[Federal Register Volume 64, Number 210 (Monday, November 1, 1999)]
[Rules and Regulations]
[Pages 58986-59009]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28417]



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Part V





Department of the Interior





_______________________________________________________________________



Bureau of Reclamation



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43 CFR Part 414



Offstream Storage of Colorado River Water; Development and Release of 
Intentionally Created Unused Apportionment in the Lower Division 
States; Final Rule

  Federal Register / Vol. 64, No. 210 / Monday, November 1, 1999 / 
Rules and Regulations  

[[Page 58986]]



DEPARTMENT OF THE INTERIOR

Bureau of Reclamation

43 CFR Part 414

RIN 1006-AA40


 Offstream Storage of Colorado River Water and Development and 
Release of Intentionally Created Unused Apportionment in the Lower 
Division States

AGENCY: Bureau of Reclamation, Interior.

ACTION: Final rule.

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SUMMARY: This rule establishes a procedural framework for the Secretary 
of the Interior (Secretary) to follow in considering, participating in, 
and administering Storage and Interstate Release Agreements among the 
States of Arizona, California, and Nevada (Lower Division States). The 
Storage and Interstate Release Agreements would permit State-authorized 
entities to store Colorado River water offstream, develop intentionally 
created unused apportionment (ICUA), and make ICUA available to the 
Secretary for release for use in another Lower Division State. This 
rule provides a framework only and does not authorize any specific 
activities. The rule does not affect any Colorado River water 
entitlement holder's right to use its full water entitlement, and does 
not deal with intrastate storage and distribution of water. The rule 
only facilitates voluntary interstate water transactions that can help 
satisfy regional water demands by increasing the efficiency, 
flexibility, and certainty in Colorado River management.

EFFECTIVE DATE: December 1, 1999.

FOR FURTHER INFORMATION CONTACT: Mr. Dale Ensminger, (702) 293-8659 or 
Ms. Erica Petacchi (202) 208-3368.

SUPPLEMENTARY INFORMATION:
I. Background
II. Final Rule as Adopted
III. Tribal Issues
IV. Responses to Comments
V. Procedural Matters

I. Background

    This final rule was preceded by a proposed rule that we published 
in the Federal Register on December 31, 1997 (62 FR 68491). The 
proposed rule provided for a public comment period that ran from 
December 31, 1997 through April 3, 1998. In addition to oral comments 
submitted at one public hearing and one public meeting, we received 47 
letters during the comment period on the proposed rule. Two letters 
commented only on the draft programmatic environmental assessment 
(DPEA). The respondents included two irrigation districts, three water 
districts, two water authorities, two water user associations, three 
individuals, one municipal utility, one city, one farmer's 
organization, one safe drinking water organization, four environmental 
organizations, 11 State agencies, nine Indian tribes, and seven Federal 
agencies. We reviewed and analyzed all comments and revised the final 
rule based on these comments.
    The DPEA provided for a comment period that ran from December 31, 
1997 through April 3, 1998. Oral comments on the DPEA were submitted at 
the same public hearing and the same public meeting for the proposed 
rule. In addition to those oral comments, we received 25 letters from 
26 respondents during the comment period. The respondents included one 
water district, one water authority, one individual, five environmental 
organizations, five State agencies, six Indian tribes, and seven 
Federal agencies. As with the rule, we reviewed and analyzed all 
comments and revised the final programmatic environmental assessment 
based on these comments.
    As a result of receiving differing comments on the definition of 
authorized entity and several other technical matters, we reopened the 
comment period on September 21, 1998 (63 FR 50183) for a 30-day period 
ending October 21, 1998. We asked interested parties to comment on 
three specific questions. We received 10 letters from 11 respondents 
during the reopened comment period. The respondents included three 
State agencies, three water districts, one water authority, one water 
users association, and three environmental organizations. We reviewed 
and analyzed all comments and revised the final rule based on these 
comments.
    Following the apportionment of water between the Upper and Lower 
Basins in the Colorado River Compact, Congress, by passing the Boulder 
Canyon Project Act of December 21, 1928 (BCPA), made a permanent 
apportionment of Colorado River water among the Lower Division States 
for use within those States. Congress also authorized the Secretary to 
allocate and distribute Colorado River water within these 
apportionments to users in the Lower Division States through contracts. 
Congress put the Secretary in charge of managing and operating the 
Colorado River in the Lower Basin of the Colorado River system (Lower 
Basin). This rule establishes a framework under which the Secretary 
will implement the contractual distribution of Colorado River water in 
the Lower Division States on an interstate basis.
    If water apportioned for use in a Lower Division State is not 
consumed in that State in any year, the Secretary may release the 
unused water for use in another Lower Division State. Offstream storage 
of Colorado River water and release of intentionally created unused 
apportionment (ICUA) can help the Lower Division States use available 
Colorado River water more effectively. This rule establishes a process 
for the Secretary to release ICUA. The Secretary's authority to issue 
this final rule stems from various Federal laws and executive orders, 
court decisions, and decrees, particularly the BCPA, the Supreme Court 
opinion (Opinion) rendered June 3, 1963 (373 U.S. 546) and the decree 
entered March 9, 1964 (376 U.S. 340) (Decree), in Arizona v. 
California, as supplemented and amended. A thorough description of 
these authorities may be found in the Background section of the 
proposed rule published December 31, 1997, at 62 FR 68493.
    Several State agencies commented that the narrative should be 
changed. In response to these comments, we are correcting two 
statements that were contained in the first paragraph of the preamble 
to the proposed rule under II. Background.
    First, the statement that: ``The compact defined the Colorado River 
Basin and divided the seven States into two basins, an Upper Basin and 
a Lower Basin,'' was incorrect and should have read: ``The compact 
defined the Colorado River Basin and divided it into two sub-basins, an 
Upper Basin and a Lower Basin. The compact further specified which 
States are Upper Division States and which States are Lower Division 
States.''
    Second, the proposed rule preamble cited the Colorado River 
Compact, approved August 19, 1921, as the source of the definition for 
``consumptive use.'' The correct source of this definition is the 
Decree.
    Several respondents, particularly State agencies, expressed concern 
that some of the terms in the preamble and the proposed rule could be 
interpreted in ways that are contrary to existing law because of 
imprecise wording. These respondents stated the rule should facilitate 
more efficient use of unused apportionment and surpluses within the 
existing authority of the Secretary under the Law of the River. We 
agree that this rule only formalizes the procedures for the Secretary 
to follow in considering, participating in, and administering Storage 
and Interstate Release Agreements and does not expand or

[[Page 58987]]

create authority to do so. The Secretary has the authority, under the 
Law of the River, to allocate and distribute waters of the mainstream 
of the Colorado River in the Lower Basin consistent with the Decree.

II. Final Rule as Adopted

Changes Made in This Final Rule

    We have concluded that a number of changes from the proposed rule 
are necessary and appropriate to respond to comments. These revisions 
clarify the basic intent of the proposed rule and are summarized in the 
following paragraphs.
     Restatement of Title and Purpose of the Rule. We have 
clarified the purpose of this rule in Sec. 414.1. This rule establishes 
a procedural framework for the Secretary to follow in considering, 
participating in, and administering Storage and Interstate Release 
Agreements among the Lower Division States that would permit State-
authorized entities to store Colorado River water offstream, develop 
ICUA, and make ICUA available to the Secretary for release and use in 
another Lower Division State utilizing Storage and Interstate Release 
Agreements. Colorado River water stored in order to develop ICUA will 
always be put to use in the Storing State.
    Under this rule, the authorized entity in the Storing State 
(storing entity) will not redeem storage credits for delivery to the 
Consuming State. For this reason, the terms ``storage credits'' and 
``redemption'' are not necessary and have been deleted. Instead, when 
the authorized entity in the Consuming State (consuming entity) 
requests water under a Storage and Interstate Release Agreement, the 
storing entity will reduce the Storing State's consumptive use of 
Colorado River water, thereby developing ICUA. The Secretary will 
release the ICUA to the consuming entity for use in the Consuming 
State.
     Definitions. We added several definitions from the 
Compact, including ``Colorado River Basin,'' ``Colorado River System,'' 
and ``Upper Division States,'' and added, deleted, or modified several 
other definitions in this rule to clarify the intent where necessary. 
New definitions were also added for ``BCPA,'' ``consuming entity,'' 
``storing entity,'' and ``water delivery contract.'' The following 
definitions were deleted: ``Contractor,'' ``Federal entitlement 
holder,'' ``Present perfected right or PPR,'' ``storage credit,'' and 
``unused entitlement.'' The definition for ``Interstate Storage 
Agreement'' was revised and the term used in the rule was renamed 
``Storage and Interstate Release Agreement.''
    We redefined ``authorized entity'' creating a two-part definition. 
As to a Storing State, for purposes of this rule, an authorized entity 
is defined as an entity in the Storing State that is expressly 
authorized by the laws of that state to enter into Storage and 
Interstate Release Agreements and to develop ICUA. As to a Consuming 
State, for purposes of this rule, an authorized entity is defined as an 
entity in the Consuming State that has authority under the laws of that 
State to enter into Storage and Interstate Release Agreements and to 
acquire the right to use ICUA.
     Storage of Water. In the proposed rule, we did not clearly 
describe the type of water that is eligible to be stored under a 
Storage and Interstate Release Agreement. This rule, in 
Sec. 414.3(a)(2), explains that the water stored within a Storing State 
for future use under a Storage and Interstate Release Agreement is 
water that would otherwise be unused in the Storing State, but that is 
within the Storing State's basic or surplus apportionment. It is 
important, as a policy matter, that water be offered to all entitlement 
holders in a Storing State before it is stored for interstate purposes 
so that, as one commenting State noted, a State-authorized entity will 
not be put in a position of ``competition with the legal right to 
deprive lower priority entitlement holders (in the Storing State) of 
their Colorado River water.'' Accordingly, in order to qualify as 
unused apportionment, the water within the Storing State's basic or 
unused apportionment that is stored for interstate transactions under 
this rule must be offered first to all entitlement holders within the 
Storing State.
    The rule, in a new Sec. 414.3(a)(3), explains that the Consuming 
State's unused basic or unused surplus apportionments may also be 
stored in the Storing State to support an interstate water transaction. 
We also clarified in this section that unused apportionment of the 
Consuming State may be made available for storage in the Storing State 
only in accordance with Article II(B)(6) of the Decree. If unused 
apportionment from the Consuming State is to be stored under a Storage 
and Interstate Release Agreement, the rule provides that the Secretary 
will make unused apportionment of the Consuming State available to the 
storing entity in accordance with the terms of a Storage and Interstate 
Release Agreement. This rule also has a new Sec. 414.3(a)(6) that 
provides that a Storage and Interstate Release Agreement must identify 
a procedure for the Secretary to follow to verify and account for the 
quantity of water stored in accordance with the Storage and Interstate 
Release Agreement.
     Development of ICUA. We added a requirement in 
Sec. 414.3(a)(9) that the Storage and Interstate Release Agreement must 
describe the notice given to entitlement holders, including Indian 
tribes, of opportunities to participate in the development of ICUA. We 
added a requirement in Sec. 414.3(a)(10) that the storing entity must 
identify the quantity, the means, and the entity by which ICUA will be 
developed. We also added a paragraph in Sec. 414.3(a)(11) to require 
the Storage and Interstate Release Agreement to specify the procedure 
for verification of the development of the ICUA. Both the means by 
which ICUA will be developed and the method of verification will be set 
forth in the Storage and Interstate Release Agreement and may vary 
according to the transaction. However, the means to develop ICUA must 
be consistent with the laws of the Storing State. Finally, under the 
final rule, nothing in the Storage and Interstate Release Agreement 
shall limit the Secretary's authority to use independent means to 
verify the existence of ICUA.
     Release of ICUA. We modified Sec. 414.3(a) to reflect that 
the Secretary will be a party to Storage and Interstate Release 
Agreements. We added a new Sec. 414.3(a)(12) that states that the 
Storage and Interstate Release Agreement will specify that the 
Secretary will only release ICUA to the consuming entity and will not 
release it to other entitlement holders. This section requires the 
release of ICUA be done in accordance with the terms of the Storage and 
Interstate Release Agreement, the BCPA, Article II(B)(6) of the Decree, 
and all other applicable laws and executive orders. We added a 
requirement in Sec. 414.3(a)(13) that the Storage and Interstate 
Release Agreement specify that ICUA will be released to the consuming 
entity only in the year and to the extent that ICUA is developed by the 
storing entity. We added a requirement in Sec. 414.3(a)(14) that the 
Secretary would only release ICUA after determining that all necessary 
actions have been taken under the rule. We added a requirement in 
Sec. 414.3(a)(15) that the Secretary, before releasing ICUA, must first 
determine that the storing entity stored water in sufficient quantities 
to support the development of ICUA requested by the consuming entity 
and be satisfied that the storing entity either (i) has developed the 
quantity of ICUA requested by the

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consuming entity, or (ii) will develop the quantity of ICUA requested 
by the consuming entity under Sec. 414.3(f). We renumbered 
Sec. 414.3(a)(9) as Sec. 414.3(a)(16) and changed the indemnification 
to relate to actions of the non-Federal parties to a Storage and 
Interstate Release Agreement. We renumbered Sec. 414.3(a)(10) as 
Sec. 414.3(a)(17).
    This final rule also includes a new Sec. 414.3(e) that addresses 
the need for a valid contract with the Secretary in accordance with 
Section 5 of the BCPA. The release or diversion of Colorado River water 
for storage under this part must be supported by a Section 5 water 
delivery contract, except for the storage of Article II(D) (of the 
Decree) water by Federal or tribal entitlement holders. The release or 
diversion of Colorado River water that has been developed or will be 
developed as ICUA under this part must also be supported by a Section 5 
water delivery contract. This section states that the Section 5 water 
delivery contract requirement of the BCPA may be satisfied by direct 
contracts with the Secretary, or by valid subcontracts with entitlement 
holders authorized to enter into subcontracts, or in the case of a 
consuming entity, by the Storage and Interstate Release Agreement 
itself. When a valid contract is in place to support the release or 
diversion of Colorado River water for storage, no additional authority 
will be required by the Secretary to authorize the storage, through a 
Storage and Interstate Release Agreement or otherwise.
    We also have added a new Sec. 414.3(f) that allows anticipatory 
releases of ICUA before the actual development of ICUA by the storing 
entity. This addition was made based on comments received that the 
demand patterns for Colorado River water in the lower basin vary 
widely. The times when the storing entity and the consuming entity 
demand water will not necessarily be concurrent. Thus, the consuming 
entity may have a need for ICUA before the storing entity would 
decrease its diversions of Colorado River water in order to develop the 
ICUA. We added Sec. 414.3(f) to the rule to allow the consuming entity 
to have the use of ICUA before its development by the storing entity. 
These anticipatory releases can only be made in the same year in which 
ICUA will be developed. Additionally, before an anticipatory release, 
the storing entity must certify to the Secretary that ICUA will be 
developed before the end of the year in order to support an early 
release.
     Financial considerations. We added a new Sec. 414.3(b) 
which states that the Secretary will not execute a Storage and 
Interstate Release Agreement that has adverse impacts on the financial 
interests of the United States. This section also provides that 
financial arrangements between and among non-Federal parties relating 
to the Storage and Interstate Release Agreement need not be included in 
the Storage and Interstate Release Agreement. Those financial 
arrangements can be set forth in separate agreements to which the 
Secretary will not be a party, should the parties so desire.
     Involvement of the Secretary. As noted above, we modified 
Sec. 414.3(a) to provide that the Secretary will be a party to Storage 
and Interstate Release Agreements. We modified Sec. 414.3(c) to 
specify:
    (1) That the Regional Director for the Bureau of Reclamation's 
Lower Colorado Region (Regional Director) has the authority to execute 
a Storage and Interstate Release Agreement on behalf of the Secretary;
    (2) That the Secretary will notify the public of the Secretary's 
intent to participate in negotiations to develop a Storage and 
Interstate Release Agreement and provide a means for public input;
    (3) That the factors to be considered in reviewing a proposed 
Storage and Interstate Release Agreement include potential impacts on 
tribal interests, including trust resources, and potential impacts on 
the Upper Division States and comments from the State agency 
responsible for Colorado River matters; and
    (4) That after consideration of the listed factors, the Secretary 
may execute or decide not to execute a Storage and Interstate Release 
Agreement.
     Stored water. We modified former Sec. 414.3(c) to conform 
the wording to changes made in other parts of the rule and separated 
the concepts that now appear in Sec. 414.3(a)(6) and Sec. 414.3(a)(10).

