FINDING OF NO SIGNIFICANT IMPACT
for the
CONVEYANCE OF THE ASSETS
of the
MIDDLE LOUP DIVISION
of the
MISSOURI RIVER BASIN PROJECT
of the
LOUP BASIN RECLAMATION DISTRICT

United States Department of the Interior
Bureau of Reclamation
Great Plains Region
Nebraska-Kansas Area Office
Grand Island, Nebraska

September 2002

Introduction

Public Law 106-366, Conveyance of the Assets of the Middle Loup Division of the Missouri River Basin Project, Nebraska, was signed into law on October 27, 2000 and requires the Secretary of the Interior (Secretary) to convey to the Loup Basin Reclamation District (District) all right, title, and interest in and to the property comprising the assets of the Missouri River Basin Project, Middle Loup Division (Division). The Division is located along the Middle Loup River in Blaine, Custer, Valley, Sherman, Nance, and Howard counties in central Nebraska. Prior to the passage of P.L. 106-366, the Bureau of Reclamation (Reclamation), the District, and the Sargent and Farwell irrigation districts entered into a Memorandum of Understanding (MOU) concerning the proposed conveyance of assets to works, facilities, and lands in the Division. The MOU includes provisions for National Environmental Policy Act (NEPA) compliance and protection of historically-significant resources. P.L. 106-366 requires that the conveyance of Division assets be accomplished in accordance with the MOU.

The environmental effects of the proposed conveyance of assets have been considered and are documented in a final environmental assessment (FEA) completed in September, 2002 in accordance with the NEPA.

Purpose and Need for the Federal Action

The purpose of the federal action is to divest the United States of interest in, and responsibility and liability for, all facilities in the Division by transferring title to the District. As part of the Federal Government's National Performance Review, Reclamation has undertaken a program to transfer title of facilities that (1) could be efficiently and effectively managed by non-federal entities and (2) are not of national importance.

Alternatives Considered in the Environmental Assessment

Two alternatives were considered in the FEA - the No Action Alternative and the Title Transfer Alternative.

No Action Alternative

The No Action Alternative continues current operation of the Division with the United States retaining title to the federal facilities. Water rights held by Reclamation would remain with the Federal Government. Renewal of long-term water service contracts with the Sargent and Farwell irrigation districts and the Middle Loup Public Power and Irrigation District (MLPPID) would be required in order to continue delivery of water to these entities after the current contracts expire on December 31, 2002.

Title Transfer Alternative (Reclamation's Preferred Alternative)

The Title Transfer Alternative would convey federal assets associated with the Division from the United States to the District. Reclamation would transfer all water rights held in the name of the United States to the District. The District and Reclamation have entered into a MOU stating that the District shall manage the Division in a manner substantially similar to the manner in which it was managed before the conveyance and in accordance with applicable federal and state laws.

The MOU calls for an agreement between the District and the Nebraska Game and Parks Commission (Commission) to protect the public interests in fish, wildlife, and recreation resources at the Division and to execute a permanent conservation easement. The District, Nebraska State Historic Preservation Office (SHPO), University of Nebraska-Lincoln (UNL), and Reclamation have also signed an agreement that provides for the protection of cultural resources at the Division.

As specified by P.L. 106-366, the Title Transfer Alternative conveys all of the assets of the Division from the United States to the District. Project assets include Sherman Dam and Reservoir (4,698 acres of land and 2,868 acres of water at top of conservation pool), Milburn Diversion Dam and canal works (317 acres of land and 355 acres of water), Arcadia Diversion Dam (838 acres of land and 109 acres of water), Sherman Feeder Canal, other canals, drains, laterals, pumping plants, associated Reclamation-constructed recreation facilities, mitigation lands, and District office buildings and maintenance yard.

Issues Raised Regarding Title Transfer

During the NEPA compliance process, a range of issues, concerns, and questions were identified by the public, other agencies, and/or Reclamation's interdisciplinary staff regarding the proposed action. Reclamation used these issues and concerns to focus the NEPA compliance process, to structure the content of the FEA, and to identify issues requiring resolution before title to the Division is transferred to the District.

The issues identified through scoping and other information-gathering processes are listed below and are organized under the six criteria identified in Reclamation's Framework for Title Transfer that must be met before federal assets associated with Reclamation projects can be conveyed. Reclamation determined that some of these issues do not fall within the scope of analysis for NEPA compliance. The issues addressed during the NEPA compliance process are underlined and discussed further below.

