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Released On: July 24, 2013

Reclamation Finalizes Water-Related Contracting Requirements
WASHINGTON - The Bureau of Reclamation has recently finalized four water-related Reclamation Manual Policies and Directives and Standards. These new policies accomplish the following goals: (1) better aligns the definitions of irrigation water use and municipal and industrial water use with relevant law; (2) provides improved parameters for contract price negotiations associated with future water transfers; and (3) fills policy gaps, and clarifies existing policy as it relates to the cost of Reclamation–supplied water. The general purpose of these revised policies is to direct Reclamation staff in duties relating to the development, negotiation, execution and administration of water-related contracts.

"These updates to the Reclamation Manual were developed in collaboration with Reclamation's stakeholders and strike an appropriate balance between the needs of family farms, the growing needs of adjacent communities, and the value of water in an arid environment," said Reclamation Commissioner Michael L. Connor. "In times of water scarcity, such as we face today in so much of the West, it is important to have tools available to focus limited resources on family farms and to expand the tools needed to maintain important water infrastructure."

The four Reclamation Manual releases are as follows:

  • Policy PEC P05, Water-Related Contracts-General Principles and Requirements;
  • Policy PEC P09, Transfers and Conversions of Project Water;
  • Directive and Standard PEC 05-01, Water Rates and Pricing; and
  • Directive and Standard PEC 09-01, Conversions of Project Water from Irrigation Use to Municipal and Industrial Use.

Reclamation posted the draft policies and directives and standards for public review and comment in September 2011 – initially for a 30-day period, and then extended to 60 days. Reclamation also provided a second 90-day public review and comment period in 2012.

The following are among the revisions made to the draft releases in response to public input:

  • The applicability of the new definitions was narrowed. Now, it will apply only to new non-agricultural irrigation water uses started after the policy becomes applicable to a given contract (which occurs when a contract is executed, renewed, amended or supplemented, rather than automatically when policy changes are issued). Previously established nonagricultural uses are unaffected by the new definitions. A flowchart was added to illustrate the definitions' applicability.
  • The 10-acre threshold in the definitions was removed to avoid confusion. Its purpose was to focus staff on the subdivision of irrigated lands to help ensure that project irrigation water continues to be used primarily in the business of farming and that water delivered for other uses is provided under appropriate contractual terms. The 10-acre term will appear in upcoming revisions to Reclamation Contract Compliance Review Directive and Standard, for purposes of administrative efficiency only.
  • The use of "market rates" was clarified. The bottom line is that market rates are not required. Rather, market data, where available, will be among the sources staff will use in formulating a proposed negotiating range for the authorizing official, specifically to determine a negotiating ceiling.
  • An option was added to include municipal and industrial payment capability studies. Contractors may request payment capability studies to use for adjustments to the established negotiating parameters for municipal and industrial water service rates, if determined to be warranted.
  • The provisions for continuing construction charges after payout under water service contracts was removed and such charges are no longer required.
  • Additional revenues generated from the application of municipal and industrial rate-setting options may accelerate repayment of the project and can be accumulated after payout – at the contractor's choice – to address future infrastructure rehabilitation needs.

Reclamation will host a webinar to explain these new policies and directives and standards on August 9, 2013. Information on the webinar will be posted on www.usbr.gov/recman. The webinar will focus on the key elements of the new releases and associated changes made in response to public input during the public review and comment process. Reclamation's ongoing outreach to stakeholders will also be discussed and a question and answer session will be held.

The new policies and directives and standards are available at www.usbr.gov/recman.

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Reclamation is the largest wholesale water supplier and the second largest producer of hydroelectric power in the United States, with operations and facilities in the 17 Western States. Its facilities also provide substantial flood control, recreation, and fish and wildlife benefits. Visit our website at www.usbr.gov.