Section-by-Section Analysis of the Rule

Section 414.1  Purpose
    This section explains that part 414 contains the procedures for 
authorized entities in the Lower Division States to follow for entering 
into Storage and Interstate Release Agreements with the Secretary for 
offstream storage of Colorado River water and for the development and 
release of ICUA on an interstate basis in the Lower Division States. 
This rule is expected to be a first step toward improving the 
efficiency associated with management of the Colorado River in the 
Lower Basin. The rule is intended to be permissive in nature and 
facilitate voluntary water transactions.
Section 414.2  Definitions of Terms Used in This Part
    This section defines terms that are used in part 414. The following 
terms are based on and are to be interpreted consistent with the 
Decree: basic apportionment, Colorado River water, consumptive use, 
Decree, mainstream, surplus apportionment, and unused apportionment. 
The terms Colorado River Basin, Colorado River System, Lower Division 
States, and Upper Division States are defined in the compact. Most of 
the other terms were defined for the purposes of this rule to establish 
a common understanding.
Section 414.3  Storage and Interstate Release Agreements
    This section identifies the details that must be specified in a 
Storage and Interstate Release Agreement regarding the storage of 
Colorado River water off of the mainstream and the development and 
release of ICUA. This section provides for verification of the quantity 
of water stored under a Storage and Interstate Release Agreement and 
verification of the quantity of ICUA developed. It also commits the 
Secretary to release ICUA to the consuming entity after the storing 
entity has certified to the Secretary, and the Secretary has verified, 
that the quantity of ICUA requested by the consuming entity has been 
developed or will be developed in that year. The release must be in 
accordance with the terms of the agreement and as permitted by law.
    This section also specifies the factors that the Secretary will 
consider in determining whether to execute a Storage and Interstate 
Release Agreement. This section allows the assignment of all or a 
portion of an authorized entity's interest in a Storage and Interstate 
Release Agreement to other authorized entities and provides for the 
satisfaction of the water delivery contract requirement of Section 5 of 
the BCPA.
    This section prescribes the limited circumstances under which ICUA 
can be released to a consuming entity before the development of ICUA by 
the storing entity.
Section 414.4  Reporting Requirements and Accounting Under Storage and 
Interstate Release Agreements
    This section specifies the reporting requirements that storing 
entities must follow and stipulates that this water will be accounted 
for in the records maintained under Article V of the Decree.

[[Page 58989]]

Section 414.5  Water Quality
    This section states that the Secretary does not guarantee the 
quality of water released under Storage and Interstate Release 
Agreements and further states that the United States is not liable for 
damages that result from water quality problems. The section states 
that the United States is not responsible for maintaining or improving 
water quality unless Federal law provides otherwise. This section also 
states that any entity who diverts, uses, and returns Colorado River 
water must comply with all applicable water pollution laws and 
regulations of the United States and the Storing and Consuming States, 
and must obtain all applicable permits or licenses regarding water 
quality and water pollution matters.
Section 414.6  Environmental Compliance
    This section states that the Secretary will ensure environmental 
compliance with the National Environmental Policy Act (NEPA), the 
Endangered Species Act (ESA), and other applicable laws and executive 
orders. This section states that authorized entities must prepare and 
fund all necessary environmental compliance documents. This section 
also specifies that the authorized entities must fund the costs 
incurred by the United States in considering, participating in, and 
administering the proposed agreement.

III. Tribal Issues

    As explained in more detail in the following section of the 
preamble (Responses to Comments), a number of Indian tribes have 
expressed reservations and/or opposition to this rule. In particular, 
the Colorado River Tribal Partnership, often referred to as the Ten 
Tribe Partnership, composed of ten Indian tribes (Chemehuevi Indian 
Tribe, Cocopah Indian Tribe, Colorado River Indian Tribes, Fort Mojave 
Indian Tribe, Jicarilla Indian Tribe, Navaho Nation, Quechan Tribe, 
Northern Ute Indian Tribe, Southern Ute Indian Tribe and Ute Mountain 
Indian Tribe) with decreed and/or claimed water rights in the Colorado 
River, has expressed opposition to this rule on the ground that it does 
not provide specific and express protection of the Tribes' interests 
both in making water transfers and developing tribal water on or off 
their reservations.
    The Department believes that this rule should and will benefit 
Indian tribes, but it acknowledges that the rule has a limited scope. 
The final rule provides a framework under which State-authorized 
entities can request Secretarial approval to implement voluntary 
interstate water transactions. The rule does not address or preclude 
independent actions by the Secretary regarding Tribal storage and water 
transfer activities. With regard to the activities covered by this 
final rule, the Department encourages Lower Division States to enact 
measures and take actions that will allow Tribes to participate in 
opportunities covered by this rule. Also, the Secretary's approval of 
specific transactions under the rule will be based, in part, on an 
analysis of the impacts that such a transaction may have on the 
interests of Indian tribes. The Department provides a fuller discussion 
of these issues in the Responses to Comments section below.

IV. Responses to Comments

    The following is a discussion of the comments received on the 
proposed rule and the DPEA, and our responses. First, we will address 
general comments and our responses. Second, we will address comments on 
specific provisions in the proposed rule. Third, we will address 
comments on the DPEA. Fourth, we will respond to specific comments 
received during the second comment period.

Public Comments on Proposed Rule and Responses on General Issues

    The following section presents public comments on the proposed rule 
that are general in nature. This section includes comments on the scope 
of the rule, Secretarial discretion, eligibility to be an ``authorized 
entity,'' the method for development of ICUA, the timing for the 
completion of the rule, tribal water rights, ground water issues, 
subsidies, power issues, concerns of California entities, potential 
impacts on the Upper Division States, concerns over deliveries to 
Mexico, environmental concerns, and economic impacts of the rule.

Scope of the Rule

    Comment: Reclamation did not hold public scoping meetings on the 
rule.
    Response: We have conducted this rulemaking in accordance with the 
Administrative Procedure Act. The Department expanded the public 
comment period for the proposed rule from 61 to 93 days. In addition to 
oral comments submitted at one public hearing and one public meeting, 
we received 49 comment letters from 47 respondents. Of these letters, 
24 commented only on the rule, 23 commented on both the proposed rule 
and the draft programmatic environmental assessment (DPEA), and 2 
commented only on the DPEA.
    As a result of receiving differing comments on the definition of 
authorized entity and several other technical matters, we reopened the 
comment period on September 21, 1998 (63 FR 50183) for a 30-day period 
ending October 21, 1998. We asked interested parties to provide 
comments on three specific questions. The Department received 10 
letters from 11 respondents during the reopened comment period. The 
respondents included three State agencies, three water districts, one 
water authority, one water users association, and three environmental 
organizations. We reviewed and analyzed all pertinent comments and 
revised the rule based on these comments. Thus, the public has 
influenced the scope and formulation of this rule.

Secretarial Discretion

    Comment: Does the Secretary of the Interior have the authority to 
enter into an agreement that binds future Secretaries to commit unused 
apportionment to a specific user in a particular State over a multiple-
year period?
    Response: Yes. The Secretary's release of ICUA in any year will be 
under Article II(B)(6) of the Decree. The Decree does not preclude the 
Secretary from releasing unused apportionment to a specific user in a 
particular State. The Secretary will agree to release ICUA only during 
the year in which it is developed by the storing entity. Moreover, 
under Sec. 414.3(a)(12) of the rule, the Secretary will commit in the 
Storage and Interstate Release Agreement to release ICUA after the 
storing entity has certified to the Secretary, and the Secretary has 
verified in accordance with Sec. 414.3(a)(15), that the quantity of 
ICUA requested by the consuming entity has been developed or will be 
developed in that year. Further, the ICUA released by the Secretary 
will be limited to the quantity developed by a storing entity during 
that year.

Eligibility To Be an Authorized Entity

    Note: There is also a discussion on the contractual requirements 
necessary to qualify as an authorized entity in the section of this 
preamble addressing comments received during the reopened comment 
period.

    Comment: The most frequently mentioned comment concerned the 
definition for the term ``authorized entity.'' Some thought 
``authorized entity'' should be defined broadly to enable the widest 
possible participation and others thought the term should be defined 
very narrowly to limit participation to State agencies. Indian tribes 
commented that the definition

[[Page 58990]]

should be expanded to include the tribes pursuant to the Secretary's 
authority under the BCPA. Tribes further commented that the proposed 
definition of ``authorized entity'' will give State government a 
virtual monopoly on water marketing.
    Response: We agree with the general suggestion made by a State 
agency that ``authorized entity'' should be a two-part definition. This 
concept was supported by several other State agencies and water 
districts. As to a Storing State, for purposes of this rule, an 
authorized entity is defined as an entity that is expressly authorized 
by the laws of that State to: (i) Enter into Storage and Interstate 
Release Agreements; and (ii) develop ICUA. As to a Consuming State, for 
purposes of this rule, an authorized entity is defined as an entity 
that has authority under the laws of that State to: (i) enter into 
Storage and Interstate Release Agreements; and (ii) acquire the right 
to use ICUA. In this way the rule is intended to be permissive in 
nature but consistent with State law. We believe this two part 
definition captures comments from several State agencies that while 
express authority is needed to store water for use in interstate water 
transactions and make ICUA available, express authority is not 
necessary for a consuming State to receive and use ICUA. We reiterate 
that we fully expect the Lower Division States to enact measures that 
will allow the tribes to participate in opportunities covered by this 
rule. Moreover, this rule does not specifically address or preclude 
independent actions by the Secretary regarding tribal storage and water 
transfer activities under other authorities.
    We have also expanded this rule to require that non-Federal parties 
to the Storage and Interstate Release Agreement provide at the 
Secretary's request any additional supporting data necessary to clearly 
set forth the details of the proposed transaction and the eligibility 
of the parties to participate as State-authorized entities in the 
proposed transaction.
    Comment: It is important to acknowledge that the apportionments of 
Colorado River water are made specifically to the individual States. 
Therefore, it is important for the States to specifically designate the 
authorized entities who are entitled to enter into Interstate Storage 
Agreements (now termed ``Storage and Interstate Release Agreements'') 
to ensure use of Colorado River water remains within a State's 
apportionment during any year.
    Response: Apportionments of Colorado River water are made for use 
within each specific Lower Division State. This rule requires that the 
authorized entity in the Storing State be an entity that is expressly 
authorized under the laws of that State to: (i) enter into Storage and 
Interstate Release Agreements; and (ii) develop ICUA. As to an 
authorized entity in a Consuming State, the rule requires that it be an 
entity that has authority under the laws of that State to: (i) enter 
into Storage and Interstate Release Agreements; and (ii) acquire the 
right to use ICUA.

Method for Development of ICUA (Forbearance)

    Comment: Several respondents commented on whether the final 
definition of ICUA should specify what types of measures or actions the 
Secretary will approve for the development of ICUA.
    Response: The measures that will be used to develop ICUA are to be 
specified in each Storage and Interstate Release Agreement and must be 
verifiable. The method used to develop ICUA and the appropriate method 
of verification may vary according to the transaction.

The Timing for the Completion of the rule

    Comment: Several respondents asked for additional time to review 
the proposed rule and DPEA and questioned why the completion of the 
rulemaking process appeared to be on a ``fast track.''
    Response: In developing this rule we have followed the mandates of 
the Administrative Procedure Act. In fact, we extended the time for 
public review and comment from 61 to 93 days despite the fact that this 
rule only formalizes the existing authority of the Secretary to enter 
into Storage and Interstate Release Agreements and does not expand or 
create this authority. Moreover, we reopened the comment period for an 
additional 30 days to obtain further comments. This extended review 
period has given the public numerous opportunities to review this rule. 
In addition, we reviewed and analyzed the comments submitted during the 
reopened comment period and revised the rule as needed. Finally, the 
Secretary will notify the public of the Secretary's intent to 
participate in negotiations to develop a Storage and Interstate Release 
Agreement and give the public further opportunity to comment before any 
specific transaction is implemented.

Tribal Water Rights

    Comment: The rule should include an introductory section that 
recognizes Indian holders of present perfected rights are not required 
to beneficially use their water, are not subject to a loss or reduction 
in their water for non-use or non-beneficial use, and are not subject 
to State law or State regulatory control for the on-reservation use of 
their entitlements.
    Response: We recognize the unique status of present perfected 
rights holders under the Decree and agree that tribal present perfected 
rights holders are not subject to a loss or reduction in their water 
rights for non-use. The 1979 supplemental decree entered March 9, 1979 
(439 U.S. 419) by the Supreme Court in Arizona v. California quantifies 
and prioritizes tribal rights to the use of Colorado River water. The 
1979 supplemental decree states that: ``Any water right listed herein 
may be exercised only for beneficial uses.'' We do not believe it is 
necessary that the information be included in an introductory section 
for the rule. We agree that Indian holders of present perfected rights 
are not subject to State law or State regulatory control for the on-
reservation use of their entitlements.
    Comment: Indian tribes should be permitted to enter into intrastate 
or interstate agreements for offstream storage and marketing of their 
unused water off the reservation under the statutory and contractual 
authority vested in the Secretary.
    Response: This rule does not apply to intrastate transactions. This 
rule applies only to interstate transactions. As explained in more 
detail below, we believe that Storage and Interstate Release Agreements 
under this rule can be implemented in a manner that will provide 
opportunities for tribes to benefit.
    Comment: Several tribes commented that they have been unable to 
fully benefit from their water rights because of the Federal 
government's failure to provide the tribes with the necessary 
financial, technical, and political assistance to fully develop their 
water resources.
    Response: We acknowledge this concern and recognize that a number 
of tribes have been unable to use their entitlement due to the lack of 
distribution and delivery systems. We are committed to making progress 
to help tribes make better use of their water rights. For example, a 
Central Arizona Project (CAP) distribution system has been built for 
the Ak-Chin Tribe. A distribution system for the Fort McDowell Tribe is 
under construction and we have entered into a repayment contract with 
the Gila River Indian Community for construction of a CAP distribution 
system. Five of the ten

[[Page 58991]]

Indian tribes with contracts for delivery of CAP water have utilized 
their statutory right to lease or transfer water. More specifically, 
the Ak Chin, Fort McDowell, Tohono O'odham, Salt River, and Yavapai 
Prescott tribes have leased or transferred CAP water.
    Comment: Indian tribes should receive compensation for their unused 
or undeveloped tribal water resources because of the Federal 
government's failure to provide the tribes with the necessary 
assistance to fully develop their water resources.
    Response: The issue of compensating the tribes in connection with 
the development of tribal water rights is beyond the scope of this 
rule.
    Comment: The Department should permit tribal governments to market 
their Central Arizona Project allocations on the same basis as the 
State. Central Arizona Water Conservation District's (CAWCD) non-Indian 
subcontractors have the capability to take direct delivery of CAP water 
but have not taken delivery of substantial quantities, primarily for 
economic reasons. Tribes with CAP allocations, with the exception of 
the Ak-Chin Indian Community, are not able to take delivery or put to 
use any substantial quantity of CAP water because the distribution and 
delivery systems that are needed to allow the tribes to put this water 
to use have not been constructed.
    Response: We reiterate that we are encouraging the Lower Division 
States to enact measures and take actions that will allow the tribes to 
participate in opportunities covered by this rule. One such example of 
tribal participation in a Storage and Interstate Release Agreement 
would be affording tribes the opportunity to develop underground 
storage facilities where Colorado River water could be stored. In 
addition, we note that the State of Arizona is exploring the use of 
facilities on tribal lands for storage of Colorado River water. Thus, 
tribes could participate by leasing the use of these facilities to the 
storing entity. Moreover, this rule does not specifically address or 
preclude independent actions by the Secretary regarding tribal storage 
and water transfer activities. As stated above, we feel that there has 
been progress in helping the tribes create irrigation infrastructure or 
otherwise put their CAP water to use and is committed to moving forward 
with this program. Only authorized entities can store water under this 
rule to support an interstate water transaction. No holders of CAP 
allocations have a right to store this water for an interstate 
transaction unless they can qualify as an authorized entity under this 
rule. Only unused water that is not requested by an entitlement holder 
(including tribes) can be stored to support a Storage and Interstate 
Release Agreement. With respect to the development of ICUA, the rule 
requires the Storage and Interstate Release Agreement to describe the 
notice given to entitlement holders, including Indian tribes, of 
opportunities to participate in the development of ICUA.

Ground Water Issues

    Comment: Because banked water is fungible, the rule should address 
both intrastate and interstate water storage to preclude a Storing 
State from circumventing any restrictions that the Department might 
impose on the storage or recovery of water stored under an Interstate 
Storage Agreement (now termed a ``Storage and Interstate Release 
Agreement''). Several respondents expressed concern that an authorized 
entity may store water in an aquifer that is hydraulically connected to 
an aquifer that holds tribal water.
    Response: The rule specifies in Sec. 414.3(c) that the Secretary 
will consider various factors in reviewing a proposed Storage and 
Interstate Release Agreement, including potential effects on trust 
resources, potential effects on entitlement holders, which includes 
Indian tribes, and environmental impacts. We reiterate that intrastate 
transactions are not covered under this rule.
    Comment: One respondent stated that the rule should expressly 
address the legal status of banked CAP water. The respondent is 
concerned that the banked water will be considered CAP water under 
Federal law and non-Indian water users in Arizona will accrue millions 
of acre-feet of credits with the sanction of Reclamation. The 
subsequent recovery of the stored water will result in significant 
increases in ground water pumping over and above that currently 
authorized in accordance with State law and the tribes might be 
precluded from pumping the remaining ground water reserves because 
those reserves will increasingly take on the character of CAP water.
    Response: As noted in Sec. 414.3(c), the potential effects of the 
proposed measures on the environment, the economy, and trust resources 
are among the factors the Secretary will consider when reviewing the 
proposed Storage and Interstate Release Agreement.
    Comment: Revise the rule to incorporate the acre-foot for acre-foot 
ground water pumping restrictions from the amended CAP master repayment 
contract and the CAP agricultural subcontracts. Reclamation has a trust 
responsibility to protect Indian ground water from continued ground 
water mining by non-Indian interests.
    Response: Nothing in this regulation modifies the ground water 
protections found in the CAP contracts or limits the Department's 
ability to protect trust resources. Also, as noted in Sec. 414.3(c), 
the potential effects of the proposed measures on the environment, the 
economy, and trust resources are among the factors the Secretary will 
consider when reviewing a Storage and Interstate Release Agreement.

