[Federal Register Volume 62, Number 250 (Wednesday, December 31, 1997)]
[Proposed Rules]
[Pages 68492-68500]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33990]



[[Page 68491]]

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Part IX





Department of Interior





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Bureau of Reclamation



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43 CFR Part 414



Offstream Storage of Colorado River Water and Interstate Redemption of 
Storage Credits in the Lower Division States; Proposed Rule

  Federal Register / Vol. 62, No. 250 / Wednesday, December 31, 1997 / 
Proposed Rules  

[[Page 68492]]



DEPARTMENT OF THE INTERIOR

Bureau of Reclamation

43 CFR Part 414

RIN 1006-AA40


Offstream Storage of Colorado River Water and Interstate 
Redemption of Storage Credits in the Lower Division States

AGENCY: Bureau of Reclamation, Interior.

ACTION: Notice of proposed rulemaking.

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SUMMARY: Under this proposed rule Colorado River water may be stored 
offstream in the Lower Basin to permit future interstate use of 
Colorado River water in the Lower Division States (Arizona, California, 
or Nevada). This proposed rule would establish the procedural framework 
under which authorized entities (for example, a State-authorized water 
bank) in any Lower Division State could store offstream Colorado River 
water to develop storage credits associated with that water, and redeem 
those water storage credits within the Lower Division. This rule would 
increase the efficiency, flexibility, and certainty in Colorado River 
management.

DATES: Comments:
    Any comments must be received by Reclamation at the address below 
on or before March 2, 1998.

Request for Public Hearings

    Upon request, Reclamation will hold public hearings on the proposed 
rule in Las Vegas, Nevada, Phoenix, Arizona and Ontario, California. 
Reclamation will accept requests for public hearings until 4:00 p.m. 
Pacific time on January 30, 1998.

ADDRESSES:

Comments

    If you wish to comment, you may submit your comments by any one of 
several methods. You may mail comments to Bureau of Reclamation, 
Administrative Record, Lower Colorado Regional Office, P.O. Box 61470, 
Boulder City, NV 89006-1470. You may also comment via the Internet at 
[email protected] (see Electronic Access and Filing Addresses under 
SUPPLEMENTARY INFORMATION).
    In addition, you may hand-deliver comments to Bureau of 
Reclamation, Administrative Record, Lower Colorado Regional Office, 400 
Railroad Avenue, Boulder City, Nevada.
    Comments, including names and street addresses of respondents, will 
be available for public review at this address during regular business 
hours (7:45 a.m. to 4:15 p.m.), Monday through Friday, Pacific time, 
except holidays. If you wish to request that Reclamation consider 
withholding your name or street address from public review or from 
disclosure under the Freedom of Information Act, you must state this 
prominently at the beginning of your comment. All submissions from 
organizations or businesses, and from individuals identifying 
themselves as representatives or officials of organizations or 
businesses, will be made available for public inspection in their 
entirety.

Public Hearings

    If Reclamation receives a request to schedule public hearings in 
Las Vegas, Nevada; Phoenix, Arizona; or Ontario, California, 
Reclamation will hold such hearings at the following locations: 
McCarran International Airport, 5757 Wayne Newton Boulevard, 
Commissioner's Meeting Room, 5th Floor, Terminal 1, Las Vegas, Nevada; 
Bureau of Indian Affairs conference room, 2 Arizona Center, 400 North 
5th Street, 12th Floor, Phoenix, Arizona; Red Lion Hotel, 222 North 
Vineyard, Ontario, California. Upon request, Reclamation will consider 
holding public hearings in other locations, at times and on dates that 
Reclamation will announce prior to the hearings.

Request for public hearings and request to participate in public 
hearings

    Submit requests for public hearings and requests to participate in 
public hearings orally or in writing to Mr. Dale E. Ensminger, Boulder 
Canyon Operations Office, Bureau of Reclamation, P.O. Box 61470, 
Boulder City, Nevada 89006-1470, telephone (702) 293-8659.

FOR FURTHER INFORMATION CONTACT: Mr. Dale Ensminger, telephone (702) 
293-8659.

SUPPLEMENTARY INFORMATION: This section provides the following 
information:

I. Public Comment Procedures
    Written Comments
    Electronic Access and Filing Addresses
    Public Hearings
II. Background
III. Purpose of this Rule
IV. Prior Rulemaking Proceedings
V. Section-by-Section Analysis of Proposed Rule
VI. Procedural Matters
    Environmental Compliance
    Paperwork Reduction Act
    Regulatory Flexibility Act
    Unfunded Mandates Reform Act of 1995
    Executive Order 12612, Federalism Assessment
    Executive Order 12630, Taking Implications Analysis
    Executive Order 12866, Regulatory Planning and Review
    Author
    List of Subjects in 43 CFR Part 414

I. Public Comment Procedures

Written Comments

    Written comments on the proposed rule should be specific, should be 
confined to issues pertinent to the proposed rule, and should explain 
the reason for any recommended change. Where possible, comments should 
reference the specific section or paragraph of the proposed rule that 
the commenter is addressing. Reclamation will not necessarily consider 
or include in the Administrative Record for the final rule comments 
which Reclamation receives after the close of the comment period (see 
DATES) or comments delivered to an address other than those listed 
above (see ADDRESSES).

Electronic Access and Filing Addresses

    If you comment via the Internet at [email protected] (see 
ADDRESSES), please submit comments as an ASCII file avoiding the use of 
special characters and any form of encryption. Please also include 
``attn: AC1006-AA40'' and your name and return address in your Internet 
message. If you do not receive a confirmation from the system that we 
have received your Internet message, contact us directly at (702) 293-
8411.

Public Hearings

    Individuals who wish to attend but not testify at any hearing 
should contact the person identified under FOR FURTHER INFORMATION 
CONTACT beforehand to verify that Reclamation will hold the hearing. 
Reclamation will hold public hearings on the proposed rule as specified 
above if a member of the public requests a public hearing. Any person 
who desires to participate at a hearing at a particular location should 
inform Mr. Dale E. Ensminger under FOR FURTHER INFORMATION CONTACT 
either orally or in writing of the desired hearing location by 4:00 
p.m. Pacific time January 30, 1998. If no one has contacted Mr. Dale E. 
Ensminger to express an interest in participating in a hearing at a 
given location by that date, Reclamation will not hold that hearing. If 
only one person expresses an interest, Reclamation may hold a public 
meeting rather than a hearing, and Reclamation will include the results 
in the Administrative Record.
    If Reclamation holds a hearing, Reclamation will continue the 
hearing until all persons wishing to testify have

[[Page 68493]]

had an opportunity to do so. In order to assist the transcriber and to 
ensure an accurate record, Reclamation requests that each person who 
testifies at a hearing give the transcriber a copy of that testimony. 
In order to assist Reclamation in hearing preparation, Reclamation also 
requests that each person who plans to testify submit to Reclamation at 
the address previously specified (see ADDRESSES) an advance copy of 
that testimony.