Treaty obligations and international agreements must be fulfilled

• No issues in this category were identified

The Secretary of the Interior's Native American trust responsibilities must be met

• Protection of cultural sites

The Federal Treasury, and thereby the taxpayer's financial interest, must be protected

• Cost of the transfer
• Project value and method of valuation
• Credits for enhancements
• Payment in lieu of taxes
• Duration and cost of the draft EA and transfer of title processes
• Maintenance responsibilities for drains impacting St. Paul, Dannebrog, and Loup City
• Liability following project transfer > Payment for NEPA compliance

Interstate compacts and agreements must be protected

• Recipient's ability to operate and maintain the project
• Protection of water rights
• Effect on water rates
• Ability of the Western Area Power Administration to meet obligations

The public aspects of the project must be protected

• Compliance responsibilities for irrigation return flows
• Compliance with all applicable state and federal laws
• Protection of historical resources
• Post-transfer adherence with State water quality standards
• Continued public access
• Impacts to fish and wildlife
• Cleanup of hazardous materials
• Input, influence, and access of all interested parties to project-related activities
• Protection of water qualit
• Future of lease with Nebraska Game and Parks Commission
• Potential contaminants in irrigation return flows
• Safety of Dams
• Responsibility for drainage facilities downslope from Sherman Reservoir

These issues and the steps taken to address them are discussed in the following section. Where appropriate, issues with common themes are addressed in a single response.

Resolution of Issues Concerning Title Transfer

1. Protection of cultural and historic sites

Prior to conveyance legislation, compliance activities associated with section 110 of the National Historic Preservation Act (NHPA) were conducted at the Division. As a result of these activities, Reclamation determined in July 1998 that the conveyance of assets would result in an adverse effect within the regulatory requirements of the NHPA unless restrictions or conditions were in place to ensure long-term preservation of historic properties. Under section 106 of NHPA, Reclamation consulted with the Nebraska SHPO and Advisory Council on Historic Preservation (Advisory Council) to identify methods to mitigate the effects of conveyance. Attached to the FEA is a memorandum of agreement (Agreement) between Reclamation, Nebraska SHPO, the District, and UNL. The Agreement identifies entities that will be responsible for all future historic preservation requirements on Division lands. Attached to the Agreement is an agreement between UNL and the District whereby they agree to cooperate to develop and implement a management plan to preserve the archeological, historical, and cultural resource values of significant sites on Division lands. Also attached to the Agreement is a Protective Management Plan that was developed in consultation with Nebraska SHPO to mitigate all adverse effects of the conveyance of assets. The Protective Management Plan promotes preservation and protection of significant archeological, historical, and cultural resource sites on Division lands and includes detailed plans to create a preservation easement for all significant sites identified as eligible or potentially eligible for inclusion on the National Register of Historic Places with the UNL as holder.

2. Cost of the transfer

The United States invested $54,225,000 in capital construction costs for the Division. Of this total, approximately $46,604,000 are reimbursable costs to be repaid to the Federal Treasury. Approximately $7,621,000 are non-reimbursable costs incurred for recreation, fish and wildlife, and flood control or were made non-reimbursable by P.L.100-202 for irrigation drainage costs. As of January 1, 2000, approximately $8,877,000 of the reimbursable costs had been repaid leaving a reimbursable balance of approximately $37,727,000. It is projected that approximately $4,332,000 of these costs would be repaid by the District over the next seventeen years under the terms of existing repayment contracts. The District and the MLPPID would have paid another approximately $149,000 pursuant to existing water service contracts that expire in December 2002. It is anticipated that repayment of an additional $4,198,000 could be expected over a fortyyear period upon renewal of water service contracts with the District and MLPPID. The remaining unpaid irrigation costs of approximately $29,048,000 would be repaid by Pick-Sloan Missouri Basin power revenues after power costs are repaid.

Conveyance of Assets FONSI Middle Loup Division The present value of these revenue streams was calculated to be $3,803,360 for the amounts that would be repaid by the District and MLPPID and $2,600,000 for the amount to be repaid by power. In addition to these revenue streams, the United States would be relieved of certain future costs. The present value of these future costs is $956,000 and, if offset against the present value of the projected future revenues to be received from the District and the MLPPID, results in a net present value for the Division of $2,847,360. These future costs include:

$86,000 - determined to be the total amount of credit resulting from the amount the District has paid to the United States for NEPA compliance costs less one-half of the estimated final NEPA compliance costs. Any costs exceeding the estimated amount used to establish the above credit is to be paid by the United States;

$200,000 - determined to be the present value of future operation and maintenance required for cultural resource preservation on Division lands at Sherman Reservoir;

$170,000 - determined to be the present value of future Payment in Lieu of Taxes to local governments that the District has agreed to assume; and

$500,000 - determined to be the present value of future costs of agricultural drainage works still necessary in the Middle Loup Valley for which the District has agreed to assume future responsibility.