Subsidies

    Comment: Several respondents stated that the Department should not 
allow extra non-reimbursable expenses to occur in storing water or 
delivering it to a new location. There were also suggestions that, with 
respect to Arizona, revenue from the Interstate Storage Agreement (now 
termed a ``Storage and Interstate Release Agreement'') should be 
collected to help repay CAWCD's debt to the United States for the CAP.
    Response: We agree that a proposed Storage and Interstate Release 
Agreement cannot obligate the United States to incur extra non-
reimbursable expenses to store water or deliver it to new locations. 
The Secretary will review the provisions of every proposed Storage and 
Interstate Release Agreement for its financial impacts on the United 
States and will not execute any agreements that may have adverse 
financial impacts on the United States. In addition, the United States 
is currently seeking to resolve the recovery of CAWCD's debt to the 
United States.

Power Issues

    Comment: Several respondents stated that Reclamation should analyze 
the impacts of the rule on power customers in the State of Arizona. 
When water passes through the Hoover and Davis generators on the way to 
storage in Arizona, there will be additional power production but CAWCD 
will incur increased pumping costs to move the water to storage. When 
stored water is withdrawn by a Nevada entity in the future, less water 
will pass through the Hoover and Davis generators, resulting in less 
power production at those dams. When Arizona ground water pumpers who 
take CAP water through in-lieu storage are required to go back to 
ground water pumping, they may require more power during years when 
stored water is withdrawn from the bank and generation is reduced at 
Hoover and Davis Dams. The rule should provide for compensation of 
power customers to protect them from subsidizing water banking.

[[Page 58992]]

    Response: Under this rule, the offstream storage of Colorado River 
water and the Secretary's release of ICUA may influence the timing of 
power generation at the Hoover, Parker, and Davis powerplants. 
Reclamation conducted an analysis to evaluate the potential impacts of 
this rule on Hoover and Parker-Davis power customers. The analysis 
reflects that under this rule the quantity of energy foregone in any 
one year between 1998 and 2017 will result in a loss of less than 0.5 
percent. Between 1998 and 2017, the quantity of Colorado River water 
released from mainstream reservoirs will be equivalent to the quantity 
that otherwise would have been released without the implementation of 
this rule.
    Section 6 of the BCPA notes ``That the dam and reservoir provided 
for by section 1 hereof shall be used: First, for river regulation, 
improvement of navigation, and flood control; second, for irrigation 
and domestic uses and satisfaction of present perfected rights in 
pursuance of Article VIII of said Colorado River compact; and third, 
for power.'' The Secretary manages and operates these reservoirs for 
multiple, often conflicting purposes, through powers vested by 
Congress. The principal source of the Secretary's power is the contract 
power under Section 5 of the BCPA to allocate and distribute mainstream 
water within the boundaries established by that Act. Each year, the 
Secretary develops and adopts an Annual Operating Plan (AOP) for the 
Colorado River reservoirs. During the AOP process, the Secretary 
consults with the Basin States and other interested parties, including 
the power users. The Secretary is mindful of the Federal contracts with 
power users for supply of electric service from hydroelectric 
powerplants on the Colorado River and will seek to minimize changes in 
power production that result from the Secretary's activities regarding 
river operations. However, because of Section 6 of the BCPA, power 
users are a junior priority for use of Colorado River water.

Concerns of California Entities

    Comment: Several California entities expressed concern that the 
rule should acknowledge and be consistent with the comprehensive plan 
being developed by California water agencies to reduce California's 
future use of Colorado River water (California 4.4 Plan).
    Response: The Department places great emphasis on the necessity for 
the implementation of a California 4.4 Plan. We do not, however, 
believe that this rule needs to address the California 4.4 Plan. This 
rule is intended to be of general application and to apply equally to 
each of the three Lower Division States.
    Comment: Some respondents asked for assurance that the rule will 
provide for storage of conserved water, such as water that is 
anticipated to result from water conservation in the Imperial 
Irrigation District (IID) that is proposed to be transferred to the San 
Diego County Water Authority (SDCWA).
    Response: The proposed transfer of water from IID to SDCWA is an 
intrastate transaction that is not covered by the rule. For conserved 
water to be stored by an authorized entity for purposes of an 
interstate water transaction under this rule, it must first be offered 
to all entitlement holders in the State in which it was conserved.
    Comment: In years when surplus water is needed to keep Metropolitan 
Water District's Colorado River Aqueduct full, a conflict will arise 
among entities who claim surplus water if the Secretary does not make a 
sufficient level of surplus water available to satisfy both 
Metropolitan Water District's demand and diversions for offstream 
storage under Interstate Storage Agreements (now termed ``Storage and 
Interstate Release Agreements'').
    Response: Surplus is divided among the Lower Division States under 
the Decree. Surplus apportioned to the State of California under the 
Decree, and thus available for use consistent with the priority system 
applicable to California, is not subject to storage under this rule by 
authorized entities in Nevada or Arizona unless entitlement holders in 
California choose not to exercise their rights to use surplus water.

Potential Impacts on the Upper Division States

    Comment: The rule should not be allowed to impact the water 
supplies available to the Upper Basin and the Upper Basin should not 
lose any yield or take increased risks because of increased 
equalization that might occur as a result of interstate water storage 
agreements.
    Response: We agree with this comment from a State agency and notes 
that this rule will not be used to justify more liberalized surplus 
determinations that will allow an increase in equalization releases 
from Lake Powell. Section 414.3(b) of this rule was modified to include 
potential impacts on the Upper Division States among the factors that 
the Secretary will consider in considering, participating in, and 
administering a Storage and Interstate Release Agreement.
    Comment: The rule should be modified to include a statement that 
the rule does not change or expand the authorities under the Law of the 
River or the apportionments made to the individual States under the Law 
of the River. The rule should also state that its intent is to provide 
for efficient use of unused apportionment and surpluses but that each 
State should keep its consumptive use of Colorado River water within 
the apportionments made to it under the Law of the River.
    Response: We agree with this comment from a State agency that this 
rule does not change or expand existing authorities under the Law of 
the River or change the apportionments for use of water within the 
individual States. We modified Sec. 414.1 Purpose to state this. We 
also agree that each Lower Division State must operate within the 
limits of the apportionment of Colorado River water made for use within 
that State but do not believe it is necessary to include this statement 
in the rule.

Concerns over Deliveries to Mexico

    Comment: The DPEA states that a minor reduction will occur in the 
quantity of surplus water available for delivery to Mexico over the 
long term without explaining what a minor reduction is or what studies 
have been done to quantify this.
    Response: The quantity of water available for delivery to Mexico is 
expected to decrease by an average of 23 thousand acre-feet (kaf)/year 
from 1999-2015 when storage is occurring with the rule. This is about a 
one percent decrease annually in the total quantity of water projected 
to reach Mexico (2.487 million acre-feet (maf) without this rule and 
2.464 maf with this rule). In addition, this decrease would affect 
flood control releases only during this same time and would have only a 
very minimal effect on projected surplus flow in years beyond 2015.
    These projections are based on analysis completed by Reclamation 
using the Colorado River Simulation Model, which is used to project 
long-term conditions relating to water supply on the Colorado River 
from Lake Mead to Mexico. The analysis used historical virgin runoff 
data from 1906-1995 and water use or demand schedules that have been 
provided by the Colorado River Basin States for the simulated future 
period 1999-2015. In addition the model includes requirements in the 
long-range operating criteria for the Colorado River.

Environmental Concerns

    Comment: Efficiency improvements in river management and the 
storage of

[[Page 58993]]

Colorado River water in underground aquifers means less water is 
available for environmental purposes, such as the riparian and aquatic 
ecosystems of the river, including the river and delta region in 
Mexico.
    Response: Offstream storage of Colorado River water under Storage 
and Interstate Release Agreements should not have a measurable effect 
on riparian and/or aquatic ecosystems of the river or the delta region 
of Mexico. During the next few years, releases from Hoover Dam are 
expected to continue to be about 10 maf/year for downstream use in the 
United States and Mexico. In addition, flood control releases are 
projected to average 788 kaf/year during the period 1999-2015. 
Offstream storage could decrease flood control releases reaching Mexico 
by an average of 23 kaf/year.
    At present, Reclamation has no authority or discretion over the 
type of use or location of use of Colorado River water once it reaches 
Mexico. The Mexican Water Treaty of 1944 and the Opinion and Decree 
control and limit Reclamation's releases from Hoover Dam to amounts 
that meet the conditions within each. Water delivered to meet Treaty 
requirements is diverted at Morelos Dam where Mexican law governs how 
it is put to use. In times of flood control operations, Colorado River 
water entering Mexico in excess of treaty requirements is under 
Mexico's jurisdiction. Once flows reach the Republic of Mexico, any 
uses for environmental purposes would have to be authorized by Mexico.
    It is possible that implementation of this rule may create 
additional flexibility to potentially make water available for fish and 
wildlife purposes as part of the ongoing Lower Colorado River Multi-
Species Conservation Program (MSCP). Under this concept, water stored 
offstream one year could potentially be used to meet fish and wildlife 
purposes in a later year.
    Comment: The level of environmental compliance proposed by 
Reclamation is inadequate and Reclamation should complete a full 
environmental impact statement (EIS) on the proposed rule as well as 
the entire operation of the Colorado River.
    Response: The programmatic environmental assessment (PEA) was 
prepared to identify and clarify issues, describe the level of 
environmental impacts associated with implementation of the proposed 
rule, and to determine whether to prepare a Finding of No Significant 
Impact (FONSI) or to prepare an Environmental Impact Statement (EIS). 
Compliance for each Storage and Interstate Release Agreement will 
reference and tier off from the PEA for this rule. Based on the 
analysis in the PEA, consultation and coordination with the Fish and 
Wildlife Service, and public input and comments, we have concluded that 
implementation of the proposed rule will not have a significant effect 
on the human environment. As a result, a FONSI has been prepared to 
complete NEPA compliance for the rule.
    As explained previously, this rule develops a framework that the 
Secretary will utilize in reviewing and evaluating whether to execute a 
specific transaction for offstream storage of Colorado River water 
under a Storage and Interstate Release Agreement. This rule does not 
increase nor abrogate the existing authority of the Secretary. When the 
storing and consuming entities enter into negotiations with the 
Secretary for the development of a Storage and Interstate Release 
Agreement, the Secretary will have the specific details needed to 
determine the potential impacts of the proposed action and can then 
determine the appropriate level of NEPA compliance required for that 
action.
    In addition, the Department believes the preparation of an EIS on 
the entire operation of the Colorado River is not required. Movement of 
water will be through existing facilities on the Colorado River and is 
within the current and projected routine operations of the lower 
Colorado River. Thus, it is not necessary to complete a comprehensive 
EIS on river operations.
    Comment: Implementation of the rule may potentially impact fish and 
wildlife resources along the Colorado River downstream from Lake Mead.
    Response: The DPEA evaluated the potential impact to fish and 
wildlife resources for a proposed scenario in which 1.2 maf would be 
stored in Arizona under a Storage and Interstate Release Agreement to 
allow an authorized entity in Nevada to meet its future water needs. 
The effects of placing Colorado River water in offstream storage were 
evaluated at two incremental storage rates, 100 kaf/year and 200 kaf/
year with future development of ICUA and the associated release of 
water from Lake Mead limited to a maximum of 100 kaf, in accordance 
with Arizona law, in any year.
    No significant impacts were identified on fish and wildlife 
resources as a result of this analysis. Consultation with the Fish and 
Wildlife Service concluded that fluctuations in water surface 
elevations associated with the most likely case storage and retrieval 
scenarios are not likely to adversely affect listed species or their 
designated critical habitat.

Economic Impacts of the Rule

    Comment: The Initial Regulatory Flexibility Analysis states that 
the future cost burden of obtaining alternative supplies for Southern 
California water users is not attributable to or the result of the 
proposed rule. The rule may reduce the quantity of Colorado River water 
available for diversion to Southern California that is apportioned for 
consumptive use in Arizona and/or Nevada but not consumed in those 
States, making California expend funds sooner than planned to obtain 
alternative water supplies.
    Response: Absent the rule, each Lower Division State may store its 
unused basic apportionment and surplus apportionment offstream for 
future intrastate use. Arizona is currently taking all of the 2.8 maf 
basic apportionment of Colorado River water available for use in 
Arizona. Therefore, the only water that California may no longer be 
able to use is Nevada unused basic apportionment. Nevada's consumptive 
use was 245.3 kaf in 1998, resulting in 54.7 kaf of unused 
apportionment. Projections show Nevada utilizing its full basic 
apportionment by 2007. This rule may impact southern California in that 
it enables Nevada to store its declining quantity of unused 
apportionment in Arizona for the short period it may be available. To 
the extent surplus is available during this time, impacts on California 
are lessened. In the long run, the rule should have little net impact 
on the expenditure of funds by California water users to obtain 
alternative water supplies.
    We reiterate that California must reduce its reliance on the 
Colorado River by conserving water or obtaining alternative water 
sources. California must continue moving forward in its efforts to 
implement a California 4.4 Plan to live within the 4.4 maf of Colorado 
River water apportioned for use in California and this rule will add 
flexibility that may be of help in implementing the California 4.4 
Plan.
    Comment: Some tribes asserted that the rule allocates to the States 
water that is reserved to the tribes and has a disproportionate, 
significant, and detrimental economic impact on the tribes in the Lower 
Basin.
    Response: We do not agree with this view. Under the rule, only 
water within a State's apportionment that is not used by entitlement 
holders within that State may be stored offstream for interstate 
purposes. Nothing in this rule precludes

[[Page 58994]]

any entitlement holder, including a Tribe, from using its Colorado 
River water entitlement. The potential effects of the proposed measures 
on the environment, the economy, and trust resources are among the 
factors the Secretary will consider when evaluating the Storage and 
Interstate Release Agreement. This review process will help ensure that 
tribal rights will be protected under this regulation.
    Comment: The Benefit-Cost Analysis shows that the overall impact of 
the proposed rule is not significant. Please explain how this was 
determined and what the threshold was or refer the reader to a specific 
page of the Benefit-Cost Analysis for the information.
    Response: The threshold for whether a proposed rule is significant 
is defined in both the Small Business Regulatory Enforcement Fairness 
Act and the Unfunded Mandates Reform Act of 1995. The Benefit-Cost 
Analysis reflects that the proposed rule is not a major rule (impacts 
are not significant) because the economic impact upon the regional and 
United States economy in any one year does not exceed the threshold; 
i.e., it is never greater than or equal to $100 million. However, even 
though the rule does not have a significant annual economic effect on 
the economy, it is still considered a significant rule because it 
raises novel legal or policy issues. See pages 38-42 and 44-46 of the 
Benefit-Cost Analysis to see the findings that led to the determination 
of no significant economic impact.
    Comment: The Executive Summary of the Benefit-Cost Analysis refers 
to two water supply models, ``A70'' and ``P80.'' To better understand 
the potential effects of both A70 and P80 criteria, state the water 
supply benefits resulting from the P80 criterion and indicate the 
incremental quantity of additional surplus water made available under 
P80.
    Response: The benefit-cost analysis shows that the benefits of 
AWBA's banking program are smaller under P80 (a more liberal surplus 
criterion that will tend to increase the risk of shortages) than A70 (a 
more conservative surplus criterion that will tend to reduce the risk 
of shortages). Under P80 surplus criteria, it is more likely that all 
valid water demands within the Lower Division States will be met from 
instream flows. Therefore, demand for ICUA by a Consuming State is 
lower than under A70. Total net economic benefits for the study period 
(1998-2017) at the regional level are shown at the bottom of page 2 of 
the executive summary for the Benefit-Cost Analysis. Because surplus 
conditions are likely to continue for several years, we did not further 
analyze that alternative in the Biological Assessment (BA) that we 
prepared for the proposed rule.
    Comment: There were a number of editorial comments on the Benefit-
Cost Analysis and the Initial Regulatory Flexibility Analysis.
    Response: We have reviewed and considered the comments submitted by 
a water district and have adopted many of the suggestions into the text 
of the final Benefit-Cost Analysis and the final Regulatory Flexibility 
Analysis.
    Comment: Some tribes commented that allowing States to use ``unused 
tribal water'' and imposing limitations on the tribes'' ability to use 
their reserved water potentially interfere with the tribes' protected 
property rights.
    Response: We do not agree with this statement. All Colorado River 
water available to the Lower Division States is apportioned for use in 
the individual States. Any water within a State's apportionment that is 
unused by tribes or non-Indian entitlement holders is available to 
junior entitlement holders in that State under the Secretary's priority 
system for the Colorado River. Only water that is not used by 
entitlement holders is eligible to be used for an interstate 
transaction under this rule. Thus, there is no interference with tribal 
property rights.
    Comment: One tribe asserted that the tribes' lack of opportunity to 
participate in interstate transactions on the same basis as the States 
under the rule violates Title VI of the Civil Rights Act of 1964, which 
states that ``No person in the United States shall, on the ground of 
race, color or national origin, be excluded from participation in, be 
denied the benefits of, or be subjected to discrimination under any 
program or activity receiving Federal financial assistance.''
    Response: We do not agree that the tribes will be denied an 
opportunity to participate under this rule or that this rule results in 
discrimination within the meaning of the Civil Rights Act. We will 
require that all entitlement holders, whether tribal or non-tribal, are 
treated equally under the rule. We will monitor efforts by the States 
and authorized entities to extend benefits to the tribes under this 
rule and will, in the future, assess whether we need to review or 
revise this rule to provide additional opportunities to the tribes.

