretary.
    Section 211 provides that all guarantees issued under this 
section have the full faith and credit of the United States.
    Section 212 authorizes such sums as necessary to be 
appropriated as necessary to carry out this title.

                   COST AND BUDGETARY CONSIDERATIONS

    The Congressional Budget Office estimate of the costs of 
this measure has been requested but was not received at the 
time the report was filed. When the report is available, the 
Chairman will request it to be printed in the Congressional 
Record for the advice of the Senate.

                      REGULATORY IMPACT EVALUATION

    In compliance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee makes the following 
evaluation of the regulatory impact which would be incurred in 
carrying out S. 895. The bill is not a regulatory measure in 
the sense of imposing Government-established standards or 
significant responsibilities on private individuals and 
businesses.
    No personal information would be collected in administering 
the program. Therefore, there would be no impact on personal 
privacy.
    Little, if any, additional paperwork would result from the 
enactment of S. 895.

                        EXECUTIVE COMMUNICATIONS

    The testimony provided by the Bureau at the Subcommittee 
hearing on S. 895 in the 109th Congress follows:

  Statement of John W. Keys, III, Commissioner, Bureau of Reclamation

    Mr. Chairman, I am John W. Keys, III, Commissioner of the 
Bureau of Reclamation.
    It is my pleasure to present the Administration's views on 
S. 895, the Rural Water Supply Act of 2005, which would 
establish a rural water supply program within the Department of 
the Interior and authorize Reclamation to develop programmatic 
criteria and guidelines giving Reclamation and rural 
communities a consistent and fair process for evaluating water 
supply needs and prospects in rural communities.
    During the last Congress, three distinct bills were 
introduced for the purpose of creating a coherent rural water 
program within the Department: S. 1732, Senator Domenici's 
bill, S. 1085, Senator Bingaman's bill, and S. 2218, the bill 
which Senator Domenici introduced by request of the 
Administration.
    The fact that there is but a single rural water bill before 
the Committee in this Congress reflects the positive spirit of 
consultation and collaboration among this Committee's 
bipartisan leadership and the Department as we have 
brainstormed solutions and narrowed issues that require more 
work. It is a pleasure to be a part of this process which we 
hope very much will culminate in enactment of a rural water 
program that meets the fair expectations of rural communities 
and U.S. taxpayers.
    Before addressing the specific provisions of S. 895, I 
think it is important to place our shared desire for a rational 
rural water program in historical context.


                         HISTORICAL BACKGROUND


    Since the early 1980s, Congress has authorized thirteen 
separate single purpose Reclamation projects for municipal and 
industrial water supply in rural communities in Reclamation 
States. The total federal budget authorization for those 
projects is over $2.3 billion. These have all come at a time 
when security and law enforcement costs, operation and 
maintenance costs, dam safety costs, and other program 
obligations continue to pressure Reclamation's already tight 
budget.
    Congress authorized and funded these projects without the 
benefit of rigorous economic justification and objective design 
review. Was the least cost alternative chosen? Once 
constructed, could the project deliver national economic 
benefits to outweigh its costs? These questions were never 
asked.
    By no means can we assume that those thirteen projects will 
be the last rural water projects ever authorized and funded. A 
1995 needs assessment conducted by the U. S. Department of 
Agriculture's Rural Development State Offices estimated that 
over 1 million people in the United States had no water piped 
into their homes, and more than 2.4 million had critical unmet 
drinking water needs. Recently released Environmental 
Protection Agency data revealed $31 billion in total funding 
needs for small systems serving populations of 3,300 or less. 
As expensive as the original thirteen Reclamation rural water 
projects are, they represent only the tip of the iceberg if no 
order and economic justification is introduced to screen 
projects.
    Compared to other Federal agencies with water-management 
mandates, Reclamation has maintained less control over rural 
water projects. Programs managed in the Departments of 
Agriculture, Commerce, Health and Human Services, and the 
Environmental Protection Agency feature specific eligibility 
criteria relating to the missions and authorities of their 
agencies and programs. In contrast, Reclamation currently has 
no program, therefore no eligibility criteria and no mechanism 
for qualitative or quantitative analysis.
``Program'' Performance
    The thirteen rural water projects authorized for 
Reclamation's involvement constitute a major Federal budget 
issue that we are currently attempting to manage without 
benefit of an integrated rural water program.
    Lacking generic authority to screen, plan, design, and 
construct rural water projects, Reclamation has limited ability 
to set priorities and criteria for project development, and to 
budget accordingly. This deficiency was brought starkly to 
light when in 2002, as part of the President's budget and 
performance integration initiative, Reclamation's rural water 
activities were assessed under two lenses: the Program 
Assessment Rating Tool (PART) and the Common Measures exercise. 
Under the PART exercise our rural water program was rated 
``Results Not Demonstrated,'' despite the fact that 
Reclamation's rural water projects were meeting authorized 
project purposes. Further, the assessment concluded that 
stronger controls for project development were needed and 
``lack of agency involvement during project development may 
result in a project that is not in the best Federal interest.''
    As a result of the PART exercise, the Administration 
concluded that legislation should be developed to establish a 
Reclamation rural water program with adequate controls and 
guidelines. We are gratified that S. 895 reflects its sponsors' 
agreement that this is necessary.
    Let me turn now to several specific elements of S. 895 that 
the Administration strongly supports.