Present values were derived using the September 1999 thirty-year Federal Treasury rate of 6.07%. The net present value of $2,847,360 and the $2,600,000 from power revenues were specified in P.L. 106-366. Reclamation believes that the net present value stipulated in P.L. 106366 adequately protects the Federal Treasury.

3. Payment in Lieu of Taxes

As a part of the MOU, the District has agreed to continue to make payments to replace the in lieu of tax (PILT) payments presently being made by the Federal government. The amount of future annual payments to be made by the District to the counties for project lands will not be less than the PILT payments received by the counties in 1998.

4. Post-transfer adherence with State of Nebraska water quality standards, protection of water quality, and potential contaminants in irrigation return flows

Based on a review of water quality data, Reclamation believes that Middle Loup River water can continue to be used for irrigation of existing crops with little likelihood that soil salinity hazards or harmful levels of exchangeable sodium would develop. Normal irrigation practices and rainfall will adequately leach soil salts that may develop. The conveyance of assets is not expected to result in adverse impacts associated with physiochemical constituents and/or

Conveyance of Assets FONSI Middle Loup Division pesticides. The level of selenium concentrations in irrigation return flows would not be affected. With conveyance of assets, the District would coordinate with Nebraska Department of Environmental Quality (DEQ) to address and resolve future water quality issues.

5. Future of lease with the Commission; impacts to fish and wildlife; and continued public access

As a part of the MOU, the District and the Commission have agreed to enter into an operating agreement that maintains fish and wildlife habitat and public access in accordance with Commission goals and objectives. Conveyance of assets would not substantially alter operation of the Division; would not impact fish and wildlife distribution, abundance, and movement; would have no adverse effect on migratory birds; and would not reduce public access. The operating agreement to be executed by the District and the Commission is attached to the MOU and included in the FEA attachments.

While the MOU addresses the application of NEPA to the proposed conveyance of assets, it does not address application of the Endangered Species Act (ESA) to the conveyance. By requiring that the Secretary shall convey the assets, Congress mandated conveyance of the Division from the United States to the District. This mandatory requirement to convey the assets from the United States to the District did not provide the Secretary with authority to unilaterally alter or condition the terms of the conveyance. In light of these factors, Reclamation has determined that conveyance of the assets is a non-discretionary Federal action and therefore, as a matter a law, is not subject to section 7 of the ESA. Nonetheless, Reclamation undertook a voluntary evaluation of the effects of conveyance on listed species and critical habitat. Reclamation determined, as a result of the voluntary evaluation, that the appropriate finding under section 7 is that the transfer of title will have no effect on listed species or proposed critical habitat. This finding is predicated on the fact that the District has agreed to manage the Division in a manner substantially similar to current management under Reclamation ownership. Thus, the mere act of conveying assets to the District is not a Federal action that will affect listed species or critical habitat. Consequently, even though Reclamation has determined, as a matter of law, that section 7 is not applicable to the conveyance of assets, we have voluntarily determined that conveyance of the assets has no effect on listed species or critical habitat. Operational effects have been fully addressed through formal consultation and through acceptance of the August 29, 2002 Biological Opinion (BO) provided by the U.S. Fish and Wildlife Service (Service).

6. Cleanup of hazardous materials

A Hazardous Materials Survey Report was prepared by Reclamation and released on April 23, 2002. No hazardous waste sites meeting Comprehensive Environmental Response, Compensation, and Liability Act criteria were identified in the Division.

Conveyance of Assets FONSI Middle Loup Division In March 1997, two underground storage tanks. for gasoline and gasoline/.oil mixture were removed from Tradewinds Marina. 'During the-'"removal process, leaks and contaminated soil were discovered. The site was overexcavated to remove contaminated soil, new tanks were installed, and backfilled with clean material. A preliminary assessment conducted by the DEQ in August 1997 confirmed that contaminated soil was still present at the site. The DEQ placed the site on the Nebraska Leaking Underground Storage Tank Funding Priority List with a priority rating of 117 out of 498 sites.