Public Comments on Proposed Rule and Responses on Specific 
Provisions

    The following section presents public comments on the proposed rule 
that apply to specific provisions in the rule.

Comments Concerning the Title of the Rule

    Comment: The title of the rule should not mention the ``redemption 
of storage credits'' because this term lack clarity and is ambiguous. 
The rule should provide that Colorado River water stored offstream 
under an Interstate Storage Agreement (now termed a ``Storage and 
Interstate Release Agreement'') will be used in the State in which the 
water is stored and that the Secretary will release ICUA rather than 
deliver storage credits.
    Response: We agree with the concept suggested by several State 
agencies, a water district, and a water authority and have modified the 
title to read, ``Offstream Storage of Colorado River Water and 
Development and Release of Intentionally Created Unused Apportionment 
in the Lower Division States.''

Comments Concerning Sec. 414.1--Purpose

    Comment: The purpose section should not use terminology that is 
vague and implies that a Storing State will create and redeem storage 
credits because the Colorado River water that is stored offstream will 
always belong to the Storing State. Amend the language to establish the 
intent that Storage credits will be redeemed in the State in which 
water will be stored and the Secretary will release ICUA rather than 
deliver storage credits under an Interstate Storage Agreement (now 
termed a ``Storage and Interstate Release Agreement'').
    Response: We have adopted the suggestions from several State 
agencies, a water district, and a water authority to describe the 
proposed transactions under this rule in terms that are clear and 
unambiguous. In lieu of developing and redeeming storage credits, we 
have changed this rule to reflect that the Secretary will release ICUA 
to consuming entities under Storage and Interstate Release Agreements.
    Comment: Because the Secretary's approval of Interstate Storage 
Agreements (now termed ``Storage and Interstate Release Agreements'') 
could delay approvals, the Secretary's authority for the Department's 
responsibilities under the rule should be delegated to Reclamation, 
subject to the right to appeal the Regional Director's decisions 
through the Department.
    Response: Under the rule, the Secretary will not approve the 
Storage and Interstate Release Agreement but will instead be a party to 
the agreement. The rule provides that the Regional Director for the 
Bureau of Reclamation's Lower Colorado Region (Regional

[[Page 58995]]

Director) shall have the authority to develop, negotiate, and execute a 
Storage and Interstate Release Agreement on behalf of the Secretary.
    Comment: The rule should use precise terminology that cannot be 
interpreted in ways that are contrary to existing law. The rule should 
contain a narrative that states the actions contemplated under this 
rule are deemed within the authority of the Secretary under the Law of 
the River and that the rule does not change or expand the Secretary's 
authorities. This narrative should emphasize the intent of the rule is 
to provide for more efficient use of unused apportionment and surpluses 
within the ``Law of the River.''
    Response: We revised this rule in several places to clarify the 
intent. In addition, we agree with the suggestion from several State 
agencies and clarified the rule to state that it does not change or 
expand the Secretary's authority under the Law of the River. This rule 
only formalizes the existing authority of the Secretary to develop, 
negotiate, and execute Storage and Interstate Release Agreements and 
does not expand or create this authority. As stated in the preamble to 
the proposed rule that was published on December 31, 1997, this rule 
will increase the efficiency, flexibility, and certainty in Colorado 
River management.

Comments Concerning Sec. 414.2--Definitions

    Comment: As addressed above in the discussion of general issues, 
the most frequently mentioned comment was regarding the definition for 
the term ``authorized entity.''
    Response: As discussed previously under general issues, we have 
changed the definition of ``authorized entity'' to consist of two 
parts, with different definitions for Consuming States and Storing 
States. Please refer to that discussion. As a result of receiving 
differing comments on the definition of authorized entity and several 
other technical matters, we reopened the comment period for a 30-day 
period. We requested interested parties to provide comments on three 
specific questions. We received 10 letters from 11 respondents during 
the reopened comment period. The respondents included three State 
agencies, three water districts, one water authority, one water users 
association, and three environmental organizations. We reviewed and 
analyzed all comments and revised the rule based on these comments. 
Please refer to that discussion.
    Comment: Modify the rule to include the definitions for ``Colorado 
River Basin'' and ``Colorado River System'' as defined and used in the 
Colorado River Compact.
    Response: We have adopted these suggestions from a State agency and 
included these definitions in this rule.
    Comment: Modify the definition of ``Consuming State'' to clarify 
that this means the State where ICUA is or will be used.
    Response: This suggestion from several entities, including State 
agencies, was adopted to clarify the actual way the proposed water 
transactions will work.
    Comment: The narrative in the preamble for the proposed rule 
incorrectly attributed the definition of ``consumptive use'' to the 
Colorado River Compact of November 24, 1922.
    Response: We agree with several State agencies, a water authority, 
and a water district that the definition was incorrectly attributed to 
the Compact. As the respondents explained, the term ``consumptive use'' 
is defined by Articles I(A) and I(C) of the Decree.
    Comment: Modify the definition of ``Interstate Storage Agreement'' 
(now termed a ``Storage and Interstate Release Agreement'') to delete 
reference to ``redemption of storage credits'' and make other changes 
consistent with the incorporation of changes to other definitions.
    Response: We agree with the suggestions from several entities, 
including State agencies, that the definition should emphasize that the 
Storage and Interstate Release Agreement provides terms for offstream 
storage of Colorado River water by a storing entity, the subsequent 
development of ICUA by the Storing State consistent with the laws of 
the Storing State, a request by the storing entity to the Secretary to 
release ICUA to the consuming entity, and the release of ICUA by the 
Secretary to the consuming entity.
    Comment: The definition for ``Interstate Storage Agreement'' (now 
termed a ``Storage and Interstate Release Agreement'') in the proposed 
rule states that the agreement may include other entities determined to 
be appropriate to the performance and enforcement of the agreement 
without indicating who those entities might be or who makes the 
determination that their inclusion is appropriate.
    Response: This rule has been revised to clarify that the decision 
to include other entities will be determined by the consuming and 
storing entities and the Secretary during the negotiation of a Storage 
and Interstate Release Agreement.
    Comment: Delete the term ``storage credit'' from the proposed rule 
as it lacks clarity.
    Response: We have adopted this change, suggested by several 
entities, including State agencies, a water authority, and a water 
district.
    Comment: Modify the definition of ``Storing State'' to clarify that 
water stored offstream under an Interstate Storage Agreement (now 
termed a ``Storage and Interstate Release Agreement'') will be used in 
the Storing State in place of water within the Storing State's 
apportionment that the Storing State otherwise would have diverted from 
the mainstream.
    Response: We have modified the definition of Interstate Storage 
Agreement and renamed it ``Storage and Interstate Release Agreement'' 
in this rule. The modified definition reflects that water stored 
offstream under a Storage and Interstate Release Agreement will be used 
in the Storing State.
    Comment: Delete the definition of ``unused apportionment'' and in 
its place, insert definitions for ``unused basic apportionment'' and 
``unused surplus apportionment.'' The intent of the suggestion is to 
clarify that, with the determination of a water supply condition by the 
Secretary, a State is receiving either a normal, surplus, or shortage 
apportionment. Also, revise the definition to clarify that to be 
unused, the water otherwise would not have been diverted and that water 
conserved or saved through an agreement between two entitlement holders 
is eligible for storage.
    Response: The Department did not adopt these changes that were 
suggested by a water district. The AOP determines whether a State is 
receiving a normal, surplus, or shortage apportionment, and that 
decision is unaffected by this rule. Also, only water that is not used 
by entitlement holders in the applicable State's priority system for 
purposes other than storage for use in interstate transactions is 
eligible for storage for use in interstate transactions under this 
rule.
    Comment: Delete the term ``unused entitlement'' from the proposed 
rule.
    Response: We have adopted this change, suggested by several 
entities, including State agencies and a water district.

Comments Concerning Sec. 414.3--Storage and Interstate Release 
Agreements and Redemption of Storage Credits

    Comment: As discussed earlier under Purpose, there should be a 
statement that the actions contemplated under this rule are within the 
Secretary's authority

[[Page 58996]]

under the Law of the River and that it is not the intent of this rule 
to change or expand the Secretary's authorities. This narrative should 
also emphasize an intent to provide for more efficient use of unused 
apportionment and surpluses within the ``Law of the River'' but specify 
that water users in the Lower Division States must plan to live within 
the apportionments made to them under the ``Law of the River.''
    Response: We agree with this suggestion from a State Agency to 
clarify that this rule is deemed to be within but does not expand the 
Secretary's authority. The preamble to this rule includes a section to 
provide further explanation of the purpose of this part. This rule is 
not intended to change or expand the Secretary's authorities under the 
``Law of the River.'' This rule is intended to facilitate more 
efficient use of unused apportionment and surpluses within the ``Law of 
the River'' in the Lower Division States.
    We also believe that this rule, in conjunction with the 
implementation of the California 4.4 Plan and the development of 
surplus criteria, will provide a framework for the Lower Division 
States to hold consumption within the apportionments available for use 
within those States.
    Comment: Conform this section of the rule with previous changes 
that delete the reference to the term, ``redemption of storage 
credits.''
    Response: We have adopted this change, suggested by several 
entities, including State agencies, a water authority, and a water 
district. As discussed previously, this rule will provide for offstream 
storage of Colorado River water in a Storing State, the subsequent 
development of ICUA by the storing entity for release by the Secretary 
to a consuming entity, and the recovery of the stored water for use in 
the Storing State.
    Comment: Delete the reference to Article II(B)(6) of the Decree in 
the first sentence under Sec. 414.3(a) because the Decree does not cite 
a legal authority for entering into Interstate Storage Agreements (now 
termed ``Storage and Interstate Release Agreements'').
    Response: We agree that ``Storage and Interstate Release 
Agreements'' are not referenced in the Decree and have modified 
Sec. 414.3(a) of the rule. However, Article II(B)(6) of the Decree 
provides authority for the Secretary to (1) make an annual 
determination under this rule of the availability of ICUA and (2) 
release any such water in accordance with the terms of a Storage and 
Interstate Release Agreement.
    Comment: Delete the last sentence of Sec. 414.3(a), that reads, 
``An Interstate Storage Agreement (now termed an ``Storage and 
Interstate Release Agreement'') will allow a storing entity 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.''
    Response: We agree with this comment from a State agency and have 
modified this rule to incorporate this change.
    Comment: A senior priority holder in California should not be 
allowed to agree to make available unused apportionment for storage in 
another State without first obtaining the agreement of California's 
junior priority holders.
    Response: Under this rule, only water that is unused by all 
entitlement holders in the applicable State's priority system is 
eligible for storage by an authorized entity for use in an interstate 
transaction.
    Comment: One respondent noted that its contract with the Secretary 
allows it to request Reclamation to approve an exchange, lease, or 
transfer of its water entitlement. The respondent further stated its 
intent to pursue interstate marketing opportunities and position its 
Colorado River water supply as an unused apportionment that may be 
released annually for use in the other Lower Division States under the 
Decree.
    Response: The Department recognizes that the entitlement holder's 
contract allows it to request approval of an exchange, lease, or 
transfer and notes that any change in the place of use or type of use 
of the entitlement is subject to the Secretary's approval. The 
development of ICUA under a Storage and Interstate Release Agreement 
may involve the exchange, lease, or transfer of Colorado River water 
under an individual entitlement holder's contract. Any such exchange, 
lease, or transfer would be subject to Secretarial approval unless the 
entitlement holder's contract specifies otherwise. Moreover, to 
participate under this rule as an authorized entity in a Storing State, 
that entity must be expressly authorized under State law.
    Comment: The rule should be modified to allow authorized entities 
in California and Nevada to have equal access to store that portion of 
Arizona's Colorado River apportionment that is not otherwise put to use 
by entitlement holders within Arizona. Also, authorized entities in 
California and Nevada should have equal access to the quantity of ICUA 
that Arizona will make available to consuming entities when those 
entities request it.
    Response: We recognize these concerns expressed by a State agency 
and a water district but do not believe it is appropriate to establish 
an allocation method in this rule. Storage and Interstate Release 
Agreements are voluntary interstate water transactions. The Secretary 
will not require authorized entities of one State to enter into Storage 
and Interstate Release Agreements with authorized entities in another 
State. We encourage each storing entity to consider the needs of all 
consuming entities under prospective Storage and Interstate Release 
Agreements.
    Comment: Modify Sec. 414.3(a) to allow a more general description 
of the entities by which Colorado River water will be stored and the 
storage facilities in which it will be stored.
    Response: We did not accept this recommendation. It is necessary to 
clearly identify the actual entity that will store Colorado River water 
under the Storage and Interstate Release Agreement and the facility 
where it will be stored so that a thorough review of the impacts of the 
storage on environmental and trust resources can be performed.
    Comment: Specify in Sec. 414.3(a) that the water to be stored will 
be within the basic apportionment or the surplus apportionment of the 
Storing State or unused basic apportionment or unused surplus 
apportionment of the Consuming State. Any unused apportionment of the 
Consuming State may only be made available by the Secretary to the 
Storing State under Article II(B)(6).
    Response: We agree with this suggestion from several State agencies 
and a water district, and have modified this rule to incorporate this 
change.
    Comment: Specify in Sec. 414.3(a) the maximum quantity of ICUA that 
will be available for release to the consuming entity under the 
agreement.
    Response: We agree with this suggestion from several State 
agencies, a water authority, and a water district. We have modified 
this rule to incorporate this change.
    Comment: Specify in Sec. 414.3(a), by January 31, the maximum 
quantity of ICUA that will be available for release and delivery to the 
consuming entity under the Interstate Storage Agreement (now termed a 
``Storage and Interstate Release Agreement'') in that current year.
    Response: We did not accept this suggestion from a water district. 
The rule leaves the determination of this detail to the Storage and 
Interstate

[[Page 58997]]

