B-230954, Aug 1, 1988

B-230954: Aug 1, 1988

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For wells is not barred just because the wells may also serve a secondary water supply function. hydroelectric power plant that is to supply power for the local water distribution system. Is not part of the system. The District is ineligible for a Public Law 84-130 loan for the power plant's construction. The District is ineligible for a Public Law 84-130 loan for either the purchase of wells or the construction of a hydroelectric power plant. As long as it is secondary to the water distribution function. We are of the opinion that a Public Law 84-130 loan for a local water distribution or drainage system is not barred because the facilities will also serve a secondary water supply function.

B-230954, Aug 1, 1988

APPROPRIATIONS/FINANCIAL MANAGEMENT - Budget Process - Funds transfer - Loans - Authority DIGEST: The Public Law 84-130 Program, 43 U.S.C. Sec. 421b, authorizes the Secretary of the Interior to loan funds to irrigation or water districts for local water distribution and drainage systems. A loan to the Yolo- Zamora Water District (District), California, for wells is not barred just because the wells may also serve a secondary water supply function. hydroelectric power plant that is to supply power for the local water distribution system, is not part of the system, and, therefore, the District is ineligible for a Public Law 84-130 loan for the power plant's construction. However, on the facts before us, the District is ineligible for a Public Law 84-130 loan for either the purchase of wells or the construction of a hydroelectric power plant.

The Honorable Vic Fazio

House of Representatives:

This responds to your letter of March 16, 1988, requesting our views about the efforts of the Yolo-Zamora Water District (District), Woodland, California, to obtain Public Law 84-130 water distribution loan program funds.

You request our opinion as to whether a project funded under Public Law 84-130 may serve a water supply function, as long as it is secondary to the water distribution function, i.e., delivery of water to the users. You also ask whether a hydroelectric facility that would be limited to supply power for project wells, may be funded under Public Law 84-130.

As explained below, we are of the opinion that a Public Law 84-130 loan for a local water distribution or drainage system is not barred because the facilities will also serve a secondary water supply function. However, based on the facts before use, we do not disagree with the denial of a loan for the purchase of wells. A hydroelectric power plant which supplies power for a local water distribution or drainage system nevertheless is not a part of such a system, and the construction of the power plant is not eligible for a Public Law 84-130 loan made for a local water distribution or drainage system.

BACKGROUND

The District wants the loan so that it can purchase privately owned wells and construct a hydroelectric power plant that would generate power exclusively for operating the pumps for some of the wells. The wells, according to the District, are intended to be used to improve the water quality in the system by mixing groundwater in areas with low boron with water from the Central Valley Project for transfer to high boron content areas. Some wells in high boron areas will be used for drainage as they are pumped. The loan request has been denied by the Bureau of Reclamation (Bureau) on the grounds that the wells are not part of a distribution system, but are instead part of a supply system. The loan for a hydroelectric plant was also denied because the Bureau does not consider such facilities to be covered by the loan program.

THE LOAN PROGRAM STATUTE

The Public Law 84-130 loan program was established by the Act of July 1, 1955, ch. 271, 69 Stat. 244, and was amended in 1956 and in 1972. This program, codified at 43 U.S.C. Sec. 421b, authorized the Secretary to make loans to irrigation districts and other public agencies to assist in the construction of local distribution and drainage systems.

WATER SUPPLY FUNCTION

Your letter included a copy of a memorandum from the Department of Interior (DOI) Associate Solicitor, Energy and Resources, to the Field Solicitor, Boulder City, dated October 9, 1981. In it, the Associate Solicitor considered whether Public Law 84-130 loans could be made for wells. He said that while wells normally serve a supply function, if it can be shown that they are bona fide (viable) components of a distribution and drainage system, they are eligible for purchase with program funds. According to him, this is a factual question to be decided by experts such as engineers and hydrologists.

As to the District's application for a Public Law 84-130 loan, the Office of the Regional Solicitor, Sacramento, informed the Regional Director of the Mid-Pacific Region of the Bureau of Reclamation that, based on the Associate Solicitor's 1981 memorandum, "the crucial issue is whether or not the wells are a viable component of a distribution and drainage system." Subsequently, on October 9, 1987, the Regional Office's Assistant Regional Director told the District that further investigation showed that the wells would serve a water supply rather than a water distribution function. Therefore, the loan was denied.

Under section 421b, loans may only be made for "local distribution and drainage systems." It is clear that the loans are limited to distribution and drainage and are not to include supply systems. Section 421b was amended in 1972 by Pub.L. No. 92-487, 86 Stat. 804, which enacted H.R. 9198. This bill, as introduced, included "local project water supply works" within the scope of the loan program. However, as recommended by a report from DOI, this change was dropped from the bill. See S. Rep. No. 1244, 92nd Cong., 2d Sess. 6, 7 (1972).