Reclamation and the District intend that the District will, upon transfer of the assets, assume responsibility for reporting and working with all Nebraska and federal agencies regarding hazardous materials inventory and remediation activities administered by the DEQ. Reclamation has received correspondence from DEQ acknowledging the District's assumption of this responsibility.

7. Input, influence, and access of all interested parties to project-related activities

Following conveyance of assets, NEPA-related public involvement requirements would no longer generally apply to management, operation, or maintenance activities within the Division unless such activities require permits or funding from federal agencies other than Reclamation. Public involvement and disclosure of proposed activities at the Division would be provided in accordance with District rules and/or subject to State of Nebraska open meetings and open records laws.

8. Safety of Dams

When Division assets are formally conveyed to the District, Reclamation will no longer be responsible for Safety of Dams-related activities. The dam safety regulatory responsibility will be formally transferred to State of Nebraska, and the dam safety ownership responsibilities will be transferred to the District. Liability for the structure and its operation will become the sole responsibility of the District.

Following issuance of the draft Environmental Assessment (DEA), Reclamation completed a more detailed dam safety risk analysis. Representatives of the District participated in the risk analysis process to facilitate transfer of technical information prior to title transfer. The results of the risk analysis are documented in the July 2002 Sherman Dam Issue Evaluation Risk Analysis and Report of Findings (2002 Risk Analysis).

The 2002 Risk Analysis confirmed risks associated with hydrologic and seismic loadings on the dam are low and additional risk reduction actions are not warranted at this time. However, the 2002 Risk Analysis identified a high degree of uncertainty associated with dam safety risks related to seepage and piping potential under static loading conditions. The 2002 Risk Analysis Conveyance of Assets FONSI Middle Loup Division Report of Findings identified six new Safety of Dams-related recommendations to better define static risks and the possible need for additional risk reduction actions.

In July 2002, Reclamation met with State of Nebraska and the District to discuss the results of the 2002 Risk Analysis and Reclamation's draft decisions related to actions necessary to address the six new Safety of Dams-related recommendations. Reclamation will transmit a final decision document to the State of Nebraska and the District with appropriate guidance related to actions and schedules necessary to address the new Safety of Dams-related recommendations. The District and State of Nebraska will be responsible for ensuring timely completion of the recommendations. The information resulting from the completion of these recommendations will be utilized by the District and State of Nebraska to determine the need for additional risk reductions, if any, at Sherman Dam.

Reclamation has revised the Standing Operating Procedures and Emergency Action Plan for Sherman Dam to ensure the accuracy of information in those documents. Copies of dam safety-related documents necessary for the District and State of Nebraska to assume their roles as owners and regulators of the facility were made available to the parties. Immediately preceding conveyance, Reclamation will meet with State of Nebraska and the District to provide a final summary of all dam safety issues and recommendations.

9. Responsibility for drainage facilities downslope from Sherman Reservoir

A portion of the Division assets to be conveyed include Reclamation facilities and land rights in the Middle Loup River valley in and around Loup City. These facilities and land rights have been developed or acquired by Reclamation for the purposes of collecting and draining excess groundwater. Following conveyance of assets, any addition, modifications, and operation and maintenance of these facilities and land rights will become the responsibility of the District.

Response to Comments

Reclamation received comments from the Service, the Commission, DEQ, the District, Nebraska Department of Natural Resources (DNR), and Nebraska State Historical Society.

Comment

The DNR stated that the taxpayer's financial interest and public aspects of the project must be protected and that they believe it would be appropriate to describe and discuss the financial condition and stability of the entities taking over the irrigation facilities.

Response

Reclamation's Framework for Title Transfer requires the Federal Treasury and the taxpayers' financial interest be protected. Public aspects of the project must also be protected. To that end,

Conveyance of Assets FONSI Middle Loup Division the District has committed to manage the Division in a manner substantially similar to the manner in which it was managed before the conveyance of assets. The District has operated and maintained the Division for over forty years utilizing District funds and expertise. In addition, the District has entered into the following agreements that provide for the continued operation of project facilities and protection of fish, wildlife, recreation, cultural, and historical resources associated with the District:

• "An Agreement to Adopt and Execute a Perpetual Conservation Easement and an Operating Agreement Between the Loup Basin Reclamation District and the State of Nebraska Game and Parks Commission" (Agreement) has been executed that provides that the District and the Commission will execute the conservation easement and the operating agreement, as prepared in final form and attached to the above Agreement upon conveyance of the assets to the District.
• The District and the Middle Loup Public Power and Irrigation District have executed a contract that provides for the continuation of service with the Middle Loup Public Power and Irrigation District subsequent to the conveyance of the assets to the District.
• A "Memorandum of Agreement between the Bureau of Reclamation, the Nebraska State Historic Preservation Officer, the Board of Regents of the University of Nebraska, and the Loup Basin Reclamation District Concerning the Transfer of Lands and Structures of the Middle Loup Division of the Pick-Sloan Missouri Basin Program Out of Federal Ownership" was executed by all parties that incorporates the provisions of the June 20, 2001 Management Plan and provides that the District and the UNL State Museum will execute the preservation easement, as prepared in final form and attached to the above Agreement upon conveyance of the assets to the District. The above Agreement provides for the preservation and further study of identified sites and to assist in the preservation or recovery of artifacts.

Reclamation's Framework for Title Transfer requires the public aspects of the project be protected including public safety. To that end, the District has committed to assume the responsibilities for reporting, working with or cooperating with the DEQ regarding water quality and hazardous materials programs that they administer and with the DNR regarding the safety of dams program that they administer.

• The DNR has advised the District that "DNR is obligated to inspect all dams located within the State of Nebraska pursuant to Neb. Rev. Stat. 46-277 ...once title is transferred, the Department would inspect those facilities in accordance with established dam safety standards." The Dam Safety Regulatory responsibility will be formally transferred to the State of Nebraska, and Dam Safety ownership responsibilities will be transferred to the District upon execution of conveyance of the assets. Liability for the structure and its operation and maintenance would become the sole responsibility of the District.

Conveyance of Assets FONSI Middle Loup Division The purchase price of the Division was established by Congress through P.L. 106-366. The purchase price was derived using established methodologies to protect the Federal Treasury and the taxpayers' financial interest. Reclamation has no discretion to alter the purchase price. Reclamation is satisfied that these agreements and easements and the continued involvement of the District, Commission, LTNL, DNR, and other entities are sufficient to protect public aspects of the Division.

Comment

The Service recommended that Table III-3 in the DEA be revised to include new information on the average monthly net depletions.

Response

Table III-3 has been revised in the FEA to include the new average monthly depletion data. The remaining comments received expressed support for the conveyance of assets.

Changes Made to the Final EA

There were no substantive changes made to the DEA in the development of the FEA. Editorial revisions were necessary to clarify aspects of the document, to assure accuracy, and to include comments and responses.

Findings

In consideration of the requirements of P.L. 106-366, Reclamation's analyses and resolution of the issues identified during the NEPA compliance process, I find that all relevant issues associated with the conveyance of assets have been identified, evaluated, and properly addressed. Many of these issues have been resolved through formal agreements between Reclamation, the District, and various governmental bodies within the State of Nebraska. Further, I find that:

• the requirements identified in Reclamation's Framework for Title Transfer have been satisfied;
• the Division will be managed in a manner substantially similar to current operations;
• conveyance of assets will have no effect on listed threatened or endangered species nor critical habitat and that operational effects have been fully addressed through formal consultation and through acceptance of the August 29, 2002 BO provided by the Service;
• Conveyance of Assets FONSI Middle Loup Division conveyance of assets will not adversely affect wetlands (E.O. 11990), flood plains (E.O. 11988), nor migratory birds (E.O. 13186);
• agreements between the District, State of Nebraska, and UNL will ensure that cultural resources are not adversely affected;
• no Indian trust assets are located within the area affected by the Division. Consultation with potentially-affected tribes was initiated in 1995 and no Indian trust assets were identified in the Division or that would be affected by project operation. A more comprehensive consultation process was reinitiated in 2001 and concluded with similar results; and
• there will be no adverse effects to minority or economically-disadvantaged communities and that the proposed action complies with Executive Order 12868 - Environmental Justice.

Based on my consideration of all of the issues brought forward by the proposed conveyance of assets and the measures taken to address and resolve those issues, I conclude that conveyance of Division assets from the United States to the District as authorized by P.L. 106-366 would have no significant effect on the quality of the human environment as defined by the NEPA and its implementing regulations. Therefore, preparation of an environmental impact statement is not necessary prior to conveyance of the assets of the Division to the District.