               AUTHORITY TO DEVELOP ELIGIBILITY CRITERIA


    Because each of the existing rural water projects has been 
authorized individually, and because of a lack of general 
programmatic authority, Reclamation and the Department have 
been limited in our ability to plan for projects effectively or 
to establish relative priorities both within the budget for 
rural water activities and within Reclamation's budget as a 
whole.
    Establishing a rural water program as proposed in S. 895 
will allow for more realistic planning so that rural water 
projects are not proposed in a vacuum, but instead are guided 
through the program's planning process to use a consistent set 
of eligibility criteria. This approach will foster some 
competition, allow for the development of priorities, and 
create more realistic expectations when a project is authorized 
for construction that it will actually be developed.


        NON-FEDERAL COST SHARE BASED UPON ``CAPABILITY TO PAY''


    The non-Federal cost shares for each of the currently 
authorized rural water projects range from zero for the Indian 
portion of the Mni Wiconi Project in South Dakota to 25 percent 
for the non-Indian Dry Prairie Rural Water System connected to 
the Fort Peck Reservation Rural Water System in Montana.
    In contrast, capital investment costs associated with 
traditional Reclamation projects or portions of projects 
authorized for municipal and industrial (M&I) use must be fully 
repaid with interest. Further, traditional Reclamation 
irrigation projects require that repayment of costs be based 
upon a project sponsor's ability to pay, as determined through 
the study of both the project sponsor's financial information 
and the project's economic (cost/benefit) feasibility.
    S. 895 would require Reclamation to identify the 
``capability to pay'' of rural communities to determine the 
appropriate level of their contribution for development and 
construction costs. The Administration strongly supports this 
approach. It will establish a fair matrix to identify the 
appropriate level of non-Federal contribution.