Release Agreement that will be negotiated among the parties to that 
agreement. Further, this subject involves accounting matters that are 
set forth in Sec. 414.4.
    Comment: Specify in Sec. 414.3(a) that the consuming entity may not 
request ICUA in a quantity that exceeds the quantity of water then in 
storage under an Interstate Storage Agreement (now termed a ``Storage 
and Interstate Release Agreement'') in the Storing State. Several 
respondents suggested deleting the statement from the proposed rule 
that water then in storage under an Interstate Storage Agreement (now 
termed a ``Storage and Interstate Release Agreement'') may not be 
recovered within the same calendar year in which the water was stored 
offstream. Another respondent suggested retaining this statement.
    Response: We agree with the suggestion from several State agencies, 
a water authority, and a water district that the Storage and Interstate 
Release Agreement must specify that the consuming entity may not 
request a quantity of ICUA in excess of the quantity of water then in 
storage under a Storage and Interstate Release Agreement. The quantity 
of water stored under a Storage and Interstate Release Agreement serves 
as the basis for the quantity of ICUA that may be developed under the 
Storage and Interstate Release Agreement. This rule allows Colorado 
River entitlement holders in the Storing State the option to use the 
water previously stored under a Storage and Interstate Release 
Agreement, under a direct contract with the Secretary, or under a valid 
subcontract with an entitlement holder authorized to enter into 
subcontracts. However, the rule also allows other means consistent with 
Storing State law to develop ICUA. We do not agree with the suggestion 
from a water district to retain the requirement that water stored under 
a Storage and Interstate Release Agreement may not be recovered within 
the same year the water is stored offstream. The parties may agree to 
permit the consuming entity to request and receive ICUA during the same 
year water is stored under a Storage and Interstate Release Agreement. 
However, the applicable law of the Storing State may not permit a 
consuming entity to request the delivery of a quantity of ICUA that 
exceeds the quantity of unused apportionment that was stored offstream 
for that consuming entity under a Storage and Interstate Release 
Agreement as of the end of the prior year.
    Comment: Modify Sec. 414.3(a) to specify that, by a date certain to 
be specified in the Interstate Storage Agreement (now termed a 
``Storage and Interstate Release Agreement''), the consuming entity 
will provide notice to the Lower Division States and to the Secretary 
of its request for a specific quantity of ICUA in the following 
calendar year.
    Response: We agree with this suggestion from two State agencies and 
a water authority and have modified this rule to incorporate this 
intent. The revised provision is now renumbered Sec. 414.3(a)(7). The 
rule will allow the parties and the Secretary to reach a mutually 
acceptable date for the notice in the Storage and Interstate Release 
Agreement.
    Comment: Modify Sec. 414.3(a) to specify that the date when the 
consuming entity will provide notice to the Lower Division States and 
to the Secretary will be the later of (i) November 30 or (ii) within 45 
days after the AOP has been transmitted to the Governors of the 
Colorado River Basin States. This change will allow more flexibility in 
case the AOP is not transmitted by the Secretary to the Governors 
before November 30, as has occurred sometimes in the past.
    Response: We did not incorporate this suggestion from a water 
district into this rule. It is possible that the processes for the 
Secretary to send the AOP to the Governors and the Colorado River 
entitlement holders to complete their annual water orders may not be 
completed until late in the year, beyond November 30. However, we agree 
with several respondents that the date when the authorized entity is to 
provide notice is better incorporated into the Storage and Interstate 
Release Agreement.
    Comment: Modify Sec. 414.3(a) to clarify that a storing entity, 
after receiving a notice of a request for a specific quantity of ICUA, 
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 the requested quantity of ICUA to be released for use in the 
Consuming State.
    Response: We agree with this suggestion from a State agency, a 
water authority, and a water district and have modified this rule to 
incorporate this change. The revised provision is now renumbered 
Sec. 414.3(a)(8).
    Comment: Modify Sec. 414.3(a) to provide that the Interstate 
Storage Agreement (now termed a Storage and Interstate Release 
Agreement will specify which types of actions may be taken in the 
Storing State to develop ICUA.
    Response: We agree with this suggestion from a State agency, a 
water authority, and a water district and have modified this rule to 
incorporate this change. The modified rule also requires the storing 
entity to specify the means by which the development of the ICUA will 
be enforceable by the storing entity. The revised provision is now 
renumbered Sec. 414.3(a)(9).
    Comment: The rule should be modified to specify that an Interstate 
Storage Agreement (now termed a ``Storage and Interstate Release 
Agreement'') will require the storing entity to certify that ICUA is 
developed that otherwise would not exist and to specify the quantity, 
the means, and the entity by which the unused apportionment will be 
developed.
    Response: We agree with this suggestion by a State agency, a water 
authority, and a water district and have modified and renumbered this 
provision Sec. 414.3(a)(10) to incorporate this change into this rule. 
We do not agree with the comment from a State agency that it is 
necessary to specify the procedure by which certification is provided 
to the Secretary. However, the Secretary and the authorized entities 
may specify the certification procedure in the Storage and Interstate 
Release Agreement if they so choose.
    Comment: The rule should provide guidance as to how the development 
of ICUA will be verified.
    Response: We agree with the suggestion from a State agency and a 
water authority that this rule should require a Storage and Interstate 
Release Agreement to specify a procedure for verification of the ICUA 
appropriate to the manner in which it is developed. This rule has been 
modified to incorporate this requirement into a new Sec. 414.3(a)(11). 
In addition, a new Sec. 414.3(a)(6) was included in this rule to 
require the Storage and Interstate Release Agreement to specify a 
procedure for verification of the quantity of water stored in the 
Storing State under a Storage and Interstate Release Agreement. 
Further, Sec. 414.3(a)(10) specifies that the storing entity must 
certify to the Secretary that ICUA has been or will be developed that 
would not otherwise exist. The Secretary may use independent means to 
verify the existence of ICUA.
    Comment: The Secretary should review the water orders and release 
the AOP before actions are taken to develop or release ICUA.
    Response: We do not agree with this suggestion from a State agency. 
The respondent raised a concern that this rule might allow a storing 
entity to increase its water order to include the quantity of requested 
ICUA. The authorized entity could then decrease its order, pump ground 
water or release

[[Page 58998]]

surface water that it otherwise would have used anyway, claim credit 
for developing ICUA, and receive payment for actions it would not have 
taken. We do not believe it is necessary for the consuming entity to 
postpone its request for ICUA until after the annual water orders and 
the AOP are completed. We believe that information on water orders 
should be shared openly and up front in the interest of better regional 
cooperation. The open nature of these water schedules will help ensure 
that an initial water order is legitimate and that it is not 
intentionally increased in order that a Storing entity could get credit 
for ICUA without taking the actions necessary to develop that ICUA.
    Comment: Modify Sec. 414.3(a) to include a requirement for the 
storing entity to provide evidence that the stored water has not 
migrated out of the State, out of the United States, to a saline sink, 
or returned to the mainstream.
    Response: We do not agree with the comment from a water district 
that this provision is necessary in this rule. We will require full 
environmental compliance on all Storage and Interstate Release 
Agreements and will consider the potential migration of ground water 
storage when evaluating the effects of storage on the environment and 
trust resources.
    Comment: Modify Sec. 414.3(a) to clarify that the parties to the 
Interstate Storage Agreement (now termed a ``Storage and Interstate 
Release Agreement'') other than the United States will indemnify the 
United States from actions taken by parties to the agreement other than 
the United States, not for the broader actions of the United States.
    Response: We agree that the United States is covered by the Federal 
Tort Claims Act and other laws and have revised this paragraph, now 
designated Sec. 414.3(a)(16), to incorporate this comment by a water 
district and an irrigation district.
    Comment: The Department should protect the water in Indian tribes' 
ground water basins by not allowing the storage or recovery of water 
from ground water basins that are hydraulically connected to the 
tribes' ground water basins.
    Response: The Department acknowledges its obligation to protect 
tribal resources. Section 414.3(b) provides that the Secretary will 
consider potential effects on trust resources and entitlement holders, 
which include Indian tribes with rights to the use of Colorado River 
water, in considering, participating in, and administering a Storage 
and Interstate Release Agreement.
    Comment: Modify the following elements of Sec. 414.3(b), now 
renumbered Sec. 414.3(c), to require the Secretary to notify the public 
of a request to approve an Interstate Storage Agreement (now termed a 
``Storage and Interstate Release Agreement''), provide a more 
definitive time for the Secretary to respond to the request, provide 
for execution of necessary contracts to authorize the diversion and use 
of Colorado River water, and provide an appeals process.
    Response: We have modified the rule to provide in Sec. 414.3(a) 
that the Secretary will be a party to a Storage and Interstate Release 
Agreement. We modified Sec. 414.3(c) to specify that the Regional 
Director for the Bureau of Reclamation's Lower Colorado Region 
(Regional Director) shall have the authority to negotiate, execute, and 
administer a Storage and Interstate Release Agreement on behalf of the 
Secretary. The rule does not provide for an appeal of the Regional 
Director's decision whether to execute a particular Storage and 
Interstate Release Agreement. The necessity of contracts to authorize 
the diversion of water under a Storage and Interstate Release 
Agreement, except for storage of Article II(D) (of the Decree) water by 
Federal or tribal entitlement holders, is addressed in Sec. 414.3(e) of 
the rule. The rule allows for the storage of Colorado River water 
either through a direct contract with the Secretary or through a valid 
subcontract with an entitlement holder authorized by the Secretary to 
enter into such subcontracts. The Storage and Interstate Release 
Agreement to which the Secretary will be a party satisfies the Section 
5 requirement for the release or diversion of ICUA to the consuming 
entity in the Consuming State.
    Comment: Amend Sec. 414.3 (c) to conform the wording to other 
changes made that delete use of the term ``redemption of storage 
credits.''
    Response: We agree with the suggestions from several State 
agencies, a water authority, and a water district, and have modified 
this rule to more clearly describe the intent of the Storage and 
Interstate Release Agreements. The revised wording specifies that, 
after receiving a notice of a request for release of ICUA, the storing 
entity will certify to the Secretary that sufficient water has been 
stored for the Storing State to support the development of the 
requested quantity of ICUA. The revised paragraph is designated 
Sec. 414.3(a)(10).
    Comment: Amend Sec. 414.3(d) to conform the wording to other 
changes that delete use of the term redemption of storage credits. 
Also, specify that ICUA is available only for use by the consuming 
entity.
    Response: We agree with the suggestions from several State 
agencies, a water authority, and a water district and has modified this 
rule to more clearly describe the intent of the Storage and Interstate 
Release Agreements. The revised wording substitutes the term 
``intentionally created unused apportionment'' (``ICUA'') for the less 
definitive term ``redemption of storage credits.'' In addition, the 
revised rule clarifies that ICUA will be released only for use by the 
consuming entity.
    Comment: The rule should provide for a contractual commitment by 
the Secretary to release to a consuming entity ICUA that exists as a 
consequence of implementation of the Interstate Storage Agreement.
    Response: We modified the rule in Sec. 414.3(a) to provide that the 
Secretary will be a party to Storage and Interstate Release Agreements. 
Sections 414.3(a)(12) through 414.3(a)(15) provide, among other things, 
that the Secretary will commit in the Storage and Interstate Release 
Agreement to release ICUA but only if all necessary actions are taken 
under the rule, if all laws and executive orders have been complied 
with, and if the Secretary has first determined that ICUA has been 
developed or will be developed by a storing entity.
    Comment: A Federal agency has commented as to whether actual 
storage of Colorado River water must take place in those instances 
where both storage and recovery take place in the same year.
    Response: The rule does allow for the release and delivery of ICUA 
in the same year in which it is developed. Consistent with the laws of 
the storing state, if recovery and development occur in the same year, 
and section 414.3(f) (Anticipatory Release of ICUA) is invoked, the 
Secretary will not require actual storage of water subsequent to the 
release of ICUA.

Comments Concerning Sec. 414.4--Reporting Requirements and Accounting 
Under Storage and Interstate Release Agreements

    Comment: Amend Sec. 414.4 to provide more flexibility in the 
reporting date and to clarify the intent that water stored under an 
Interstate Storage Agreement (now termed a ``Storage and Interstate 
Release Agreement'') will be recovered and used in the State in which 
water will be stored and it will be ICUA water rather than credits that 
the Secretary will release under an Interstate Storage Agreement (now 
termed a ``Storage and Interstate Release Agreement''). The language 
should reference the Interstate Storage

[[Page 58999]]

Agreements (now termed ``Storage and Interstate Release Agreements'') 
that establish the basis for the accounting for the water to be 
released by the Secretary for use in the Consuming State.
    Response: We agree with this suggestion from several State 
agencies, a water authority, and a water district, and have revised 
this rule to more clearly describe the intent of the Storage and 
Interstate Release Agreements. The reporting date was made more 
flexible by allowing the date to be agreed upon by the parties to the 
Storage and Interstate Release Agreement and specified in the Storage 
and Interstate Release Agreement. To be consistent with other changes 
made in this rule, this provision refers to the water stored under a 
Storage and Interstate Release Agreement as water that is available to 
the storing entity. The Secretary will account for water stored under a 
Storage and Interstate Release Agreement and available to support the 
development of ICUA. The Secretary will release ICUA for use by a 
consuming entity when the provisions of this rule and the Storage and 
Interstate Release Agreement have been satisfied.
    Comment: It is not clear how the ``cut to the aquifer'' or losses 
from storage or transportation are determined or if they are arbitrary 
or based on actual data. It is not clear whether this detail is 
specific to a State's regulation or the Interstate Storage Agreement 
(now termed a ``Storage and Interstate Release Agreement'').
    Response: A storing entity will determine how much stored water 
must remain in an aquifer based on the Storing State's applicable law 
and/or the policy of the authorized entity. In Arizona, that decision 
is based on State law which requires that 5 percent of water placed in 
offstream storage remain in the ground to replenish the aquifer. The 
authorized entity will determine, consistent with applicable State law, 
how much stored water can be recovered when that authorized entity 
decreases its diversions and consumptive use of Colorado River water in 
the future to develop ICUA that the Secretary will release for use by a 
consuming entity.

Comments Concerning Sec. 414.5--Water Quality

    Comment: Modify Sec. 414.5(a) to clarify that the interstate 
agreements referred to are Interstate Storage Agreements (now termed 
``Storage and Interstate Release Agreements''). Clarify which water is 
being referred to and recognize the Secretary's responsibilities under 
the Colorado River Basin Salinity Control Act.
    Response: We agree with these suggestions from several State 
agencies, a water authority, and a water district, and have modified 
Sec. 414.5(a). This rule clarifies that the referenced agreements are 
Storage and Interstate Release Agreements. In addition, the last 
sentence of Sec. 414.5(a) was modified to qualify that the United 
States has no obligation to construct or furnish water treatment 
facilities to maintain or improve water quality except as otherwise 
provided in relevant Federal law. Implementation of this rule will not 
modify the Secretary's responsibilities under the Colorado River Basin 
Salinity Control Act of June 24, 1974 (88 Stat. 266).

Comments Concerning Sec. 414.6--Environmental Compliance and Funding of 
Federal Costs

    Comment: Modify Sec. 414.6(b) to clarify that the interstate 
agreements referred to are Interstate Storage Agreements (now termed 
``Storage and Interstate Release Agreements'') and that the costs 
incurred by the United States in evaluating, processing, and approving 
an Interstate Storage Agreement (now termed a Storage and Interstate 
Release Agreement'') will be funded by the parties to that agreement.
    Response: We agree with these suggestions from several State 
agencies, a water authority, and a water district, and have modified 
Sec. 414.6(b) to require that the authorized entities that are parties 
to a Storage and Interstate Release Agreement must fund the United 
States costs of considering, participating in, and administering that 
agreement.

Public Comments on DPEA and Responses

    The following is a discussion of the comments received on the DPEA 
and our responses. This section includes comments on the scope of the 
DPEA, Secretarial discretion, adequacy of the environmental assessment, 
potential effects on plants and wildlife, water available for instream 
flows and habitat enhancement, concerns over deliveries to Mexico, 
efficiency improvements, storage alternatives, consultations, sunset 
clause, economic impacts of the rule, effects on ground water storage, 
and general comments.

Scope of the DPEA

    Comment: The description of proposed interstate transactions in the 
draft programmatic environmental assessment is overly broad and the 
draft environmental assessment is therefore unnecessarily broad in its 
scope.
    Response: We recognize, from comments on the proposed rule and 
DPEA, that prospective transactions are not described the way 
prospective authorized entities will intend them to work. Colorado 
River water stored offstream under a Storage and Interstate Release 
Agreement will be available for use in the Storing State. When a 
consuming entity requests water stored under a Storage and Interstate 
Release Agreement, it will receive ICUA, not storage credits. The 
storing entity will take actions to reduce its State's consumptive use 
of Colorado River water, thereby developing ICUA. When the Secretary is 
satisfied that ICUA has been or will be developed, an equivalent 
quantity of ICUA will be released by the Secretary for use by the 
consuming entity. Based on a reformulation of the prospective 
transactions that may take place under the rule, we believe that the 
final programmatic environmental assessment (FPEA) is appropriate.

Secretarial Discretion

    Comment: Several respondents commented that the rule should not be 
finalized or surplus water stored offstream before the Department 
clarifies exactly what discretion the Secretary has in providing water 
for habitat enhancement and how the proposed rule would affect that 
discretion.
    Response: In the Lower Colorado River area (LCR), the Decree 
apportions surplus among the Lower Division States as follows: 50 
percent to California, 46 percent to Arizona, and 4 percent to Nevada. 
Entities with surplus contracts are currently using surplus and may 
store it offstream for intrastate use without the proposed Rule. We 
recognize that the Secretary's management of the LCR to accommodate 
endangered and sensitive species and their critical habitat is being 
reviewed as part of the MSCP. FWS developed a Reasonable and Prudent 
Alternative (RPA) in the Biological and Conference Opinion (BCO) for 
the current and projected routine operations and maintenance of the 
LCR. The RPA contains a number of provisions, one of which, 13(a), 
addresses the type and extent of the Secretary's discretionary action 
flexibility for all operations and maintenance activities on the 
Colorado River. Reclamation has provided a summary of its discretion to 
FWS. Reclamation complied with RPA provision 13(b) by providing a 
report to FWS on December 30, 1998, that identifies opportunities to 
increase the Secretary's discretion in Colorado River operations in 
order to provide water for fish and wildlife purposes. We believe

[[Page 59000]]

that this rule can be implemented without compromising the MSCP 
process.
    Adequacy of the Environmental Assessment
    Comment: The level of environmental compliance proposed by 
Reclamation is inadequate and Reclamation should complete a 
programmatic EIS on the proposed rule and the entire operation of the 
Colorado River.
    Response: Please refer to the previous discussion of adequacy of 
the environmental assessment under the Environmental Concerns section 
of the Public Comments on Proposed Rule and Responses on General 
Issues.