II. Background

    The Colorado River serves as a source of water for irrigation, 
domestic, and other uses in the States of Arizona, California, 
Colorado, Nevada, New Mexico, Utah, and Wyoming, and in the Republic of 
Mexico. The initial apportionment of water from the Colorado River was 
made by an interstate compact, the Colorado River Compact, dated 
November 24, 1922 (Compact). The Compact became effective in 1929 
following ratification by six states and approval by the Congress of 
the United States. The State of Arizona became the final State to 
ratify the Compact in 1944. The Compact defined the Colorado River 
Basin and divided the seven States into two basins, an Upper Basin and 
a Lower Basin. The Compact apportioned to each basin, in perpetuity, 
the exclusive beneficial consumptive use of 7.5 million acre-feet (maf) 
of water. Under the Compact, ``consumptive use'' means diversions of 
water from the mainstream of the Colorado River, including water drawn 
from the mainstream by underground pumping, less return flow to the 
river.
    The Lower Basin includes those parts of the States of Arizona, 
California, Nevada, New Mexico, and Utah within and from which waters 
naturally drain into the Colorado River system below Lee Ferry 
(Arizona), a point in the mainstream of the Colorado River 1 mile below 
the mouth of the Paria River. The Compact also grouped the seven States 
into two divisions, the Upper Division and the Lower Division. The 
Lower Division consists of the States of Arizona, California, and 
Nevada. All mainstream Colorado River water apportioned by the Compact 
to the Lower Basin is divided among the three Lower Division States. 
All mainstream Colorado River waters apportioned to the Lower Basin, 
except for a few thousand acre-feet apportioned to the State of 
Arizona, have been allocated to specific entities and, except for 
certain Federal establishments, placed under permanent water delivery 
contracts with the Secretary for irrigation or domestic use. These 
entities include irrigation districts, water districts, municipalities, 
Federal establishments including Indian reservations, public 
institutions, private water companies, and individuals.
    The Supreme Court of the United States, in its Opinion of June 3, 
1963, (373 U.S. 546) and Decree entered March 9, 1964 (376 U.S. 340) 
(Decree), in the case of Arizona v. California, et al., confirmed that 
the Secretary was vested with sufficient authority and charged with the 
responsibility to direct, manage, and coordinate the operation of dams 
and related works on the Colorado River in the Lower Basin. The Supreme 
Court concluded, among other things, that the Secretary derives 
significant authority from the contract authority under section 5 of 
the Boulder Canyon Project Act of 1928 (45 Stat. 1057, 43 U.S.C. 
617)(BCPA) that requires water users in the Lower Basin to have a 
contract with the Secretary. The Supreme Court further concluded that 
Congress intended the Secretary, principally through the Secretary's 
section 5 contract power, to carry out the allocation of the waters of 
the mainstream of the Colorado River among the Lower Basin States and 
to decide which water users within each State would get water and on 
what terms. Accordingly, the Secretary acts as water master of the 
Colorado River in the Lower Basin.
    The Decree excludes Federal establishments from the BCPA 
requirement for a contract with the Secretary, but the water allocated 
to a Federal establishment is included within the apportionment of the 
Lower Division State in which the Federal establishment is located. 
Waters available to a Lower Division State within its apportionment but 
with a priority date later than June 25, 1929, have been allocated by 
the Secretary to water users within that State after consultation with 
the State.
    Many Colorado River water rights originated as ``perfected rights'' 
that are specified in the Decree as rights acquired in accordance with 
State law and exercised by the actual diversion of a specific quantity 
of water for beneficial use on a defined area of land or to definite 
municipal or industrial works, and in addition will include water 
rights created by the reservation of mainstream water for the use of 
Federal establishments under Federal law whether or not the water has 
been applied to beneficial use. The highest priority Colorado River 
water rights are present perfected rights (PPR's) that the Decree 
defines as those perfected rights existing on June 25, 1929 (the 
effective date of the BCPA). The Decree also recognizes Federal Indian 
reserved rights for the quantity of water necessary to irrigate all the 
practically irrigable acreage on five Indian reservations along the 
Colorado River. The Decree defines the rights of Indian and other 
Federal reservations to be Federal establishment PPR's. PPR's are 
important because in any year in which there is less than 7.5 maf of 
Colorado River water available for consumptive use in the Lower Basin 
States, PPR's will be satisfied first in the order of their priority 
without regard to State lines.
    In 1996, Arizona enacted a State-authorized program establishing an 
Arizona State Water bank that would allow offstream storage of Colorado 
River water and subsequent interstate delivery of such stored water 
through redemption of credits pursuant to Interstate Storage 
Agreements. In the future, other Lower Division States may enact 
comparable measures.

III. Purpose of this Rule

    Arrangements that facilitate more efficient use of the limited 
Colorado River water resource are beneficial to all water users. This 
proposed rule addresses offstream storage of Colorado River water and 
development of storage credits by authorized entities within the Lower 
Division States. Authorized entities include a State water banking 
authority, or other entity of a Lower Division State holding 
entitlements to Colorado River water, expressly authorized pursuant to 
applicable laws of Lower Division States to: (1) Enter into Interstate 
Storage Agreements; (2) develop intentionally created unused 
apportionment; (3) acquire the right to use intentionally created 
unused apportionment; or (4) develop or redeem storage credits for the 
benefit of an authorized entity in another Lower Division State.
    The rule will establish a framework for the Secretary to follow in 
approving and administering interstate agreements to allow offstream 
storage and contractual distribution of Colorado River water, and 
thereby encourage voluntary interstate water transactions among the 
Lower Division States. Such voluntary water transactions, including 
interstate contractual distribution of Colorado River water consistent 
with the BCPA and the requirements of the Supreme Court of the United 
States in its Decree entered March 9, 1964 (3376 U.S. 340) (Decree) in 
Arizona v. California, et al., can help to satisfy regional water 
demands. The proposed rule does not deal with intrastate storage and 
distribution of water.
    The proposed rule will foster prudent water management in the Lower 
Division States by allowing authorized