EARLY RECLAMATION INVOLVEMENT AND DEVELOPMENT OF CRITERIA FOR APPRAISAL 
                        AND FEASIBILITY STUDIES


    Because Reclamation does not have an integrated rural water 
program, communities initiate studies that have not been 
reviewed by Reclamation and do not meet current Federal 
planning and engineering standards. They do not necessarily 
explore all of the available options to meet their water supply 
needs beyond those designs that preceded them. While these 
plans become the basis for legislation, some of them are 
inadequate for sound decision-making or may not reflect an 
exploration of all the options. In these cases plans must be 
redeveloped once the project is authorized and funded. Project 
reformulation is complicated by the fact that the original 
project concept mandated in authorizing legislation cannot be 
changed without further legislation, even if it turns out to be 
a suboptimal option.
    The rural water program proposed in S. 895 will allow 
communities to approach Reclamation for guidance early in the 
process and, more importantly, will allow Reclamation to 
participate in the early project scoping, appraisal and 
feasibility study processes for rural water projects in the 
Western United States. For example, most projects developed to 
date have consisted of pumping water and then transporting it 
through long pipelines at great expense. One option that has 
not been explored yet, but which could be more economical to 
build and to maintain, would be to develop small localized 
desalination plants to treat brackish groundwater, thereby 
avoiding the cost of building and maintaining long pipelines. 
Under S. 895, Reclamation and the local communities can explore 
this option.
    A positive innovation in S. 895 that had not appeared in 
any of the rural water bills considered in the previous 
Congress allows local communities to complete their own 
appraisal and feasibility studies--either at their own expense 
or through a grant from or cooperative agreement with 
Reclamation--as long as those studies meet a set of minimum 
criteria to be developed by Reclamation. Not only could this 
reduce the cost of these studies, but it should also increase 
the sense of ownership of the study and of its recommendations 
by the non-Federal project entity.


                    OPERATION AND MAINTENANCE COSTS


    In general, the Administration supports the provisions in 
S. 895 that require the non-Federal entities (particularly for 
the non-Indian project beneficiaries) to demonstrate their 
capability to pay 100 percent of the operations, maintenance 
and replacement (OM&R) costs associated with the projects 
proposed to be built for their benefit. A specific concern with 
how this issue relates to certain Tribal and Indian projects 
will be addressed later in my statement.


          COORDINATION WITH OTHER FEDERAL RURAL WATER PROGRAMS


    Section 107(d) requires the Secretary to coordinate the 
rural water program established by the Act with existing 
Federal and state programs to facilitate the most efficient and 
effective solutions to meeting the water needs of the project 
sponsors.
    This will help the rural water supply programs in the 
various Federal and state agencies to derive maximum value for 
the dollar from the limited Federal and state resources 
identified for this purpose.