Since the loans may only be made for local distribution and drainage systems, the primary purpose of the loan must be for a distribution rather than water supply facility. However, we find no restriction in the authorizing legislation that would require denial of a loan for a water distribution facility because it may incidentally serve a water supply purpose. Since supply and distribution have a natural relationship, and in many ways represent different aspects of one larger system, circumstances are likely to be present where they overlap or are difficult to distinguish. The fact that this distinction is a difficult one to draw does not, however, relieve the agencies called upon to make this determination from doing so.

Subsequent to your letter, you forwarded additional correspondence from the District. In it, the District's Secretary states that the District wishes to use the wells to mix groundwater in low boron areas with water received from the Central Valley Project and transfer the water to those areas where the boron content is high. Thus, according to the Secretary, the wells will be used to distribute the water throughout the entire District by injecting it into the distribution system for the benefit of all landowners. Also, some of the wells would be used to remove drainage water. The Secretary of the District indicates that under the Associate Solicitor's opinion, the Bureau should not categorically reject a loan for wells which are part of a distribution or drainage system just because the wells may also supply water to District landowners.

The Bureau denied a loan for the wells based on its determination that the wells would serve a water supply rather than a water distribution function. It is not clear from the record that consideration was given to a circumstance where, although wells were used for water supply, this was incidental to serving a water distribution or drainage function. We think that if the primary use for the wells is for water distribution or drainage, an incidental or subsidiary water supply use would not bar a loan under Pub.L. No. 84 130, 43 U.S.C. Sec. 421b. However, based on the information that we have, we cannot disagree with the Bureau's conclusion that the wells would be used for water supply and not for water distribution.

HYDROELECTRIC POWER PLANT

Loan funds also were denied for the construction of a hydroelectric power plant which would supply electric power to some of the wells. The District regards the proposed hydropower facilities as an integral part of a distribution system. However, the Regional Solicitor's Office concluded that there is no authority for the loan either in 43 U.S.C. Sec. 421b or in the authorization for the Sacramento Canals Unit, Central Valley Project, which includes the Yolo-Zamora Water District.

Reclamation Projects, such as the Central Valley Project, ordinarily include the construction of storage reservoirs and related dams, canals and pumping plants, which are used to supply water to irrigation or water districts, which then convey the water in their own canals for distribution to farms and ranches. (See Schinmann v. United States, 618 F.Supp. 1030, 1031 (D.C. Wash. 1985) (Yakima Project)).

Section 2 of the Act of September 26, 1950, ch. 1047, 64 Stat. 1036, was amended by section 2 of Pub.L. No. 96-570, December 22, 1980, 94 Stat. 3339, to add the District to the Sacramento Valley Canals service area of the Central Valley Project. Neither Act expressly provides for the construction of hydroelectric power plants. Further, water distribution systems, which convey irrigation water from project supply facilities to farms or ranches via canals and laterals, do not normally encompass power plants which generate the energy that is sometimes needed by the distribution systems.

In the additional correspondence which you forwarded to us, the Secretary of the district stated his view that a hydroelectric power station is an essential part of the District's water distribution system. He points out that a source of power is an essential and integral part of the pumping plant which is necessary to lift water from underground and transport it through the distribution system. As in the answer to the first issue, the determination of which facilities are authorized for loans as part of a water distribution system is one the administrative agency must make. think the Bureau's determination in this case is reasonable because while a pumping plant must use energy to drive the pumps, the electrical energy used for this purpose is generally obtained from an outside source and is not an integral part of the pumping plant. We think it is reasonable to conclude that a hydroelectric power plant may not be considered to be part of the pumping plan and so not part of the distribution system. We think that they are different types of facilities, and find no indication that the legislation establishing the loan program took such an expansive view of a distribution system. Further, the Bureau of Reclamation has held that the wells for which the power will be generated would not be a part of the District's water distribution system. Accordingly, even if the power plant were a part of the wells' pumping plant, this would not make the power plant a part of the distribution system.

Consequently, it is our opinion that absent additional statutory authorization, loans available for the construction of local distribution and drainage systems under Pub.L. No. 84-130, 43 U.S.C. Sec. 421b, may not be used by the Bureau of Reclamation to financially assist the construction of a hydroelectric power plant by the Yolo Zamora Water District.

As agreed with your staff, unless you publicly announce its contents earlier, we do not plan to distribute this opinion further until 10 days from its issue date.