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entities of Consuming States, pursuant to an interstate agreement, to 
store Colorado River water offstream, to receive storage credits for 
the stored water, and to recover this water for future use. The 
offstream storage will be accomplished through an authorized entity of 
the Storing State. The water to be stored will be basic apportionment 
from the Storing State or unused basic apportionment or unused surplus 
apportionment of the Consuming State. The proposed rule is based on the 
understanding that this type of offstream storage is a beneficial 
consumptive use of Colorado River water. The rule is permissive in 
nature and is intended to encourage and facilitate these voluntary 
water transactions.
    The proposed rule is designed to improve the Secretary's ability to 
fulfill his responsibilities to manage the Lower Basin of the Colorado 
River on a more efficient basis. This proposed rule is expected to be a 
first step toward improving the efficiency associated with management 
of the Colorado River in the Lower Basin.
    While taking action in the form of this proposed rule to assist the 
States of the Lower Division of the Colorado River to meet their water 
needs, the Department also acknowledges its responsibilities to the 
Indian Tribes in the Lower Division. The Department is interested in 
finding ways that the Tribes may more fully benefit from the water 
rights they hold in the Lower Basin, and in protecting the availability 
of water supplies to which these rights attach.
    The focus in the proposed rule is on the use of State-authorized 
entities, including water banks, as a vehicle for authorizing 
interstate storage and redemption of storage credits associated with 
Colorado River water. The Department believes that the interstate water 
storage and deliveries permitted by these rules can be implemented 
without compromising its responsibilities toward, and in fact may lead 
to benefits to, the Indian Tribes. The Department's proposed reliance 
on State-authorized entities is predicated, in part, on its expectation 
that these entities will be operated in a fashion that provides an 
opportunity for Indian Tribes to participate in storage and similar 
activities. In this regard the Department notes that the State of 
Arizona is examining ``mechanisms that will enable Indian communities 
that hold entitlements to Colorado River water to participate in water 
banking with the Arizona Water Banking Authority.'' Arizona Laws 1996, 
ch. 308, Sec. 27. The Department encourages Arizona and the other Lower 
Division States to implement programs within the existing Law of the 
River that will allow the Tribes to more fully benefit from their water 
rights.
    In addition, the Department will be mindful of the need to protect 
local tribal water resources when fulfilling its role as set forth in 
these interstate water banking rules. Tribes as well as other water 
rights holders may, for example, have concerns regarding the potential 
impacts of future groundwater withdrawals from a water bank on their 
water rights. The Department wants to work with Lower Division States 
and authorized entities banking Colorado River water to ensure that 
water stored and recovered for interstate delivery does not adversely 
impact those local tribal water resources. Under the proposed rule the 
Secretary will, when determining whether to approve a proposed 
interstate transaction, take into account, among other things, the 
potential impacts of a proposed transaction on water rights holders, 
including Indian Tribes. See Sec. 414.3(b).
    Finally, this proposal does not address, and is not intended to 
govern the exercise of, whatever authority the Secretary of the 
Interior has to consider and implement, in appropriate situations, 
tribal storage and water transfer activities.
    Except as described below, the Secretary, in reviewing an 
Interstate Storage Agreement, will not focus on the price associated 
with utilization of storage credits or other financial details agreed 
to by the authorized entities as willing sellers and willing buyers. 
The transaction must leave the United States in no worse a financial 
position than if the transaction had not occurred. When it is 
operationally feasible to do so, United States facilities may be 
available for use in storing, delivering, and distributing Colorado 
River water offstream under the proposed rule to the extent that the 
United States is fully reimbursed for relevant capital, interest, and 
operation and maintenance costs. Approval to deliver Colorado River 
water cannot obligate the Federal Government to incur extra non-
reimbursable expenses to store water or deliver it to a new location. 
Further, existing Reclamation law requires adjustment in repayment 
terms when use of the water shifts from a non-interest bearing category 
to an interest-bearing category, such as from agriculture use to 
municipal and industrial use. Additionally, if pumping power is needed 
to affect a given transaction, the parties to the transaction must 
provide or pay for such power, and may have to secure it from non-
Federal sources.
    The actions and transactions contemplated in the proposed rule are 
within the current authority of the Secretary, the BCPA, and the 
Decree. Under BCPA, with the exception of Federal Establishments PPR's, 
no authorized entity may receive Colorado River water except in 
accordance with a contract with the Secretary. Where appropriate to 
implement the Interstate Storage Agreement, the Secretary will contract 
for water deliveries under Section 5 of the Boulder Canyon Project Act. 
In accordance with specific approvals, offstream storage and 
development of storage credits for interstate purposes have already 
taken place on a limited basis. The proposed rule will provide a 
standard set of procedures to be used in place of the ad hoc processes 
that have been used for previous interstate water transactions. These 
procedures will provide greater flexibility, certainty, and assurance 
to all parties potentially interested in entering into interstate 
transactions for storage of Colorado River water and use or redemption 
of storage credits. This increased certainty is expected to promote 
more efficient management of the Colorado River and facilitate 
additional voluntary water transactions of this type among Lower Basin 
water users.
    The Secretary will consider the implications of the proposed 
Interstate Storage Agreement for the financial interests of the United 
States and the United States will require the parties who benefit from 
the transactions to fund the United States' reasonable costs to 
evaluate, process, and/or approve transactions entered into under this 
rule. In considering a request for approval of an Interstate Storage 
Agreement for offstream storage of Colorado River water and use or 
redemption of storage credits, the Secretary will consider, among other 
relevant factors: applicable law; applicable contracts; potential 
effects on trust resources; potential effects on contractors or Federal 
entitlement holders, including Indian and non-Indian PPR holders and 
other Indian tribes; potential effects on other third parties; 
environmental impacts and effects on threatened and endangered species; 
comments from interested parties, particularly parties who may be 
affected by the proposed action; and other relevant factors, including 
the implications of the proposed Interstate Storage Agreement for the 
financial interests of the United States.

IV. Prior Rulemaking Proceedings

    In 1991, 1992, and 1994, Reclamation developed draft rules for 
administering

[[Page 68495]]

Colorado River water entitlements and distributed drafts to known 
interested parties. Among other things, those drafts included 
provisions that would have allowed instream storage of water saved, 
interstate transfer of conserved water, reductions in entitlements due 
to nonuse, and proposed water conservation criteria. Because of the 
controversy associated with these proposals, Reclamation suspended 
further work on the rule in late 1994 to allow the Lower Division 
States time to develop a consensus on storage and interstate transfer 
issues. While a consensus on all of these issues has not been achieved, 
it appears that there is strong support and demand for a new, more 
narrowly focused rule that will facilitate offstream water storage and 
interstate water delivery programs in the Lower Basin.