Potential Effects on Plants and Wildlife

    Comment: Compliance with the ESA for the proposed rule was not 
accomplished through the biological opinions for Central Arizona 
Project (CAP) or Lower Colorado River Operations and Maintenance 
Activity and Reclamation cannot defer them until a later date.
    Response: We do not agree with this view expressed by several 
environmental groups. Reclamation has prepared a biological assessment 
(BA) for the proposed rule and entered into informal consultation with 
FWS. Please refer to the response to the following comment for more 
details about those consultations. Reclamation has incorporated by 
reference into its BA for the proposed rule the 1996 Biological 
Assessment for Description and Assessment of Operations, Maintenance, 
and Sensitive Species of the Lower Colorado River (LCRBA). The LCRBA 
analyzed the potential effects to listed species and designated 
critical habitat from current and projected routine LCR operations and 
maintenance where Reclamation has discretionary involvement or control. 
Reclamation also incorporated by reference FWS's 1997 BCO based on the 
LCRBA. These documents provide the baseline for current and projected 
routine LCR operations. More information on the BA prepared for this 
rule is contained in the next few responses.
    The BCO and prior consultations with FWS for physical facilities 
and water delivery contracts with the Central Arizona Water 
Conservation District and Southern Nevada Water Authority cover the 
effects of both mainstream and offstream areas that would be involved 
in the scope of proposed actions under the rule.
    Comment: The offstream storage and retrieval of water under the 
proposed rule is likely to have adverse direct, indirect, and 
cumulative effects on wildlife and critical habitat, particularly for 
threatened and endangered species.
    Response: We do not agree with the view by several environmental 
groups that proposed actions under the proposed rule will adversely 
affect threatened and endangered species and critical habitat. 
Reclamation has met with FWS and engaged in informal consultations 
under the ESA. In the course of those consultations, Reclamation 
prepared a BA that analyzed the potential effects of operations under 
the proposed rule on listed species and designated habitat in the LCR 
action area. This analysis was based upon the most likely storage and 
retrieval scenarios of water from Lakes Mead or Havasu and associated 
river reaches to obtain ICUA under the proposed rule. At the request of 
FWS, several worst case scenarios were formulated by Reclamation for 
purposes of comparison with Colorado River operations that are most 
likely to occur under the proposed rule. These worst case scenarios 
were given detailed analysis and discussed with FWS but were later 
eliminated because they are not realistic and will not be allowed under 
proposed Storage and Interstate Release Agreements.
    The BA analyzed several scenarios, one of which was a proposed 
action in which 1.2 maf would be stored in Arizona under a Storage and 
Interstate Release Agreement to allow an authorized entity in Nevada to 
meet its future water needs. Maximum conveyance capacity expected to be 
made available on the CAP to store water for interstate water 
transactions is 200 kaf/year. An authorized entity in Nevada will make 
future diversions of water from Lake Mead, in addition to Nevada's 
normal basic and surplus apportionments, to use ICUA released by the 
Secretary. This additional diversion of ICUA will be limited, under 
Arizona law, to a maximum of 100 kaf in any year. The BA analyzed the 
effects of this and other scenarios for storage of Colorado River water 
and future release of ICUA on listed species and their designated 
habitat. Effects to each species were determined for the most likely 
and low probability case scenarios. Habitat requirements for breeding, 
nesting, and foraging of some species are not dependent on the LCR. 
Fluctuations in water surface elevations associated with most likely 
and low probability storage and retrieval scenarios on reservoirs and 
riverine reaches on the LCR are very small and are not likely to 
adversely affect bonytail chub, razorback sucker, Yuma clapper rail, or 
southwestern willow flycatcher. Based upon the available information 
regarding the critical habitats for the razorback sucker and bonytail 
chub, storage and release of ICUA under this rule will not adversely 
modify critical habitat for these fish species. Other listed and 
sensitive species will not be affected by implementation of the rule. 
Reclamation did not consult with FWS on species in Mexico because the 
United States has no authority or discretion regarding Mexico's use of 
its treaty water or flood control releases.
    Reclamation has notified the National Marine Fisheries Service that 
a section 7 consultation for Mexican species under its administration 
is not required.

Water Available for Instream Flows and Habitat Enhancement

    Comment: Concern was expressed that Colorado River stream flows 
downstream from Lake Mead would first increase when water is put into 
storage in Arizona and then decrease in the future as more water is 
diverted from Lake Mead when Nevada recovers stored water.
    Response: No significant changes are expected in stream flows 
downstream from Lake Mead as a result of implementation of a Storage 
and Interstate Release Agreement between Arizona and Nevada under the 
rule. The Biological Assessment for this rule evaluated the effects of 
storage of 100 and 200 kaf/year of Colorado River water in Arizona and 
subsequent diversion in a later year of up to 100 kaf by Nevada from 
Lake Mead. Very small changes in water surface elevations would occur 
in the riverine and reservoir areas below Lake Mead. The largest 
increase or decrease in average monthly water surface elevation when 
storing or using water was 0.12 feet. These changes fall within the 
range of increases and decreases in water surface elevations below Lake 
Mead and Hoover Dam under current river operations.

Concerns over Deliveries to Mexico

    Comment: The DPEA states that a minor reduction will occur in the 
quantity of surplus water available for delivery to Mexico over the 
long term without explaining what a minor reduction is or what studies 
have been done to quantify this.
    Response: Please refer to the previous discussion of adequacy of 
the environmental assessment under the Environmental Concerns section 
of the Public Comments on Proposed Rule and Responses on General 
Issues.
    Comment: Offstream storage of surplus water will decrease the 
likelihood that water from flood control releases will reach the Gulf 
of

[[Page 59001]]

California, thereby reducing the quantity of water that otherwise would 
be available for environmental restoration in the delta.
    Response: Flood control releases are projected to average 788 kaf/
year during the period 1999-2015. Offstream storage could decrease 
flood control releases reaching Mexico by an average of 23 kaf/year 
during this time. The probability of occurrence of flood control 
releases could decrease by 0.83 percent. These decreases fall within 
the range of flood control projections previously consulted on in the 
1996 Biological Assessment of Operations, Maintenance, and Sensitive 
Species of the Lower Colorado River.
    Please refer to the previous discussion of adequacy of the 
environmental assessment under the Environmental Concerns section of 
the Public Comments on Proposed Rule and Responses to General Issues.

Efficiency Improvements

    Comment: Efficiency improvements in river management and the 
storage of Colorado River water in underground aquifers mean less water 
is available for environmental purposes, such as the riparian and 
aquatic ecosystems of the river, including the river and delta region 
in Mexico.
    Response: Please refer to the previous discussion of efficiency 
improvements under Public Comments on Proposed Rule and Responses on 
General Issues.

Storage Alternatives

    Comment: It is not clear what storage options are available under 
the rule, or how the rule would apply if there are changes in Arizona's 
laws or if California or Nevada enact conflicting laws.
    Response: We have modified this rule in response to comments from 
several State agencies, a water district, and a water authority. This 
rule now provides in Sec. 414.3(a)(2) and Sec. 414.6(a)(3), 
respectively, for the storage of basic or surplus apportionment of the 
Storing State, not otherwise put to use by entitlement holders within 
the Storing State, or storage of the unused basic or surplus 
apportionment of the Consuming State. If unused apportionment from the 
Consuming State is to be stored under a Storage and Interstate Release 
Agreement, the rule provides that the Secretary will make that water 
available to the storing entity in accordance with the terms of a 
Storage and Interstate Release Agreement and will not make that water 
available to other entitlement holders. The rule has been drafted to 
apply uniformly to all three Lower Division States and the Department 
will not speculate about potential changes in Arizona's laws or whether 
California or Nevada may enact conflicting laws.
    Comment: Banking in Lake Mead is illegal and it should not be 
listed as an alternative to the rule.
    Response: We do not agree with the comment from a State agency that 
banking in Lake Mead is illegal. Moreover, under NEPA, Reclamation is 
charged with the responsibility to analyze reasonable alternatives, and 
the Department believes that it has appropriately complied with NEPA in 
this regard.
    Comment: The DPEA misstates Arizona law with regard to the ability 
to create ICUA during a shortage year.
    Response: We agree with the comment from a State agency that the 
statement in the DPEA that ``Interstate recovery of storage credits in 
Arizona for California and Nevada will not be allowed in a shortage 
year'' is not accurate. The FPEA has been revised to clarify that AWBA 
has discretion to decide whether it is in Arizona's best interests to 
enter into a Storage and Interstate Release Agreement that would 
require decreased diversions of mainstream water by Arizona during 
years when the Secretary has declared a shortage on the Colorado River.

Consultations

    Comment: The requirement for consultation under the Fish and 
Wildlife Coordination Act is broader than described and consultation is 
required with the State wildlife agencies on an equal footing with FWS.
    Response: We do not agree with this comment from a State agency 
that Reclamation is required to consult with State wildlife agencies. 
Reclamation's responsibility under the Fish and Wildlife Coordination 
Act is to coordinate with FWS who in turn is expected to interface and 
represent fish and wildlife concerns based on, among other things, 
coordination with State game and fish agencies. In addition, the Fish 
and Wildlife Coordination Act requirements will be met through both ESA 
and NEPA consultations. The Fish and Wildlife Coordination Act requires 
Reclamation to consider fish and wildlife resource needs in operation 
and management of water projects.

Sunset Clause

    Comment: The need for a permanent rule was questioned and it was 
suggested that the rule should have a termination date, such as the end 
of the time that storage is anticipated. It was suggested that a sunset 
date will allow the Department an opportunity to do a programmatic 
reevaluation of how the rule is being used.
    Response: We do not agree with the suggestion from a Federal agency 
that there should be a sunset date. Under this rule, a consuming entity 
will be able to enter into Storage and Interstate Release Agreements 
and pay for storage of water that the Storing State will use in the 
future when the consuming entity calls for ICUA. However, there is no 
way to accurately predict the future and unanticipated changes in the 
rate of population growth or the occurrence of droughts or surplus 
conditions will affect how much water can be stored or when ICUA will 
be needed. The parties to a Storage and Interstate Release Agreement 
would not agree to subject any water already in storage to new terms 
and conditions under new rules. A consuming entity that invests 
significant sums of money into funding water storage in a Storing State 
is not likely to agree to subject itself to limited term storage or 
revised terms and conditions for the right to receive ICUA under an 
already signed Storage and Interstate Release Agreement. The storage 
and retrieval period between Arizona and Nevada is projected to run 
from years 1999 to 2030 and may run longer if both California and 
Nevada enter into Storage and Interstate Release Agreements with 
Arizona. Under Arizona law no more than a total of 100 kaf of water 
stored in Arizona may be retrieved by California and Nevada in any 
given year. If Nevada is limited to retrieving a maximum of 50 kaf of 
ICUA from Arizona because California is also retrieving ICUA, the water 
stored under a Storage and Interstate Release Agreement could be 
retrieved at this rate beyond the year 2030.

Economic Impacts of the Rule

    Comment: Some respondents commented that the proposed rule may 
impact the southern California water rates if less water that is 
apportioned to but unused by Arizona and Nevada is made available to 
California.
    Response: Please refer to the previous discussion of potential 
economic impacts of the rule on southern California water rates that is 
included in the discussion of economic impacts of this rule under 
Public Comments on Proposed Rule and Responses on General Issues.
    Comment: The DPEA provides little information regarding potential 
environmental justice concerns regarding minority and low-income 
communities, such as Indian tribes, communities along the Mexican 
border, and communities near the Gulf of California.

[[Page 59002]]

    Response: We have reevaluated the section of the DPEA on 
environmental justice and has included additional analysis. Based on 
this additional analysis, we do not find that this rule will have an 
effect on minority or low-income communities. As discussed in previous 
responses, this rule is not intended as a mechanism to compensate 
tribes.
    Because Mexico is a sovereign nation, we have no control over how 
Colorado River water is used once it reaches the international border. 
Thus while we have determined that there may be minimal effects of this 
rule on flood control deliveries to the international border, we cannot 
determine the potential effects that any potential reduction in the 
deliveries of flood control water may have within the Republic of 
Mexico.

Effects on Ground Water Storage

    Comment: Some respondents, including Indian tribes, commented that 
the rule would result in a net loss in ground water over time to 
``indirect storage'' and that this is a significant indirect effect of 
the rule but the DPEA shows no analysis of this effect.
    Response: We do not agree that actions under this rule will result 
in a loss of ground water to indirect storage. The method by which 
Colorado River water is stored by indirect storage allows water to 
remain in the ground in lieu of being pumped. When Arizona is the 
Storing State, the development of ICUA is limited to only 95 percent of 
the water previously stored under a Storage and Interstate Release 
Agreement. Therefore, the ground water will gain by 5 percent of the 
water that would have been pumped anyway if it were left in the ground 
through in lieu storage actions. Further, although Arizona law 
currently does not allow the development of ICUA by any means other 
than pumping water that was stored under a Storage and Interstate 
Release Agreement, this rule allows additional flexibility. If Arizona 
changes its laws or policy in the future to allow other means of 
developing ICUA, it is possible that the alternative means could help 
preserve Arizona's ground water. Finally, as stated previously, this 
rule allows Colorado River entitlement holders in the Storing State the 
option to use the water previously stored under a Storage and 
Interstate Release Agreement or other means consistent with Storing 
State law to develop ICUA.
    Comment: Reclamation should clarify how the rule fits within the 
regulatory framework for ground water protection in each State, as well 
as the federal role in ground water protection. The preamble to the 
proposed rule contains a statement that, ``Water quality will be 
monitored by the Environmental Protection Agency . . .'' It is not 
clear to what extent Reclamation expects the Environmental Protection 
Agency (EPA) to be involved in offstream storage authorized under the 
rule.
    Response: We do not anticipate a need for EPA to evaluate data 
collected through any offstream storage of Colorado River water. The 
purpose of the statement was to declare that the Department, and more 
specifically Reclamation, does not have the responsibility to regulate 
ground water quality.

General Comments

    Comment: There were a number of editorial comments on the DPEA that 
suggested clarification or additional explanation on various points.
    Response: We have reviewed and considered the comments and has 
adopted many of the suggestions into the text of the FPEA. In addition, 
the previously mentioned informal consultations between Reclamation and 
FWS resulted in Reclamation's incorporation of numerous suggestions 
made by FWS into the BA and FPEA.

Public Comments on Definition of Authorized Entity and Several 
Other Technical Matters and Responses

    As a result of receiving differing comments on the definition of 
authorized entity and several other technical matters, the Department 
reopened the comment period on September 21, 1998 (63 FR 50183) for a 
30-day period ending October 21, 1998. We asked interested parties to 
provide comments on three specific questions:
    Question 1: Should the definition of ``authorized entity'' be 
revised to clarify that an authorized entity, including a water bank, 
must hold an entitlement to Colorado River water in order to ensure 
consistency with the Law of the River, including specifically Section 5 
of the BCPA as interpreted by the Decree?
    Question 2: Should an approved Interstate Storage Agreement (now 
termed a Storage and Interstate Release Agreement) and a contract under 
Section 5 of the BCPA be combined into one document, thus making the 
parties entitlement holders upon execution of the agreement?
    Question 3: If not combined, should the Interstate Storage 
Agreement (now termed a Storage and Interstate Release Agreement) and 
any separate Section 5 contract (or amendments to an existing contract) 
be processed and approved simultaneously to eliminate duplication of 
any administrative and compliance procedures?
    The Department received 10 letters from 11 respondents during the 
reopened comment period. The respondents included three State agencies, 
three water districts, one water authority, one water users 
association, and three environmental organizations. We reviewed and 
analyzed all pertinent comments and revised the rule based on these 
comments. Four respondents, including one water users association and 
three environmental organizations, did not address the issues on which 
comments were solicited during the reopened comment period. One water 
users association resubmitted its comments from the original comment 
period. Three environmental organizations reiterated the same 
environmental concerns addressed in their respective responses in the 
original comment period. Two respondents jointly submitted a report 
that addresses potential effects of water flows from the United States 
on the riparian and marine ecosystems of the Colorado River delta in 
Mexico.
    The remaining seven respondents provided comments on issues 
pertinent to the reopened comment period, although one State agency and 
one water district also resubmitted their respective comments from the 
original comment period.
    The following is a discussion of the comments received on the 
issues pertinent to the reopened comment period and our responses.

Comments on Question 1

    Comment: One State agency and two water districts cite the BCPA and 
the Decree to support their view that an authorized entity must have a 
contract with the Secretary. Two State agencies, one water district, 
and one water authority commented that an authorized entity need not be 
an entitlement holder to store water and make it available to a 
Consuming State under an Interstate Storage Agreement (now termed a 
``Storage and Interstate Release Agreement''). The latter group 
recognizes that the BCPA and the Decree require all diversions of 
Colorado River water from the mainstream to be based on an entitlement. 
However, these respondents believe there is no statutory requirement 
for the authorized entity to have a direct contract with the Secretary 
in order to fulfill its responsibilities to store its own State's 
unused apportionment. Under their reasoning, the authorized entity can 
arrange for storage and ensure the availability of unused apportionment 
in the future

[[Page 59003]]

through existing contractual arrangements with other parties that have 
entitlements through contracts with the Secretary.
    Response: With the exception of Federal and tribal rights 
identified in Article II(D) of the Decree, all diversions of water from 
the Colorado River for use within the Lower Division States require a 
contract with the Secretary. This is specified in Section 5 of the BCPA 
and confirmed by the Decree in Arizona v. California. Under this rule 
diversions of Colorado River water will occur in two circumstances. The 
first is when water is taken from the river and stored off-stream by 
the storing entity and the second is when ICUA has been developed and 
that water is released by the Secretary for use by the consuming 
entity.
    For authorized entities that do not hold a Federal or tribal 
entitlement recognized in Article II(D) of the Decree, the rule allows 
for the storage of Colorado River water either through a direct 
contract with the Secretary or through a valid subcontract with an 
entitlement holder. For the release or diversion of ICUA to the 
consuming entity, the Storage and Interstate Release Agreement, to 
which the Secretary will be a party, satisfies the Section 5 
requirement.

