B-234347, Aug 8, 1990

B-234347, Aug 8, 1990

MISCELLANEOUS TOPICS - Environment/Energy/Natural Resources - Watershed projects - Alternatives - Statutory compliance - Authority legislation DIGEST: 1. The Water Supply Act of 1958, 43 U.S.C. Sec. 390b, authorizes municipal and industrial (m i) water storage to be included in any reservoir project of the ebureau of Reclamation or the Army Corps of Engineers. The act's purpose is to add additional reservoir capacity either prior to additional reservoir capacity either prior to original reservoir construction or by additional construction. It does not authorize the reallocation of water from an authorized project purpose to m i water supply. Accordingly, the contracts reviewed are not authorized by the Water Supply Act. MISCELLANEOUS TOPICS - Environment/Energy/Natural Resources - Watershed projects - Surplus water - Use MISCELLANEOUS TOPICS - Environment/Energy/Natural Resources - Watershed projects - Alternatives - Statutory compliance - Authority legislation 2. Section 6 of the Flood Control Act of 1944, 33 U.S.C. Sec. 708, authorizes the Secretary of the Army to supply surplus reservoir water for municipal and industrial uses. This authority applies only to water that is excess to the needs of authorized project purposes. It cannot be determined from the facts made available whether the water subject to the contract reviewed qualifies as surplus.

Honorable Butler Derrick

House of Representatives:

Our Resources, Community, and Economic Development Division issued to you its report, WATER RESOURCES: Corps of Engineers' Drought Management of Savannah River Projects, GAO/RCED-89-169, on June 12, 1989. As you will recall, the report concerns the U.S. Army Corps of Engineers (Corps) Savannah District's management of the three Savannah River Basin reservoirs-- Hartwell, Richard B. Russell, and J. Strom Thurmond- during the drought which began in July 1987.

Incident to our analysis of how the district managed the reservoirs during the drought, our Office reviewed the authorized project purposes for the three reservoirs. As provided in the report, this opinion deals with the Corps' legal basis for using each of the reservoirs for water supply purposes.

By letter of February 8, 1989, we requested the Secretary of the Army to inform us of the legal basis for every water supply contract for each of the three reservoirs. On November 21, 1989, a response was received from the Deputy for Planning Policy and Legislative Affairs of the Office of the Assistant Secretary of the Army. Attached was an opinion from the Corps' Chief Counsel, dated September 20, 1989, on the authority for water supply contracts at Lakes Hartwell, Russell and Thurmond, copies of pertinent contracts, as well as a copy of an opinion prepared by the Army General Counsel, dated March 13, 1986, regarding proposed contracts for municipal and industrial (m i) water withdrawals from Main Stem Missouri reservoirs. A copy of that response is enclosed.

The executed contracts referred to by the Chief Counsel included agreements for water from Hartwell and from Thurmond. The Duke Power (Hartwell) contract, two of the three City of McCormick (Thurmond) contracts, and the City of Lincolnton contract (Thurmond) are purportedly authorized under the Water Supply Act. The City of Washington (Thurmond) contract, we are told, is authorized under section 6 of the Flood Control Act of 1944. In addition, under current consideration are two contracts for Hartwell, three for Thurmond, and one contract for Russell. We are told that all six contracts are being drafted pursuant to the Water Supply Act.

LEGAL OPINION

As explained below, although the Corps, consistent with its longstanding policy and practice, claims authority under the Water Supply Act of 1958 for several of the above contracts, we are unpersuaded that the act provides such authority. The contracts provide for the reallocation of existing water supply capacity for the purpose of serving municipal water supply needs. However, as we read the Water Supply Act, it authorizes increasing water supply capacity only through reservoir construction or expansion. It does not permit reallocation for purposes not included in the original construction or subsequent expansion of the reservoirs. Municipal water supply was not included in the original construction of the reservoirs, nor is there any indication that the reservoirs were expanded to provide additional storage space for this purpose. Accordingly, we believe the Corps lacks authority under the Water Supply Act for these contracts.