V. Section by section analysis of the Proposed Rule

Section 414.1. Purpose

    Under this proposed rule Colorado River water may be stored 
offstream to permit future interstate use of Colorado River water. This 
proposed rule would establish the procedural framework under which 
authorized entities of any of the Lower Division States (Arizona, 
California, or Nevada) could store offstream through another authorized 
entity (for example, State-authorized water banks) in any Lower 
Division State, Colorado River water allocated but not taken by water 
entitlement holders within the State where the storage occurs, or 
unused basic apportionment, or surplus apportionment of the Consuming 
State. The authorized entity of the Storing State would develop, on 
behalf of the authorized entity in the consuming state, storage credits 
associated with that water. When unused apportionment is intentionally 
created to satisfy a request for delivery of water from storage 
credits, the authorized entity must ensure that its State's consumptive 
use is decreased by a quantity sufficient to offset the quantity of 
storage credits that are to be made available as unused apportionment 
by the Secretary and delivered for use in another Lower Division State 
in accordance with Article II(B)(6) of the Decree. This rule would 
increase efficiency, flexibility, and certainty in Colorado River 
management.
    The proposed rule establishes procedures for interstate contractual 
distribution derived from credits for Colorado River water stored 
offstream. These procedures will apply to all holders of entitlements 
to use Colorado River water in the Lower Division States. The proposed 
rule allows authorized entities of any Lower Division State to enter 
into agreements with authorized entities of another Lower Division 
State to store Colorado River water offstream, develop storage credits, 
and redeem storage credits associated with that water, subject to the 
approval of the Secretary.

Section 414.2. Definitions

    This section of the rule defines terms that are used in the rule. 
The following terms are defined by or derived from the Decree: basic 
apportionment, Colorado River water, consumptive use, mainstream, 
surplus apportionment, and unused apportionment. Most of the other 
terms were defined for the purposes of this rule to establish a common 
understanding of terms relating to storage of water.
    All Interstate Storage Agreements for offstream storage of Colorado 
River water and the interstate redemption of storage credits under this 
proposed rule would be executed by a State water banking authority, or 
other entities holding entitlements to Colorado River water, expressly 
authorized pursuant to applicable laws of Lower Division States to: (1) 
enter into Interstate Storage Agreements; (2) develop intentionally 
created unused apportionment; (3) acquire the right to use 
intentionally created unused apportionment; or (4) develop or redeem 
storage credits for the benefit of an authorized entity in another 
Lower Division State. States are encouraged to define the term 
``authorized entity'' broadly so as not to exclude appropriate entities 
potentially interested in entering into arrangements to develop or 
acquire water storage credits on an interstate basis. Constraints 
placed on ``authorized entities'' will have the likely effect of 
reducing the net benefits associated with the proposed rule.
    The proposed rule includes a definition of intentionally created 
unused apportionment of Colorado River water. As proposed, it does not 
specify what measures or actions may be used to create such 
apportionment. In Section 414.3, the Secretary specifies the 
information that he will consider in approving any proposed Interstate 
Storage Agreement. Subparagraph (a)(7) of Section 414.3 directs that 
any request for approval of a proposed Interstate Storage Agreement, 
``specify which action the authorized entity will take to create 
intentionally created unused apportionment.'' The Department seeks 
comment on the issue of whether the final definition of intentionally 
created unused apportionment should specify what types of measures or 
actions the Secretary would approve as intentionally created unused 
apportionment. Comments should identify actions that would be adequate 
to demonstrate the development of intentionally created unused 
apportionment.

Section 414.3. Interstate Storage Agreements and Redemption of Storage 
Credits

    The proposed rule would authorize offstream storage of Colorado 
River water in the Lower Division States by State-authorized entities 
on the basis of approved Interstate Storage Agreements. Under this 
section of the proposed rule, a Lower Division State authorized entity 
could establish a water bank and store Colorado River water on behalf 
of authorized entities in the other two Lower Division States. Such 
water banks could store water consisting of water allocated but not 
taken by water entitlement holders within the Storing State, or unused 
basic apportionment, or surplus apportionment of the Consuming State.
    The proposed rule assumes that there are two ways to ``store'' 
water in offstream storage: direct storage or indirect storage. Direct 
storage can be accomplished by putting water into an underground 
aquifer at an underground water storage facility or in a surface 
reservoir located off the mainstream of the Colorado River. Indirect 
storage can be accomplished through groundwater savings that result 
from replacing established groundwater use with Colorado River water.
    A central feature of the procedures in the proposed rule is the 
Interstate Storage Agreement. Under this section of the proposed rule, 
the authorized entities of two or more Lower Division States may enter 
into an agreement to store Colorado River water offstream. To become 
effective, these agreements require approval by the Secretary. To 
obtain the approval of the Secretary, each Interstate Storage Agreement 
must contain a description of the following: quantity of water to be 
stored; location of storage; type and source of water; accounting, 
reporting and use of storage credits associated with water to be 
stored; end use of water to be stored; and the extent to which Federal 
facilities or resources will be used to deliver or store Colorado River 
water stored offstream.
    Under the proposed rule, the Secretary has 120 days to approve or 
disapprove such agreements unless the Secretary determines that 
additional time is necessary to review the agreement because the 
proposal

[[Page 68496]]

involves significant environmental compliance activities or other 
issues. In reviewing any proposed Interstate Storage Agreement, the 
Secretary will consider the following: applicable law; applicable 
contracts; potential effects on trust resources; potential effects on 
contractors or Federal entitlement holders, including Indian and non-
Indian present perfected rights (PPR) holders and other Indian tribes; 
potential effects on third parties; environmental impacts and effects 
on threatened and endangered species; comments from interested parties, 
particularly parties who may be affected by the proposed action; and 
other relevant factors, including the implications of the proposed 
Interstate Storage Agreement for the financial interests of the United 
States.
    Under this section of the proposed rule, storage credits are 
developed for the benefit of the authorized entity for which Colorado 
River water is placed in offstream storage. The storage credits entitle 
the entity to recover water at a later date. The authorized entities 
involved in the transaction will account for the water diverted and 
stored offstream under an Interstate Storage Agreement, and prior to 
any redemption of storage credits certify to the Secretary that water 
associated with storage credits has been stored. The Secretary must be 
satisfied that necessary actions have been taken to develop 
intentionally created unused apportionment. Once this determination has 
been made, the Secretary will make available this intentionally created 
unused apportionment for use by the authorized entity of the Consuming 
State consistent with the BCPA, Article II(B)(6) of the Decree, and all 
other applicable laws. Also, under this section, Interstate Storage 
Agreements may be assigned in whole or in part to authorized entities 
upon the agreement of the parties to the Interstate Storage Agreement 
and approval of the Secretary.