Comments on Question 2

    Comment: One State agency and one water district believe that 
sufficient statutory and contractual authorities exist to allow the 
authorized entity to take water for banking purposes that otherwise 
would be unused in that State. These parties believe the authorized 
entity does not need to hold its own entitlement because sufficient 
legal authority already exists under applicable laws and contracts. The 
State agency states that not all end users of Colorado River water are 
required to have entitlements or contracts with the Secretary. The 
State agency further contends that the Colorado River Basin Project Act 
[43 U.S.C. 1524(b)] makes a direct contract between the Secretary and 
end-users of Colorado River water in Arizona discretionary.
    Response: The Department recognizes in new Sec. 414.3(e) that 
storage of Article II(D) water by Federal or tribal entitlement holders 
or existing contracts may allow for the delivery of water under this 
rule. These include direct contracts between authorized entities and 
the Secretary. These also include subcontracts between authorized 
entities and an entitlement holder that has been authorized by the 
Secretary to enter into subcontracts for the delivery of Colorado River 
water. Authorized entities that are Federal or tribal entitlement 
holders identified in Article II(D) of the Decree are not subject to 
the Section 5 contract requirement in the Decree. Section 414.3(e) also 
provides that the Storage and Interstate Release Agreement, to which 
the Secretary is a party, can be a water delivery contract. We agree 
that when existing contracts or valid subcontracts provide for delivery 
of Colorado River water under this rule, there is no need to combine 
these contracts with the Storage and Interstate Release Agreement.
    Comment: Another State agency and one water authority, in a joint 
response, believe an additional contract, beyond the contract necessary 
to fulfill the requirements of Section 5 of the BCPA, is necessary with 
the Secretary for the release of water based on the development of ICUA 
by a storing entity. However, those parties do not see a need for new 
and additional Section 5 contracts beyond those that now exist.
    Response: The Department modified the rule in Sec. 414.3(a) to 
provide that the Secretary will be a party to Storage and Interstate 
Release Agreements. Sections 414.3(a)(12) through 414.3(a)(15) provide, 
among other things, that the Secretary will commit in the Storage and 
Interstate Release Agreement to release ICUA but only if all necessary 
actions are taken under the rule, if all laws and executive orders have 
been complied with, and if the Secretary has first determined that ICUA 
has been developed or will be developed by a storing entity.
    Comment: One State agency and two water districts commented that 
whether or not the Interstate Storage Agreement (now termed a ``Storage 
and Interstate Release Agreement'') and Section 5 contract are combined 
is discretionary and that this should be determined by the particular 
situation.
    Response: We have modified Sec. 414.3(a) to provide that the 
Secretary will be a party to the Storage and Interstate Release 
Agreement. The Storage and Interstate Release Agreement can serve as a 
water delivery contract within the meaning of Section 5 of the BCPA. We 
recognize in Sec. 414.3(e) that, in certain circumstances, existing 
contracts or subcontracts can satisfy the requirements of Section 5 for 
the delivery of water under a Storage and Interstate Release Agreement. 
In such circumstances, the rule does not anticipate the need for the 
execution of any further Section 5 contracts in order to implement a 
Storage and Interstate Release Agreement. Storage of water by 
authorized entities that hold Article II(D) of the Decree entitlements 
will not be subject to a Section 5 contract requirement.
    Comment: One water district suggested that while there is no legal 
requirement for the Interstate Storage Agreement (now termed a 
``Storage and Interstate Release Agreement'') and Section 5 contract to 
be combined, it was suggested that such an action would have the effect 
of making the Secretary a party to the Interstate Storage Agreement 
(now termed a ``Storage and Interstate Release Agreement''). It was 
asserted that making the Secretary party to the Interstate Storage 
Agreement (now termed a ``Storage and Interstate Release Agreement'') 
may give the authorized entities a greater sense of security that 
future obligations will be performed.
    Response: The Department recognizes in new Sec. 414.3(e) that 
existing contracts may allow for the delivery of water under this rule. 
These include direct contracts between authorized entities and the 
Secretary. These also include subcontracts between authorized entities 
and an entitlement holder that has been authorized by the Secretary to 
enter into subcontracts for the delivery of Colorado River water. 
Section 414.3(e) also provides that the Storage and Interstate Release 
Agreement, to which the Secretary is a party, can serve as a water 
delivery contract. We agree that when existing contracts or valid 
subcontracts provide for delivery of Colorado River water under this 
rule, there is no need to combine these contracts with the Storage and 
Interstate Release Agreement.
    Comment: Another water district stated that if one of the parties 
to the Interstate Storage Agreement (now termed a ``Storage and 
Interstate Release Agreement'') already holds an entitlement for 
delivery of Colorado River water under a BCPA Section 5 contract, a new 
or amended water delivery contract may not be necessary.
    Response: The Department recognizes in the new Sec. 414.3(e) that 
in certain circumstances existing contracts may satisfy the Section 5 
requirement of the BCPA so that additional Section 5 authority would be 
unnecessary to perform activities under a Storage and Interstate 
Release Agreement. Section 5 authority is also unnecessary for the 
storage of Article II(D) of the Decree water by Federal or tribal 
entitlement holders. In circumstances where additional Section 5 
authority is unnecessary, the Storage and Interstate Release Agreement 
would only cover the specific details of a transaction between the 
Secretary and the other parties to the Storage and Interstate Release 
Agreement.

[[Page 59004]]

Comments on Question 3

    Comment: One State agency and one water district stated that 
sufficient statutory and contractual authorities already exist under 
applicable laws and contracts to allow the authorized entity to take 
water for banking purposes. Therefore there would be no need for a new 
or amended contract. Another State agency and one water authority 
believe that an additional contract is necessary with the Secretary to 
ensure the Secretary's commitment to release water based on the 
development of ICUA by a storing entity. That contract could be 
executed concurrently with an Interstate Storage Agreement. However, as 
noted under comments on Question 2, those parties do not see a need for 
new and additional Section 5 contracts beyond those that now exist. One 
State agency responded that if there are two separate agreements, they 
should be processed, reviewed, and approved simultaneously. The two 
water districts commented that any necessary Section 5 contract, 
whether or not combined with an Interstate Storage Agreement, should be 
processed and approved simultaneously with the Interstate Storage 
Agreement.
    Response: Question 3 asked whether Storage and Interstate Release 
Agreements and Section 5 contracts, if not combined, should be 
processed simultaneously. We have modified the rule in Sec. 414.3(a) to 
provide that the Secretary will be a party to a Storage and Interstate 
Release Agreement. The Department also recognizes in Sec. 414.3(e) 
that, in certain circumstances, existing contracts or subcontracts 
satisfy the requirements of Section 5 for the delivery of water under a 
Storage and Interstate Release Agreement. The rule does not anticipate 
the need for the execution of any further Section 5 contracts in order 
to implement a Storage and Interstate Release Agreement. Question 3 is 
moot in light of these modifications to the rule. Comments by the 
parties in response to Question 3 primarily address issues raised by 
Questions 1 and 2 and are responded to above.

V. Procedural Matters

 Environmental Compliance
 Paperwork Reduction Act
 Regulatory Flexibility Act
 Small Business Regulatory Enforcement Fairness Act (SBREFA)
 Unfunded Mandates Reform Act of 1995
 Executive Order 12612, Federalism Assessment
 Executive Order 12630, Takings Implications Analysis
 Executive Order 12866, Regulatory Planning and Review
 Executive Order 12988, Civil Justice Reform

Environmental Compliance

    We prepared a DPEA and placed it on file in the Reclamation 
Administrative Record. We received comments on the DPEA (discussed 
above in III. Responses to Comments), and carefully considered those 
comments in preparing the final programmatic environmental assessment 
(FPEA). We have accepted many of these comments and incorporated them 
into the FPEA, which is on file in the Reclamation Administrative 
Record. Based on the FPEA, we have determined that a Finding of No 
Significant Impact is warranted.
    We have also, under the ESA, consulted with FWS on potential 
impacts of this rule on listed species and designated habitat. Based on 
the analysis contained in the BA that we prepared for the rule, we have 
determined that operations under this rule are not likely to adversely 
affect listed species or designated habitat in the action area. FWS has 
concurred with this finding. We have also determined that we have no 
Section 7 obligations for species within Mexico due to our inability to 
control the use of water once it reaches Mexico.
    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 
critical habitat, and is analyzed by an appropriate environmental 
document. Consultation and coordination between Reclamation, FWS, other 
agencies, and interested parties will be completed on a case-by-case 
basis.

Paperwork Reduction Act

    This rule is geographically limited to the States of Arizona, 
California, and Nevada. The collection of information contained in the 
rule covers storing entities that would store Colorado River water off 
the mainstream of the Colorado River. The information we would collect 
would be compiled by these storing entities in the course of their 
normal business, and the annual reports to the Secretary will not 
impose any significant time or cost burden. We will submit the 
information collection requirements in this rule to the Office of 
Management and Budget for approval as required by the Paperwork 
Reduction Act, 44 U.S.C. 3501 et seq. We will not require collection of 
this information until the Office of Management and Budget has given 
its approval.

Regulatory Flexibility Act

    The Department of the Interior certifies that this document will 
not have a significant economic effect on a substantial number of small 
entities under the Regulatory Flexibility Act (5 U.S.C. 601 et seq.). 
This rule will not impose any direct cost on small entities. Financial 
costs associated with the development and release of intentionally 
created unused apportionment will be borne by the parties who 
voluntarily enter into offstream storage and release agreements. A 
benefit-cost analysis was completed and concludes that this 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. 
From a financial perspective, since the rule may provide an opportunity 
for authorized entities in the Lower Division States to secure 
additional supplies of Colorado River water, Colorado River water users 
may experience a cost savings. The rule will not affect any Colorado 
River entitlement holder's right to use its full water entitlement. 
Further, in times of shortage on the Colorado River, numerous small 
water users with senior water rights, which are determined by an 
earlier priority date, will retain their seniority and will be served 
before less senior users regardless of size.

Small Business Regulatory Enforcement Fairness Act (SBREFA)

    This rule is not a major rule under 5 U.S.C. 804(2), the SBREFA. 
This rule:
    (1) Does not have an annual effect on the economy of $100 million 
or more. The Department prepared a benefit-cost analysis, which 
estimated that this rule would cause net economic benefits on a State 
and regional level using different water supply models and discount 
rates. 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 per cent and $9.5 to $47.7 million at 
8.27 per cent. 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 per cent and $350,789 to 
$3.1 million at 8.27 per cent. Under the scenario characterized by 10 
surplus

[[Page 59005]]

years, demand for banked water is relatively low because water users in 
the Lower Division States can meet most of their water needs with 
diversions from the mainstream within the basic and surplus 
apportionments for use within those States.
    (2) Will not cause a major increase in costs or prices for 
consumers, individual industries, Federal, State, or local government 
agencies, or geographic regions.
    This rule facilitates the creation of an additional alternative for 
water agencies to secure water supplies. However, entering into Storage 
and Interstate Release Agreements for the offstream storage of Colorado 
River water and the release of ICUA provided for in this rule is 
voluntary. Should the costs of the procedures to facilitate these 
transactions, provided for in the rule, be greater than the cost of 
other alternative water supplies, the States would probably select the 
cheaper alternatives.
    This rule may create an opportunity for the total cost of 
alternative water supplies to decrease, thereby reducing the cost 
burden on all water users in southern California.
    Water users in southern Nevada are just now approaching use of the 
entire 300 kaf basic annual apportionment of Colorado River for use in 
Nevada. Like California, Nevada will also need alternative water 
supplies to satisfy the increasing demands of economic development and 
population growth. The cost of securing alternative supplies will be 
greater than the cost of obtaining Colorado River water under the 
State's basic or surplus apportionment. This rule may provide an 
opportunity for Colorado River water users in Nevada to experience a 
cost savings in securing additional supplies of Colorado River water.
    (3) Does not have significant adverse effects on competition, 
employment, investment, productivity, innovation, or the ability of 
U.S.-based enterprises to compete with foreign-based enterprises.
    This rule is facilitating voluntary water transactions that may 
confer benefits on a national basis in many economic sectors.
    (i) Voluntary water transactions can promote economic efficiency 
gains. These gains accrue to the parties in a given transaction and to 
the wider regional and national economy. The gains result due to 
greater flexibility in how and where water is used.
    (ii) Voluntary water transactions offer a cost effective way to 
increase water supplies without constructing new mainstream facilities 
such as dams.
    (iii) Voluntary water transactions may stimulate investment and 
development in conservation technology that is currently economically 
infeasible given the returns to water in its present use.

Unfunded Mandates Reform Act of 1995

    This rule does not impose an unfunded mandate on State, local, or 
tribal governments or the private sector of more than $100 million per 
year. The range of benefits and costs associated with the rule are 
constrained because the amount of water that can be released under an 
offstream storage agreement in any one year is constrained by State law 
and immediate demand. This rule does not have a significant or unique 
effect on State, local, or tribal governments or the private sector. 
The rule provides a framework under which authorized entities could 
voluntarily store Colorado River water offstream for future interstate 
use. The publication of this rule does not authorize specific 
activities, and will not impose costs on any State, local, or tribal 
government, or the private sector. A statement (benefit-cost analysis) 
containing the information required by the Unfunded Mandates Reform Act 
(2 U.S.C. 1531 et seq.) has been prepared and is summarized below in 
the section relating to Executive Order 12866.
    We received comments on the benefit-cost analysis that were 
editorial in nature or asked for clarification or revision of 
information in the analysis. We accepted approximately 85 percent of 
the comments and revised the text or footnotes as necessary to include 
those changes where requested.
    The benefit-cost analysis concluded that this rule does not impose 
significant or unique impact upon small governments (including Indian 
communities), small entities such as water districts, or individual 
entitlement holders. The rule will not affect the priority of water use 
on the Colorado River. Therefore benefits received by water users, 
regardless of size, associated with the right to divert Colorado River 
water will remain. Costs of storage and release of unused apportionment 
water will be borne by authorized entities in the Storing State and the 
Consuming State who voluntarily enter into storage and release 
agreements. All Colorado River water users may experience a decrease in 
water costs since the rule will enable authorized entities in the Lower 
Division States to secure additional water supplies. 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

    In accordance with Executive Order 12612, this rule does not have 
sufficient federalism implications to warrant the preparation of a 
Federalism Assessment. A Federalism Assessment is not required. This 
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.

Executive Order 12630, Takings Implications Analysis

    In accordance with Executive Order 12630, this rule does not have 
significant takings implications. A takings implication assessment is 
not required. This 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 and would 
not result in physical invasion or occupancy of private property or 
substantially affect its value or use. This rule would not result in 
any Federal action that would place a restriction on a use of private 
property and does not affect a Colorado River water entitlement 
holder's right to use its full water entitlement. Under this 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. When the Storing 
State must reduce its diversions to develop ICUA, an entity that 
reduces its consumptive use of Colorado River water to develop that 
unused apportionment will do so voluntarily under an appropriate 
agreement. Therefore, the Department of the Interior has determined 
that this 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 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). The Department's benefit-cost 
analysis determines that this 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.

[[Page 59006]]

    California and Nevada are looking for alternative water supplies to 
satisfy the increasing demands of economic development and population 
growth. This rule may provide an opportunity for Colorado River water 
users in Nevada to experience a marginal cost savings in securing 
alternative supplies. Offstream storage of Colorado River water and 
making available ICUA are voluntary actions. Should the costs of the 
procedures in this 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.
    The benefit-cost analysis estimated net economic benefits of this 
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 per cent (the average rate on 
municipal bonds in 1996, which is a rate faced by major water purveyors 
in California and Nevada) and 8.27 per cent (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 per cent and $9.5 to $47.7 million at 
8.27 per cent. 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 per cent and $350,789 to 
$3.1 million at 8.27 per cent. Under the scenario characterized by 10 
surplus years, demand for banked water is relatively low because water 
users in the Lower Division States can meet most of their water needs 
with diversions from the mainstream within the basic and surplus 
apportionments for use within those States.
    We have placed the full analysis on file in the Reclamation 
Administrative Record at Bureau of Reclamation, Administrative Record, 
Lower Colorado Regional Office, P.O. Box 61470, Boulder City, NV 89006-
1470, Attention: BC00-4451.

Executive Order 12988, Civil Justice Reform

    In accordance with Executive Order 12988, the Office of the 
Solicitor has determined that this rule does not unduly burden the 
judicial system and meets the requirements of sections 3(a) and 3(b)(2) 
of the Order.

List of Subjects in 43 CFR Part 414

    Environmental compliance, Public lands, Water bank program, Water 
resources, Water storage, Water supply, and Water quality.

    Dated: October 26, 1999.
Patricia J. Beneke,
Assistant Secretary--Water and Science.

    For the reasons stated in the preamble, the Bureau of Reclamation 
adds a new part 414 to title 43 of the Code of Federal Regulations as 
follows:

PART 414--OFFSTREAM STORAGE OF COLORADO RIVER WATER AND DEVELOPMENT 
AND RELEASE OF INTENTIONALLY CREATED UNUSED APPORTIONMENT IN THE 
LOWER DIVISION STATES

Sec.

Subpart A--Purposes and Definitions

414.1  Purpose.
414.2  Definitions of terms used in this part.

Subpart B--Storage and Interstate Release Agreements

414.3  Storage and Interstate Release Agreements.
414.4  Reporting Requirements and accounting under storage and 
interstate release agreements.

Subpart C--Water Quality and Environmental compliance

414.5  Water Quality.
414.6  Environmental Compliance and funding of Federal costs.

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

Subpart A--Purposes and Definitions


Sec. 414.1  Purpose.