Additionally, for one contract-- with the City of Washington, Georgia-- the Corps cites section 6 of the Flood Control Act of 1944 as authority. Section 6 authorizes the Corps to supply reservoir water for m i purposes, even if this is not an authorized project purpose. However, under the statute, this may be done only when the water is surplus, i.e., when it exceeds what is needed for existing authorized purposes. The Corps, which previously took a very restrictive view of its authority under section 6, now construes that authority much more broadly. While acknowledging that, under the statute, the water must be "surplus water," the Corps has apparently made no determination that the m i water supplied under the City of Washington contract is, in fact, surplus to authorized reservoir purposes. Rather, the Corps seeks to justify the contract on the basis of a less restrictive standard-- one that, in our opinion, is insufficient to satisfy the express requirement of section 6. Accordingly, we believe that, on the basis of the present record, the City of Washington contract is not authorized under section 6 of the Flood Control Act.

DISCUSSION

When Corps reservoirs are authorized by the Congress, each reservoir's purposes are specified either in the authorizing legislation or in the Corps' reports, which are incorporated by reference. Additional purposes are sometimes added by subsequent legislation dealing with particular reservoirs.

The principal purposes of the three reservoirs involved in the contracts under review (Hartwell, Thurmond, and Russell) are flood control and hydropower. Municipal water supply is not an authorized purpose for any of the three reservoirs.

Water Supply Act Contracts

The three contracts for which the Water Supply Act is cited as authority are described below.

Duke Power Company

Contract DACW21-67-C-0011, June 2, 1967, with Duke Power Company, is for water storage at Hartwell for an initial term of 50 years. The contract states that Duke will utilize storage space available in the allocated power storage of the project as a source of present and future m i water for the City of Anderson, South Carolina, and the surrounding vicinity. The contract recites that it is executed under the authority of the Water Supply Act and indicates that Duke will contribute to the (already incurred) reservoir construction costs.

City of McCormick

Contract DA(S)-09-133 CIVENG-56-3, January 12, 1956, with the City of McCormick, South Carolina, provides that the Corps will give the city water supply storage space at Clark Hill Reservoir (Thurmond) for up to 600 acre-feet annually for a period not to exceed 50 years. The contract referred to the Act of April 11, 1955, chapter 25, (Pub. L. No. 84-23), which authorized the contract and required that money received from the city be deposited in the U.S. Treasury as miscellaneous receipts.

The 1956 contract was modified on April 26, 1968, to include an additional 600 acre-feet of storage space available in the allocated power storage of the project as a source of present and future water supply. Modification No. 2, dated September 17, 1971, increased the available storage space another 600 acre-feet, to a total of 1,800 acre feet of water annually from the reservoir. Both modifications cite the Water Supply Act as authority.

City of Lincolnton

Contract DA-09-133-CIVENG-64-16, with the City of Lincolnton, Georgia, dated May 11, 1964, uses space available in the allocated power storage of Thurmond as a source of present water supply for an initial period of 50 years. The city is to pay a share of the construction and other costs of the reservoir previously assigned to power production.

Water Supply Act

The Corps' longstanding position is that the Water Supply Act authorizes the Corps to enter into long-term contracts, such as those under review, that provide for the reallocation of existing water supply capacity for the purpose of serving municipal water supply needs. Indeed, over the years since enactment of the Water Supply Act, the Corps has entered into numerous contracts for this purpose on the basis of that purported legislative authority. Further, as noted above, six additional contracts the Corps has under current consideration are all being drafted pursuant to the Water Supply Act. However, on the basis of our examination of the language and legislative history of the Water Supply Act, we are unpersuaded that the act provides the Corps with authority for such reallocation contracts.

The Water Supply Act of 1958, Title III of Pub. L. No. 85-500, as amended, is codified at 43 U.S.C. Sec. 390b. Its concern, as stated in the act's Declaration of Policy, is with "developing ... water supplies." The act expressly recognizes that state and local interests have "primary responsibilities" in developing their water supplies. The act provides that the federal role should be to "participate and cooperate" with state and local interests in developing these water supplies "in connection with the construction, maintenance, and operation of Federal ... projects."

To that end, the act authorizes, for the purpose of impounding water for present or future local needs, the inclusion of "storage ... in any reservoir project surveyed, planned, constructed ... or to be constructed." In addition, the reasonable value of the impounded water may be taken into account in estimating the economic value of the entire project.