Section 414.4. Reporting Requirements and Accounting for Storage 
Credits

    Under this section of the proposed rule, each authorized entity 
that has stored Colorado River water offstream for interstate purposes 
must submit a report to the Secretary by January 31 of each year. The 
report will specify the quantity of Colorado River water that was 
stored during the previous year and is recoverable in future years and 
the number of storage credits associated with that water. Under this 
proposed rule, the Department has assumed that storage credits would be 
equal to the quantity of water stored less deductions and losses from 
storage that includes losses attributable to evaporation or percolation 
or water required by State law to remain in an aquifer. Such reports 
will also specify the balance of Colorado River storage credits 
redeemed during the previous year and the balance of such credits that 
remain recoverable as of December 31 of the previous year. This 
reporting requirement will not impose a burden on the authorized entity 
of a Storing State because the authorized entity will need to maintain 
these records for its own purposes.
    Under the proposed rule, the United States will continue to fulfill 
the requirements of the Decree that requires the Secretary to prepare 
and maintain, at least annually, complete, detailed, and accurate 
records of diversions of water from the mainstream, return flow of such 
water to the mainstream, and consumptive use of such water. Under the 
proposed rule, the water diverted and stored offstream will be 
accounted for as consumptively used in that same year in the Storing 
State, in accordance with Article V of the Decree. The accounting 
records would also reflect an equivalent quantity of storage credits in 
the Storing State. When unused apportionment is intentionally created 
to satisfy a request for delivery of water from storage credits, the 
authorized entity must take action to ensure that its State's 
consumptive use is decreased by a quantity sufficient to offset the 
quantity of water made available as unused apportionment by the 
Secretary and delivered for use in another Lower Division State. After 
the authorized entity confirms in writing to the Secretary the quantity 
of water to be delivered for use in the Consuming State and includes 
documentation of actions taken to intentionally create a like quantity 
of unused apportionment, the Secretary will declare unused 
apportionment available within the Storing State and allocate that 
unused apportionment to the Consuming State to allow recovery of the 
storage credits. The intentionally created unused apportionment so made 
available to the Consuming State by the Secretary will be accounted for 
as consumptively used when Colorado River water in the amount of the 
intentionally created unused apportionment is released for use in the 
Consuming State, in accordance with Article V of the Decree.
    Under the proposed rule and in accordance with Article II(B)(6) of 
the Decree, the Secretary may release in any one year any Colorado 
River water that is apportioned for consumptive use in a Lower Division 
State but which will be unused in that State for consumptive use in 
another Lower Division States in that same year. The water so released 
for consumptive use in the other Lower Division States is unused 
apportionment.
    For example, under the proposed rule, when storage credits are 
redeemed, Colorado River water that would otherwise be supplied to a 
water user in a Storing State could be supplied from offstream storage 
in that State. The Storing State will reduce its Colorado River water 
use in accordance with the approved Interstate Storage Agreement. Then 
the Secretary, in accordance with the terms of Article II (B)(6) of the 
Decree, will make the Colorado River water available to the Consuming 
State. No other Lower Division State or other user in the Storing State 
will be able to claim the water since the Secretary is authorized under 
Article II (B)(6) of the Decree to make such water available, and the 
Secretary will have agreed to implement the terms of the Interstate 
Storage Agreement. No other Lower Division State will be eligible to 
receive water made available to the Consuming State under that 
Interstate Storage Agreement.

Section 414.5. Water Quality

    This section of the rule is a disclaimer which states that except 
for specific water quality responsibilities that are established for 
the Secretary by Federal law, the Secretary does not guarantee the 
quality of water released or delivered through Federal facilities. 
Water quality will be monitored by the Environmental Protection Agency 
and the Army Corps of Engineers and will be subject to State or Tribal 
jurisdiction, as appropriate, in accordance with the Clean Water Act.

Section 414.6 Environmental Compliance

    Under the proposed rule, the Secretary is responsible for ensuring 
the actions taken under the rule comply with the National Environmental 
Policy Act of 1969, as amended (NEPA), the Endangered Species Act of 
1973, as amended (ESA), and will integrate the requirements of other 
statutes, laws, and executive orders as required for Federal actions 
taken under this proposed rule.
    Federal actions requiring environmental compliance may include, but 
are not limited to, approval of transactions that entail changes in the 
place or quantity of water diversions necessary to store a Lower 
Division State's water. In evaluating a proposed Federal action taken 
under this part for compliance with the National Environmental Policy 
Act, the Secretary will consider effects on natural and

[[Page 68497]]

other resources as identified in the Bureau of Reclamation's National 
Environmental Policy Act (NEPA) Handbook and other relevant 
environmental laws and regulations. The parties to a proposed 
transaction would be responsible for completing environmental 
compliance documentation in accordance with the standards set forth in 
the Bureau of Reclamation's NEPA Handbook and subject to Reclamation 
approval prior to the Secretary's approval of the proposed action.
    The Department, through Reclamation, will collect in advance the 
estimated costs incurred by the United States in evaluating, 
processing, or approving the action from the persons or entities who 
would benefit from a proposed action under this rule.

VI. Procedural Matters

Environmental Compliance

    Reclamation has prepared a draft environmental assessment (DEA). 
Reclamation has placed the DEA on file in the Reclamation 
Administrative Record at the address specified previously. The public 
is invited to review the DEA by contacting Reclamation at the addresses 
listed above (see ADDRESSES) and suggests that anyone wishing to submit 
comments in response to the DEA do so in accordance with the Written 
Comments section above.
    Compliance with NEPA, the ESA, and other relevant statutes, laws, 
and executive orders will be completed for future Federal actions taken 
under this rule to ensure that any action authorized or carried out by 
the Secretary does not jeopardize the continued existence of any 
threatened or endangered species, does not adversely modify or destroy 
a critical habitat, and is analyzed by an appropriate environmental 
document. Consultation and coordination between Reclamation, the Fish 
and Wildlife Service, other agencies, and interested parties will be 
completed on a case-by-case basis.

Paperwork Reduction Act

    The Department believes that this rule does not contain information 
collection requirements that the Office of Management and Budget (OMB) 
must approve under the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 
et seq. This proposed rule is geographically limited to the States of 
Arizona, California and Nevada. The proposed rule covers authorized 
entities that would store Colorado River water off the mainstream of 
the Colorado River. The information to be reported will be compiled by 
the authorized entities in the course of their normal business and the 
annual reports to the Secretary will not impose any significant time or 
cost burden. It is estimated that each respondent would need one hour 
at an estimated cost of $20 to complete the annual reporting 
requirement. Moreover, the Department assumes that there will never be 
an industry-wide collection of information and assumes that there will 
always be fewer than 10 entities required to report information. 
Notwithstanding these circumstances, the Department intends to seek 
information collection approval from the OMB, pursuant to the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501 et seq.