    (a) What this part does. This part establishes a procedural 
framework for the Secretary of the Interior (Secretary) to follow in 
considering, participating in, and administering Storage and Interstate 
Release Agreements in the Lower Division States (Arizona, California, 
and Nevada) that would:
    (1) Permit State-authorized entities to store Colorado River water 
offstream;
    (2) Permit State-authorized entities to develop intentionally 
created unused apportionment (ICUA);
    (3) Permit State-authorized entities to make ICUA available to the 
Secretary for release for use in another Lower Division State. This 
release may only take place in accordance with the Secretary's 
obligations under Federal law and may occur in either the year of 
storage or in years subsequent to storage; and
    (4) Allow only voluntary interstate water transactions. These water 
transactions can help to satisfy regional water demands by increasing 
the efficiency, flexibility, and certainty in Colorado River management 
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, (373 U.S. 546) (1963), as supplemented and 
amended.
    (b) What this part does not do. This part does not:
    (1) Affect any Colorado River water entitlement holder's right to 
use its full water entitlement;
    (2) Address or preclude independent actions by the Secretary 
regarding Tribal storage and water transfer activities;
    (3) Change or expand existing authorities under the body of law 
known as the ``Law of the River';
    (4) Change the apportionments made for use within individual 
States;
    (5) Address intrastate storage or intrastate distribution of water;
    (6) Preclude a Storing State from storing some of its unused 
apportionment in another Lower Division State if consistent with 
applicable State law; or
    (7) Authorize any specific activities; the rule provides a 
framework only.


Sec. 414.2  Definitions of terms used in this part.

    Authorized entity means:
    (1) An entity in a Storing State which is expressly authorized 
pursuant to the laws of that State to enter into Storage and Interstate 
Release Agreements and develop ICUA (``storing entity''); or
    (2) An entity in a Consuming State which has authority under the 
laws of that State to enter into Storage and Interstate Release 
Agreements and acquire the right to use ICUA (``consuming entity'').
    Basic apportionment means the Colorado River water apportioned for 
use within 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 United States Supreme Court, in Arizona v. 
California, confirmed that the annual basic apportionment for the Lower 
Division States is 2.8 maf of consumptive use in the State of Arizona, 
4.4 maf of consumptive use in the State of California, and 0.3 maf of 
consumptive use in the State of Nevada.
    BCPA means the Boulder Canyon Project Act, authorized by the Act of 
Congress of December 21, 1928 (45 Stat. 1057).

[[Page 59007]]

    Colorado River Basin means all of the drainage area of the Colorado 
River System and all other territory within the United States to which 
the waters of the Colorado River System shall be beneficially applied.
    Colorado River System means that portion of the Colorado River and 
its tributaries within the United States.
    Colorado River water means water in or withdrawn from the 
mainstream.
    Consuming entity means an authorized entity in a Consuming State.
    Consuming State means a Lower Division State where ICUA will be 
used.
    Consumptive use means diversions from the Colorado River less any 
return flow to the river that is available for consumptive use in the 
United States or in satisfaction of the Mexican treaty obligation.
    (1) Consumptive use from the mainstream within the Lower Division 
States includes water drawn from the mainstream by underground pumping.
    (2) 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.
    Decree means the decree entered March 9, 1964, by the Supreme Court 
in Arizona v. California, 373 U.S. 546 (1963), as supplemented or 
amended.
    Entitlement means an authorization to beneficially use Colorado 
River water pursuant to:
    (1) The Decree;
    (2) A water delivery contract with the United States through the 
Secretary; or
    (3) A reservation of water from the Secretary.
    Intentionally created unused apportionment or ICUA means unused 
apportionment that is developed:
    (1) Consistent with the laws of the Storing State;
    (2) Solely as a result of, and would not exist except for, 
implementing a Storage and Interstate Release Agreement.
    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 ground water aquifer. Offstream storage includes 
indirect recharge when Colorado River water is exchanged for ground 
water that otherwise would have been pumped and consumed.
    Secretary means the Secretary of the Interior or an authorized 
representative.
    Storage and Interstate Release Agreement means an agreement, 
consistent with this part, between the Secretary and authorized 
entities in two or more Lower Division States that addresses the 
details of:
    (1) Offstream storage of Colorado River water by a storing entity 
for future use within the Storing State;
    (2) Subsequent development of ICUA by the storing entity, 
consistent with the laws of the Storing State;
    (3) A request by the storing entity to the Secretary to release 
ICUA to the consuming entity;
    (4) Release of ICUA by the Secretary to the consuming entity; and
    (5) The inclusion of other entities that are determined by the 
Secretary and the storing entity and the consuming entity to be 
appropriate to the performance and enforcement of the agreement.
    Storing entity means an authorized entity in a Storing State.
    Storing State means a Lower Division State in which water is stored 
off the mainstream in accordance with a Storage and Interstate Release 
Agreement for future use in that State.
    Surplus apportionment means the Colorado River water apportioned 
for use within 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 
otherwise put to beneficial consumptive use during that year within 
that State.
    Upper Division States means the States of Colorado, New Mexico, 
Utah, and Wyoming.
    Water delivery contract means a contract between the Secretary and 
an entity for the delivery of Colorado River water in accordance with 
section 5 of the BCPA.

Subpart B--Storage and Interstate Release Agreements


Sec. 414.3  Storage and Interstate Release Agreements.

    (a) Basic requirements for Storage and Interstate Release 
Agreements. Two or more authorized entities may enter into Storage and 
Interstate Release Agreements with the Secretary in accordance with 
paragraph (c) of this section. Each agreement must meet all of the 
requirements of this section.
    (1) The agreement must specify the quantity of Colorado River water 
to be stored, the Lower Division State in which it is to be stored, the 
entity(ies) that will store the water, and the facility(ies) in which 
it will be stored.
    (2) The agreement must specify whether the water to be stored will 
be within the unused basic apportionment or unused surplus 
apportionment of the Storing State. For water from the Storing State's 
apportionment to qualify as unused apportionment available for storage 
under this part, the water must first be offered to all entitlement 
holders within the Storing State for purposes other than interstate 
transactions under proposed Storage and Interstate Release Agreements.
    (3) The agreement must specify whether the water to be stored will 
be within the unused basic apportionment or unused surplus 
apportionment of the Consuming State. If the water to be stored will be 
unused apportionment of the Consuming State, the agreement must 
acknowledge that any unused apportionment of the Consuming State may be 
made available from the Consuming State by the Secretary to the Storing 
State only in accordance with Article II(B)(6) of the Decree. If unused 
apportionment from the Consuming State is to be stored under a Storage 
and Interstate Release Agreement, the Secretary will make the unused 
apportionment of the Consuming State available to the storing entity in 
accordance with the terms of a Storage and Interstate Release Agreement 
and will not make that water available to other entitlement holders.
    (4) The agreement must specify the maximum quantity of ICUA that 
will be developed and made available for release to the consuming 
entity.
    (5) The agreement must specify that ICUA may not be requested by 
the consuming entity in a quantity that exceeds the quantity of water 
that had been stored under a Storage and Interstate Release Agreement 
in the Storing State.
    (6) The agreement must specify a procedure to verify and account 
for the quantity of water stored in the Storing State under a Storage 
and Interstate Release Agreement.
    (7) The agreement must specify that, by a date certain, the 
consuming entity will:
    (i) Notify the storing entity to develop a specific quantity of 
ICUA in the following calendar year;
    (ii) Ask the Secretary to release that ICUA; and
    (iii) Provide a copy of the notice or request to each Lower 
Division State.
    (8) The agreement must specify that when the storing entity 
receives a request to develop a specific quantity of ICUA:

[[Page 59008]]

    (i) It will ensure that the Storing State's consumptive use of 
Colorado River water will be decreased by a quantity sufficient to 
develop the requested quantity of ICUA; and
    (ii) Any actions that the storing entity takes will be consistent 
with its State's laws.
    (9) The agreement must include a description of:
    (i) The actions the authorized entity will take to develop ICUA;
    (ii) Potential actions to decrease the authorized entity's 
consumptive use of Colorado River water;
    (iii) The means by which the development of the ICUA will be 
enforceable by the storing entity; and
    (iv) The notice given to entitlement holders, including Indian 
tribes, of opportunities to participate in development of this ICUA.
    (10) The agreement must specify that the storing entity will 
certify to the Secretary that ICUA has been or will be developed that 
otherwise would not have existed. The certification must:
    (i) Identify the quantity, the means, and the entity by which ICUA 
has been or will be developed; and
    (ii) Ask the Secretary to make the ICUA available to the consuming 
entity under Article II(B)(6) of the Decree and the Storage and 
Interstate Release Agreement.
    (11) The agreement must specify a procedure for verifying 
development of the ICUA appropriate to the manner in which it is 
developed.
    (12) The agreement must specify that the Secretary will release 
ICUA developed by the storing entity:
    (i) In accordance with a request of the consuming entity;
    (ii) In accordance with the terms of the Storage and Interstate 
Release Agreement;
    (iii) Only for use by the consuming entity and not for use by other 
entitlement holders; and
    (iv) In accordance with the terms of the Storage and Interstate 
Release Agreement, the BCPA, Article II(B)(6) of the Decree and all 
other applicable laws and executive orders.
    (13) The agreement must specify that ICUA shall be released to the 
consuming entity only in the year and to the extent that ICUA is 
developed by the storing entity by reducing Colorado River water use 
within the Storing State.
    (14) The agreement must specify that the Secretary will release 
ICUA only after the Secretary has determined that all necessary actions 
have been taken under this part.
    (15) The agreement must specify that before releasing ICUA the 
Secretary must first determine that the storing entity:
    (i) Stored water in accordance with the Storage and Interstate 
Release Agreement in quantities sufficient to support the development 
of the ICUA requested by the consuming entity; and
    (ii) Certified to the satisfaction of the Secretary that the 
quantity of ICUA requested by the consuming entity has been developed 
in that year or will be developed in that year under Sec. 414.3(f).
    (16) The agreement must specify that the non-Federal parties to the 
Storage and Interstate Release Agreement will 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 loss or claim of any nature 
whatsoever arising by reason of the actions taken by the non-federal 
parties to the Storage and Interstate Release Agreement under this 
part.
    (17) The agreement must specify the extent to which facilities 
constructed or financed by the United States will be used to store, 
convey, or distribute water associated with a Storage and Interstate 
Release Agreement.
    (18) The agreement must include any other provisions that the 
parties deem appropriate.
    (b) How to address financial considerations. The Secretary will not 
execute an agreement that has adverse impacts on the financial 
interests of the United States. Financial details between and among the 
non-Federal parties need not be included in the Storage and Interstate 
Release Agreement but instead can be the subject of separate 
agreements. The Secretary need not be a party to the separate 
agreements.
    (c) How the Secretary will execute storage and interstate release 
agreements. The Regional Director for the Bureau of Reclamation's Lower 
Colorado Region (Regional Director) may execute and administer a 
Storage and Interstate Release Agreement on behalf of the Secretary. 
The Secretary will notify the public of his/her intent to participate 
in negotiations to develop a Storage and Interstate Release Agreement 
and provide a means for public input. In considering whether to execute 
a Storage and Interstate Release Agreement, the Secretary may request, 
and the non-Federal parties must provide, any additional supporting 
data necessary to clearly set forth both the details of the proposed 
transaction and the eligibility of the parties to participate as State-
authorized entities in the proposed transaction. The Secretary will 
also consider: applicable law and executive orders; applicable 
contracts; potential effects on trust resources; potential effects on 
entitlement holders, including Indian tribes; potential impacts on the 
Upper Division States; potential effects on third parties; potential 
environmental impacts and potential effects on threatened and 
endangered species; comments from interested parties, particularly 
parties who may be affected by the proposed action; comments from the 
State agencies responsible for consulting with the Secretary on matters 
related to the Colorado River; and other relevant factors, including 
the direct or indirect consequences of the proposed Storage and 
Interstate Release Agreement on the financial interests of the United 
States. Based on the consideration of the factors in this section, the 
Secretary may execute or decide not to execute a Storage and Interstate 
Release Agreement.
    (d) Assigning interests to an authorized entity. Non-Federal 
parties to a Storage and Interstate Release Agreement may assign their 
interests in the Agreement to authorized entities. The assignment can 
be in whole or in part. The assignment can only be made if all parties 
to the agreement approve.
    (e) Requirement for contracts under the Boulder Canyon Project Act. 
Release or diversion of Colorado River water for storage under this 
part must be supported by a water delivery contract with the Secretary 
in accordance with Section 5 of the BCPA. The only exception to this 
requirement is storage of Article II(D) (of the Decree) water by 
Federal or tribal entitlement holders. The release or diversion of 
Colorado River water that has been developed or will be developed as 
ICUA under this part also must be supported by a Section 5 water 
delivery contract.
    (1) An authorized entity may satisfy the requirement of this 
section through a direct contract with the Secretary. An authorized 
entity also may satisfy the Section 5 requirement of the BCPA, for 
purposes of this part, through a valid subcontract with an entitlement 
holder that is authorized by the Secretary to subcontract for the 
delivery of all or a portion of its entitlement.
    (2) For storing entities that do not otherwise hold a contract or 
valid subcontract for the delivery of the water to be stored, the 
Storage and Interstate Release Agreement will serve as the vehicle for 
satisfying the Section 5 requirement for the release or diversion of 
that water.
    (3) For consuming entities that do not otherwise hold a contract or 
valid subcontract for the delivery of the water to be released by the 
Secretary as ICUA, the Storage and Interstate Release Agreement will 
serve as the vehicle for

[[Page 59009]]

satisfying the Section 5 requirement for the release or diversion of 
that water.
    (f) Anticipatory release of ICUA. The Secretary may release ICUA to 
a consuming entity before the actual development of ICUA by the storing 
entity if the storing entity certifies to the Secretary that ICUA will 
be developed during that same year that otherwise would not have 
existed.
    (1) These anticipatory releases will only be made in the same year 
that the ICUA is developed.
    (2) Before an anticipatory release, the Secretary must be satisfied 
that the storing entity will develop the necessary ICUA in the same 
year that the ICUA is to be released.
    (g) Treaty obligations. Prior to executing any specific Storage and 
Interstate Release Agreements, the United States will consult with 
Mexico through the International Boundary and Water Commission under 
the boundary water treaties and other applicable international 
agreements in force between the two countries.


Sec. 414.4  Reporting requirements and accounting under Storage and 
Interstate Release Agreements.

    (a) Annual report to the Secretary. Each storing entity will submit 
an annual report to the Secretary containing the material required by 
this section. The report will be due on a date to be agreed upon by the 
parties to the Storage and Interstate Release Agreement. The report 
must include:
    (1) The quantity of water diverted and stored during the prior year 
under all Storage and Interstate Release Agreements; and
    (2) The total quantity of stored water available to support the 
development of ICUA under each Storage and Interstate Release Agreement 
to which the storing entity is a party as of December 31 of the prior 
calendar year.
    (b) How the Secretary accounts for diverted and stored water. The 
Secretary will account for water diverted and stored under Storage and 
Interstate Release Agreements in the records maintained under Article V 
of the Decree.
    (1) The Secretary will account for the water that is diverted and 
stored by a storing entity as a consumptive use in the Storing State 
for the year in which it is stored.
    (2) The Secretary will account for the diversion and consumptive 
use of ICUA by a consuming entity as a consumptive use in the Consuming 
State of unused apportionment under Article II(B)(6) of the Decree in 
the year the water is released in the same manner as any other unused 
apportionment taken by that State.
    (3) The Secretary will maintain individual balances of the 
quantities of water stored under a Storage and Interstate Release 
Agreement and available to support the development of ICUA. The 
appropriate balances will be reduced when ICUA is developed by the 
storing entity and released by the Secretary for use by a consuming 
entity.

Subpart C--Water Quality and Environmental Compliance


Sec. 414.5  Water quality.

    (a) Water Quality is not guaranteed. The Secretary does not warrant 
the quality of water released or delivered under Storage and Interstate 
Release Agreements, and the United States will not be liable for 
damages of any kind resulting from water quality problems. The United 
States is not under any obligation to construct or furnish water 
treatment facilities to maintain or improve water quality except as may 
otherwise be provided in relevant Federal law.
    (b) Required water quality standards. All entities, in diverting, 
using, and returning Colorado River water, must:
    (1) Comply with all applicable water pollution laws and regulations 
of the United States, the Storing State, and the Consuming State; and
    (2) 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 and funding of Federal costs.

    (a) Ensuring environmental compliance. The Secretary will complete 
environmental compliance documentation, 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 to be taken under this part.
    (b) Responsibility for environmental compliance work. Authorized 
entities seeking to enter into a Storage and Interstate Release 
Agreement under this part may prepare the appropriate documentation and 
compliance document for a proposed Federal action, such as execution of 
a proposed Storage and Interstate Release Agreement. The compliance 
documents must meet the standards set forth in Reclamation's national 
environmental policy guidance before they can be adopted.
    (c) Responsibility for funding of Federal costs. All costs incurred 
by the United States in evaluating, processing, and/or executing a 
Storage and Interstate Release Agreement under this part must be funded 
in advance by the authorized entities that are party to that agreement.

[FR Doc. 99-28417 Filed 10-29-99; 8:45 am]
BILLING CODE 4310-94-P