                        CONCERNS AND SUGGESTIONS


    The Administration views S. 895 as having the potential to 
be one of the most positive legislative developments for the 
Department of the Interior in some time. Nevertheless, we have 
a few concerns that we will work with the Committee to address 
as this bill goes forward.
    Create a Programmatic Framework: The Administration 
recommends that S. 895 establish an overall programmatic 
framework for all aspects of the rural water program--not just 
limited to completion of the appraisal and feasibility studies, 
but as a framework for how projects, once authorized, would be 
planned, designed, constructed and then overseen and managed. 
This approach will allow for the development of priorities, and 
could create more realistic expectations when a project is 
authorized for construction that it will actually be developed. 
It would also facilitate the legislative process for future 
rural water activities and projects, since the programmatic 
framework would already be in place rather than having to be 
spelled out with each subsequent project authorization.
    Economic Factors for Eligibility Criteria and Evaluation: 
As introduced, S. 895 spells out a number of specific factors 
that must be included in the eligibility criteria and in the 
factors for consideration for the appraisal and feasibility 
studies. While we support including these factors, we also 
suggest that the bill include criteria for analysis and 
reporting of economic and financial benefits and impacts 
necessary to justify the Federal investment.
    For feasibility studies, Section 106(g)(3) allows the 
Secretary to increase the Federal share based upon a 
demonstration of financial hardship by the non-Federal 
entities. These relatively small local contributions are an 
important measure of the communities' commitment in pursuing a 
first indication of the level of priority that such a project 
holds for these rural communities. If an exemption is deemed to 
be necessary, we recommend that such exemptions be limited to 
Indian tribes or tribal organizations.
    Construction Cost Share: As introduced, Section 
106(e)(1)(A)(i)(II)(aa) requires that the Feasibility Report 
include non-Federal cost share of construction costs of no less 
than 25%. The Administration recommends that the non-Federal 
share of construction costs be increased to no less than 35%, 
which is similar to the \1/3\ local cost-share that is central 
to the landmark CALFED legislation passed by the 108th 
Congress.
    Operations and Maintenance Costs for Native American 
Projects: S. 895, as introduced, requires that all O&M costs be 
the sole responsibility of the non-Federal project entities. 
This may be beyond the capability of some Tribes.
    In stark contrast, however, the authorizing legislation for 
the Mni Wiconi Project and the Garrison Project each directed 
the Secretary to operate and maintain project facilities 
constructed to serve the Indian reservations. As construction 
of these Indian rural water projects is completed, the 
associated O&M costs consume an increasing percentage of 
Reclamation's budget with no prospect of declining. These 
ongoing obligations will have increasingly significant budget 
impacts without any consideration for the improvements to the 
tribes' financial situation or to their improved capability to 
pay for these O&M costs due to the improved water supply 
systems.
    The Administration recommends some middle ground between 
these two approaches. We recommend some accommodation for 
Tribes that cannot cover 100% of their initial O&M costs in the 
near term. However, this should be structured to account for 
the positive economic impacts that the rural water delivery 
projects will have in these communities. It should also 
encourage greater tribal self-sufficiency, conservation, and 
the development of the technical and financial expertise needed 
to efficiently manage these water systems themselves. In 
contrast to the current practice of subsidizing all the OM&R 
costs associated with Indian rural water facilities, we 
recommend that the Secretary be authorized to seek 
appropriations to assist Tribes to pay for the difference 
between the actual OM&R costs and the projected revenues from 
water sales to project beneficiaries. As project benefits spur 
economic development, Tribes will have a greater capability to 
pay for their OM&R costs and the need for this assistance will 
decline.
    Such a provision is found in S. 2218, the Administration-
sponsored rural water bill from the 108th Congress.
    Application of the Indian Self Determination and Education 
Assistance Act (P.L. 93-638): Another area that S. 895 does not 
address is the application of the Indian Self Determination and 
Education Assistance Act (P.L. 93-638), commonly referred to as 
638. As introduced, S. 895 would not impact the application of 
provisions of P.L. 93-638 such that tribes would have priority 
in construction activities impacting or benefiting Tribal 
entities. The Administration strongly concurs. However, we 
recommend that S. 895 specifically provide that the amounts 
appropriated and made available to Indian project beneficiaries 
under a self determination contract or a self governance 
compact and all project revenues (including interest earned and 
all collected fees) should be: (1) reported to the Secretary by 
the Tribes, (2) expended only for the purposes for which they 
were originally appropriated; and (3) used by the Secretary to 
determine the amount of funds otherwise obligated to the 
contract or agreement in subsequent years.
    These provisions will improve the financial management of 
these projects; will guarantee that the appropriated funds and 
their associated revenues will directly benefit the rural water 
projects and will potentially reduce the need for some 
appropriated funds since some project construction costs could 
be addressed through interest and associated revenues.
    Indian Trust Responsibilities: As introduced, section 
105(c)(1)(F) and section 106(c)(12) speak to ``Indian trust 
responsibilities.'' We believe these provisions may be read to 
create a trust responsibility for rural water systems that has 
not previously existed. We think these provisions should be 
removed.


                            LOAN GUARANTEES


    Title II of the legislation presents a potentially valuable 
innovation, not only for the rural water program, but for other 
Reclamation customers. However, it would be an entirely new 
tool for the Bureau, with far-reaching programmatic, staffing, 
and budgetary impacts that are not yet fully understood. The 
Administration is interested in further exploring a loan 
guarantee program for Reclamation, but will reserve judgment on 
the merits of this proposal until we can complete our ongoing 
process of developing and vetting the idea, so that we can 
clearly say whether this is the best policy mechanism to 
address the particular challenges faced by water users, and 
what it will cost the taxpayer.
    In addition to the above comments, we have identified a few 
technical issues that may require clarification. We are 
confident that Committee staff will be able to determine 
quickly whether to incorporate them or not.
    In conclusion, Mr. Chairman, we are honored to work with 
you and Senator Bingaman to advance legislation to establish a 
rural water program within the Department of the Interior that 
can benefit both rural communities and taxpayers-at-large.
    I am pleased to answer any questions.

                        CHANGES IN EXISTING LAW

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee notes that no 
changes in existing law are made by the bill S. 895, as ordered 
reported.

                                  
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