Regulatory Flexibility Act

    Congress enacted The Regulatory Flexibility Act of 1980 (RFA), 5 
U.S.C. 601 et seq., to ensure that Government regulations do not 
unnecessarily or disproportionately burden small entities. The RFA 
requires a regulatory flexibility analysis if a rule would have a 
significant economic impact, either detrimental or beneficial, on a 
substantial number of small entities. An initial RFA analysis has been 
completed. This rule will not impose any direct cost on small entities. 
A benefit-cost analysis was completed and concludes that the proposed 
rule does not impose significant or unique impact upon small 
governments (including Indian communities), small entities such as 
water purveyors, water districts, or associations, or individual 
entitlement holders.

Unfunded Mandates Reform Act of 1995

    The adoption of 43 CFR part 414 will not result in any unfunded 
mandate to State, local, or tribal governments in the aggregate, or to 
the private sector, of $100 million or more in any one year.

Executive Order 12612, Federalism Assessment

    The proposed rule does not alter the relationship between the 
Federal Government and the States under the Decree nor does it alter 
the distribution of power and responsibilities among the various levels 
of government. Therefore, in accordance with Executive Order 12612, the 
Secretary has determined that this proposed rule does not have 
sufficient federalism implications to warrant preparation of a 
Federalism Assessment.

Executive Order 12630, Takings Implications Analysis

    The proposed rule does not represent a government action capable of 
interfering with constitutionally protected property rights. This rule 
does not impose additional fiscal burdens on the public. This rule 
would not result in physical invasion or occupancy of private property 
or substantially affect its value or use. The rule would not result in 
any Federal action that would place a restriction on a use of private 
property. The rule does not affect a Colorado River water entitlement 
holder's right to use its full water entitlement. Under the proposed 
rule, an authorized entity may store unused Colorado River water 
available from an entitlement holder's water rights only if the water 
right holder does not use or store that water on its own behalf. Under 
the proposed rule, the only water that can be used to satisfy storage 
credits is unused apportionment created by the forbearance of a use 
which otherwise would have occurred. Therefore, the Department of the 
Interior has determined that the rule would not cause a taking of 
private property or require further discussion of takings implications 
under this Executive Order.

Executive Order 12866, Regulatory Planning and Review

    This proposed rule is a significant regulatory action under section 
3(f)(4) of Executive Order 12866 because it raises novel legal or 
policy issues. Executive Order 12866 requires an assessment of 
potential costs and benefits under section 6(a)(3) of that Executive 
Order. Reclamation's benefit-cost analysis determines that the proposed 
rule does not impose significant or unique impacts upon small 
governments (including Indian communities), small entities such as 
water purveyors or associations, or even individual water entitlement 
holders.
    The proposed rule authorizes the distribution of Colorado River 
water storage credits created by off stream storage on an interstate 
basis.
    California and Nevada are looking for alternative water supplies to 
satisfy the increasing demands of economic development and population 
growth. The proposed rule may provide an opportunity for Colorado River 
water users in Nevada to experience a marginal costs savings in 
securing alternative supplies. Off stream storage of Colorado River 
water and interstate distribution of Colorado River water storage 
credits are voluntary actions. Should the costs of the procedures 
proposed in the rule to facilitate these transactions be greater than 
the costs of other alternative water supplies, California and Nevada 
would probably select the lower cost alternatives.

[[Page 68498]]

    The benefit-cost analysis estimated net economic benefits of the 
proposed rule on a State and regional level using different water 
supply models and discount rates. The different water supply models 
represent potential water supply conditions on the Colorado River that 
affect interstate demand for water from an Arizona water bank and the 
magnitude of economic benefits obtained from that water. The discount 
rates used in the analysis were 5.75% (the average rate on municipal 
bonds in 1996, which is a rate faced by major water purveyors in 
California and Nevada) and 8.27% (the prime rate in 1996, which more 
accurately represents the cost of money).
    Under a conservative water supply scenario characterized by 19 
years of normal conditions on the Colorado River and one surplus year, 
discounted net economic benefits at the regional level ranged from 
$12.8 to $61.2 million at 5.75% and $9.5 to $47.7 million at 8.27%. 
Under a water supply scenario characterized by 10 years of surplus 
conditions on the Colorado River, the net economic benefits range from 
$550,255 to $4.8 million at 5.75% and $350,789 to $3.1 million at 
8.27%. Under the scenario characterized by 10 surplus years, demand for 
banked water is relatively low because the Lower Division States can 
meet most of their water needs with diversions from the mainstream.
    Reclamation has placed the full analysis on file in the Reclamation 
Administrative Record at the address specified previously (see 
ADDRESSES).

Author

    The principal author of this rule is Mr. Dale E. Ensminger, Boulder 
Canyon Operations Office, Bureau of Reclamation, P.O. Box 61470, 
Boulder City, Nevada 89006-1470, telephone (702) 293-8659.

List of Subjects in 43 CFR Part 414

    Administrative practice and procedure, Environmental protection, 
Public lands, Reporting and recordkeeping requirements, Water bank 
program, Water resources, Water storage, Water supply, Water quality.

    Dated: December 22, 1997.
Patricia J. Beneke,
Assistant Secretary--Water and Science.
    For the reasons stated in the preamble, the Bureau of Reclamation 
proposes to add a new part 414 to title 43 of the Code of Federal 
Regulations as follows:

PART 414--OFFSTREAM STORAGE OF COLORADO RIVER WATER AND INTERSTATE 
REDEMPTION STORAGE CREDITS IN THE LOWER DIVISION STATES

Sec.
414.1 Purpose.
414.2 Definitions.
414.3 Interstate storage agreements and redemption of storage 
credits.
414.4 Reporting requirements and accounting for storage credits.
414.5 Water quality.
414.6 Environmental compliance.

    Authority: 43 U.S.C. 617; 43 U.S.C. 391; 43 U.S.C. 485; 43 
U.S.C. 1501; 5 U.S.C. 553; 373 U.S. 546; 376 U.S. 340.


Sec. 414.1  Purpose.

    This part sets forth the procedural framework for approval by the 
Secretary of the Interior of interstate agreements for the offstream 
storage of Colorado River water in the Lower Division States by State-
authorized entities consistent with State law. In accordance with the 
Secretary's authority under Article II (B) (6) of the Decree entered 
March 9, 1964 (376 U.S. 340), in the case of Arizona v. California, et 
al. as supplemented and amended, this part also includes the procedural 
framework to develop and redeem storage credits associated with 
Colorado River water stored offstream by authorized entities consistent 
with State law. This part does not address intrastate storage or 
distribution of water not subject to an Interstate Storage Agreement.


Sec. 414.2  Definitions.

    The following definitions, listed alphabetically, apply to this 
part:
    Authorized entity means a State water banking authority, or other 
entity of a Lower Division State holding entitlements to Colorado River 
water, expressly authorized pursuant to applicable laws of Lower 
Division States to:
    (1) Enter into Interstate Storage Agreements;
    (2) Develop intentionally created unused apportionment;
    (3) Acquire the right to use intentionally created unused 
apportionment; or
    (4) Develop or redeem storage credits for the benefit of an 
authorized entity in another Lower Division State.
    Basic apportionment means the Colorado River water apportioned to 
each Lower Division State when sufficient water is available for 
release, as determined by the Secretary of the Interior, to satisfy 7.5 
million acre-feet (maf) of annual consumptive use in the Lower Division 
States. The annual basic apportionment for the Lower Division States is 
2.8 maf of consumptive use for the State of Arizona, 4.4 maf of 
consumptive use for the State of California, and 0.3 maf of consumptive 
use for the State of Nevada.
    Colorado River water means water in or withdrawn from the 
mainstream.
    Consuming State means a Lower Division State where water made 
available by redeeming storage credits is or will be used.
    Consumptive use means diversions from the Colorado River less such 
return flow to the river as is available for consumptive use in the 
United States or in satisfaction of the Mexican treaty obligation. 
Consumptive use from the mainstream within the Lower Division States 
includes all consumptive use of water from the mainstream, including 
water drawn from the mainstream by underground pumping. The Mexican 
treaty obligation is set forth in the February 3, 1944, Water Treaty 
between Mexico and the United States, including supplements and 
associated Minutes of the International Boundary and Water Commission.
    Contractor means any person or entity in the States of Arizona, 
California, or Nevada who has a valid contract or agreement with the 
United States for the delivery of Colorado River water.
    Decree means the decree entered March 9, 1964, by the Supreme Court 
in Arizona v. California, et al., 373 U.S. 546 (1963), as supplemented 
or amended.
    Entitlement means an authorization to beneficially use Colorado 
River water pursuant to:
    (1) A decreed right,
    (2) A contract with the United States through the Secretary, or
    (3) A reservation of water from the Secretary.
    Federal entitlement holder means a Federal agency or Indian tribe 
identified in Article II(D) of the Decree as having an entitlement for 
the beneficial use of Colorado River water.
    Intentionally created unused apportionment means unused 
apportionment that is created solely as a result of an agreement within 
a Storing State for the purposes of making Colorado River water 
available for use in a Consuming State in fulfillment of a request for 
redemption of storage credits pursuant to an Interstate Storage 
Agreement.
    Interstate storage agreement means an agreement, consistent with 
this part, that provides for offstream storage of Colorado River water 
in a Storing State for authorized entities in Consuming States and for 
the recovery of the stored water. An Interstate Storage Agreement will 
be among authorized entities of two

[[Page 68499]]

or more Lower Division States and may include other entities that are 
determined to be appropriate to the performance and enforcement of the 
agreement under Federal law and the respective laws of the Storing 
State and the Consuming State.
    Lower Division States means the States of Arizona, California, and 
Nevada.
    Mainstream means the main channel of the Colorado River downstream 
from Lee Ferry within the United States, including the reservoirs 
behind dams on the main channel, and Senator Wash Reservoir off the 
main channel.
    Offstream storage means storage in a surface reservoir off of the 
mainstream or in a groundwater aquifer. Offstream storage also includes 
indirect recharge when mainstream water is exchanged for groundwater 
that otherwise would be pumped and consumed.
    Present perfected right or PPR means perfected rights defined by 
the Decree, existing as of June 25, 1929, the effective date of the 
Boulder Canyon Project Act (45 Stat. 1057, 43 U.S.C. 617) (BCPA). All 
present perfected rights are listed in the supplemental decrees entered 
January 9, 1979, and April 16, 1984, by the United States Supreme Court 
in Arizona v. California, et al., as amended or supplemented.
    Secretary means the Secretary of the Interior or an authorized 
representative.
    Storage Credit refers to an accounting device to reflect a quantity 
of Colorado River water that is stored offstream.
    Storing State means a Lower Division State in which water is stored 
off the mainstream.
    Surplus apportionment means the Colorado River water apportioned to 
each Lower Division State when sufficient water is available for 
release, as determined by the Secretary, to satisfy in excess of 7.5 
maf of annual consumptive use in the Lower Division States.
    Unused apportionment means Colorado River water within a Lower 
Division State's basic or surplus apportionment, or both, which is not 
put to beneficial consumptive use during that year within that State.
    Unused entitlement means any Colorado River water that is made 
available to but not scheduled and used by an entitlement holder during 
the year for which it is made available.


Sec. 414.3  Interstate storage agreements and redemption of storage 
credits.

    (a) Interstate storage agreements. In accordance with Article 
II(B)(6) of the Decree, authorized entities of two or more Lower 
Division States may enter into Interstate Storage Agreements subject to 
the approval of the Secretary in accordance with paragraph (b) of this 
section. An Interstate Storage Agreement will allow an authorized 
entity in a Storing State to store unused entitlement and/or unused 
apportionment for the credit of an authorized entity located in a 
Consuming State and will provide for the subsequent redemption of the 
credit. Such an agreement must:
    (1) Specify the quantity of Colorado River water to be stored, by 
which authorized entity it will be stored, the Lower Division State in 
which it is to be stored, and the storage facility(ies) in which it 
will be stored.
    (2) Specify whether the water to be stored will be basic 
apportionment from the Storing State or unused basic apportionment or 
unused surplus apportionment of the Consuming State. If it is to be 
unused apportionment, it may only be made available from the Consuming 
State and the agreement must so specify.
    (3) Specify the quantity of storage credits associated with water 
stored offstream that will be available to the authorized entity in the 
Consuming State at the time water is actually stored under the 
agreement.
    (4) Specify that accumulated storage credits may not be redeemed 
within the same calendar year in which the water that generated those 
credits was stored offstream.
    (5) Specify that the authorized entity in the Consuming State will 
provide notice to the Lower Division States and to the Secretary no 
later than November 30 of its intention to request delivery of a 
specific quantity of Colorado River water by redeeming accumulated 
storage credits in the following calendar year.
    (6) Specify that the authorized entity of a Storing State, after 
receiving a notice of intention to redeem offstream storage credits, 
will take actions to ensure that the Storing State's consumptive use of 
Colorado River water will be decreased by a quantity sufficient to 
develop intentionally created unused apportionment to offset the 
delivery of Colorado River water for use in the Consuming State in 
fulfillment of the storage credits.
    (7) Specify which actions the authorized entity will take to 
develop intentionally created unused apportionment.
    (8) Specify that the authorized entity of the Storing State must 
certify to the Secretary that intentionally created unused 
apportionment has been developed that would not otherwise exist and 
that the authorized entity will request the Secretary to make available 
that quantity of Colorado River water for use in the Consuming State 
pursuant to Article II(B)(6) of the Decree to redeem storage credits.
    (9) Indemnify the United States, its employees, agents, 
subcontractors, successors, or assigns from loss or claim for damages 
and from liability to persons or property, direct or indirect, and of 
any nature whatsoever arising by reason of the actions taken by the 
United States in accordance with this part.
    (10) Identify the extent to which facilities constructed or 
financed by the United States will be used to store, convey, or 
distribute water associated with an Interstate Storage Agreement.
    (b) Approval by the Secretary. A request for approval of an 
Interstate Storage Agreement should be made in writing to the 
Secretary. The request will be acknowledged in writing by the Secretary 
within 10 business days of receipt. The request should include copies 
of the proposed interstate agreement and any additional supporting data 
that clearly set forth the details of the proposed transaction. In 
reviewing the proposed interstate agreement, the Secretary will 
consider, among other relevant factors: applicable law; applicable 
contracts; potential effects on trust resources; potential effects on 
water rights holders, including contractors, Federal entitlement 
holders, Indian and non-Indian PPR holders, and other Indian tribes; 
potential effects on third parties; environmental impacts and effects 
on threatened and endangered species; comments from interested parties, 
particularly parties who may be affected by the proposed action; and 
other relevant factors, including the direct or indirect consequences 
of the proposed Interstate Storage Agreement on the financial interests 
of the United States. The Secretary will respond to the request within 
120 days. However, if the proposal involves significant environmental 
compliance activities or other issues such that 120 days is an 
insufficient period in which to respond, the Secretary will communicate 
this to all parties to the proposed request and set out a schedule by 
which such work will be completed or such issues resolved. In that 
case, the Secretary will render a decision within 90 days of completion 
of the environmental compliance activities and resolution of other 
issues (if applicable). Where appropriate to implement the Interstate 
Storage Agreement, the Secretary will contract for water deliveries 
under Section 5 of the Boulder Canyon Project Act.

[[Page 68500]]

    (c) Stored water. The authorized entity of the Storing State will 
account for the water diverted and stored offstream under an Interstate 
Storage Agreement, and prior to any redemption of storage credits will 
certify to the Secretary that water associated with storage credits has 
been stored.
    (d) Redemption of storage credits. The Secretary must be satisfied 
that necessary actions have been taken to develop intentionally created 
unused apportionment for redemption of storage credits. Once this 
determination has been made, the Secretary will make available a 
quantity of Colorado River water to redeem those credits consistent 
with the BCPA, Article II(B)(6) of the Decree, and all other applicable 
laws. Intentionally created unused apportionment that is developed by 
the authorized entity of the Storing State will be made available to 
the authorized entity of the Consuming State and will not be made 
available to other contractors or Federal entitlement holders.
    (e) Assignment. Interstate Storage Agreements may be assigned in 
whole or in part to authorized entities upon the agreement of the 
parties to the Interstate Storage Agreement and upon the approval by 
the Secretary consistent with the requirements of paragraph (b) of this 
section.


Sec. 414.4  Reporting requirements and accounting for storage credits.

    Each authorized entity will annually report to the Secretary, by 
January 31, the quantity of water it diverted and stored on behalf of 
authorized users in other Lower Division States and the balance of 
storage credits remaining in interstate storage for each entity as of 
December 31 of the prior calendar year. This water will be accounted 
for, in the records maintained by the Secretary under Article V of the 
Decree, as a consumptive use in the Storing State for the year in which 
it is stored. The Secretary will maintain individual balances of 
storage credits established by the offstream storage of water under 
Interstate Storage Agreements. The balances will be reduced when 
intentionally created unused apportionment is developed by the 
authorized entity in a Storing State and made available for use in a 
Consuming State. In the records maintained by the Secretary under 
Article V of the Decree, the taking of unused apportionment for use in 
a Consuming State by an authorized entity in redemption of its storage 
credits will be accounted for as consumptive use by the Consuming State 
of unused apportionment in the year the water is used, the same as with 
any other unused apportionment taken by that State.


Sec. 414.5  Water quality.

    (a) No guarantee of water quality. The Secretary does not warrant 
the quality of water released or delivered under interstate agreements, 
and the United States will not be liable for damages of any kind 
resulting from water quality problems. The United States will not be 
under any obligation to construct or furnish water treatment facilities 
to maintain or improve water quality standards.
    (b) Water quality standards. All contractors or Federal entitlement 
holders, in diverting, using, and returning Colorado River water, must 
comply with all relevant water pollution laws and regulations of the 
United States, the Storing State, and the Consuming State, and must 
obtain all applicable permits or licenses from the appropriate Federal, 
State, or local authorities regarding water quality and water pollution 
matters.


Sec. 414.6  Environmental compliance.

    (a) Ensuring environmental compliance. The Secretary will ensure 
that environmental compliance is completed. The Secretary will be 
responsible for ensuring compliance with the National Environmental 
Policy Act of 1969, as amended, and the Endangered Species Act of 1973, 
as amended, and will integrate the requirements of other statutes, 
laws, and executive orders as required for Federal actions taken under 
this part.
    (b) Responsibility for environmental compliance work. Authorized 
entities requesting Secretarial approval of an interstate transaction 
pursuant to this part may prepare the appropriate documentation and 
compliance document for a proposed Federal action such as approving a 
proposed interstate transaction. Such compliance documents must meet 
the standards set forth in Reclamation's National Environmental Policy 
Act Handbook before they can be adopted. All costs incurred by the 
United States in evaluating, processing, and/or approving transactions 
entered into under this part must be funded by the parties that propose 
the transaction.

[FR Doc. 97-33990 Filed 12-30-97; 8:45 am]
BILLING CODE 4310-94-P