These statutory provisions strongly suggest that, under the Water Supply Act, authorization to provide water for local needs is limited to what may be accomplished through construction or expansion of reservoirs. This is even more evident in the following two statutory provisos:

"Provided, That the cost of any construction or modification authorized under the provisions of this section shall be determined on the basis that all authorized purposes served by the project shall share equitably in the benefits of multiple purpose construction. ... Provided further, That before construction or modification of any project including water supply provisions for present demand is initiated, State or local interests shall agree to pay for the cost of such provisions in accordance with the provisions of this section. 43 U.S.C. Sec. 390b(b).

Thus, the Water Supply Act authorizes the Corps to include space for water storage for m i purposes when it builds or modifies reservoirs under its jurisdiction. This contemplates the physical construction of storage for m i water supply, either by inclusion of storage space for this purpose in a reservoir to be constructed or in the construction of additional storage space in an existing reservoir, for example, by increasing its height. But the act does not appear to provide authority to reallocate water supplies for m i purposes in reservoirs previously constructed or modified. Thus the act specifies that, before initiation of such construction or modification, the state or local interests desiring the water storage for m i present demand purposes must agree to pay for the cost.

The Chief Counsel's opinion asserts, consistent with the Corp's longstanding practice, that the Water Supply Act authorizes the described contracts, with the exception of the first City of McCormick contract, which was specifically authorized by the Congress. However, aside from quoting portions of the Water Supply Act, including the provision for present water needs, no support is offered for this assertion.

As noted above, as we read the act, when m i water supplies are needed as soon as available, local interests desiring the water supply must contract with the Corps before initial construction or modification of a reservoir. If this is done, then a part of the capacity of the reservoir may be dedicated for m i purposes. This, in our view, is the way that planned storage for m i water supply, available upon completion of facility construction (present demand), may be included in reservoir projects. /1/

The act's focus on new construction or modification of reservoirs is reflected in its legislative history. The act resulted from congressional concern that national water supplies were limited and, with increasing demand associated with a growing population, there was a need to provide for the "optimum development" of dam sites, including water supply storage in reservoirs, and "for development of water supplies for all purposes." See S. Rep. No. 168, 85th Cong., 1st Sess. 111 (1957); H.R. Rep. No. 1122, 85th Cong., 1st Sess. 57 (1957).

We find no indication of congressional intent to authorize reallocation of already available water supplies. See H.R. Rep. No. 675, 87th Cong., 1st Sess. 13 (1961), in which the Conference Committee dealing with the proposed amendment of other provisions of the Water Supply Act, referred to the 1958 act as providing the authority "to include municipal and industrial water supply capacity in reservoirs."

The contracts, which the Chief Counsel contends are authorized by the Water Supply Act, reallocate existing storage capacity from power to m i uses. However, there is no indication that m i storage capacity either was included in the original construction of the reservoirs or that the reservoirs were expanded to provide additional storage space, as authorized by the Water Supply Act. Further, the contracts in question were not executed prior to construction of the reservoir or its modification, as required by the provisions of the act affecting water supply for present demand. Therefore, we believe that, despite the Corps' longstanding practice, the Water Supply Act of 1958 does not provide authority for the contracts we have reviewed, which deal with the reallocation of water supplies from an authorized project purpose-- power- - to an otherwise unauthorized purpose-- m i water supply. Flood Control Act

City of Washington

Contract DACW21-76-C-0045 with the City of Washington, Georgia, for withdrawal of water at Thurmond, dated December 12, 1975, and supplemented on May 14, 1982, grants the city the privilege of withdrawing water at a rate of up to 2 million gallons per day but not to exceed 700 million gallons per year. The city specifically recognizes that it acquires no right to the use of storage space. While the contract is for up to 50 years, and may be extended by mutual agreement, either party may terminate the contract and the privilege of withdrawing water upon 30 days' written notice.

The Corps' Chief Counsel states that the contract is authorized by section 6 of the Flood Control Act of 1944, as amended, 33 U.S.C. Sec. 708. Section 6 provides as follows:

"The Secretary of the Army is authorized to make contracts with States, municipalities, private concerns, or individuals, at such prices and on such terms as he may deem reasonable, for domestic and industrial uses for surplus water that may be available at any reservoir under the control of the Department of the Army: Provided, That no contracts for such water shall adversely affect then existing lawful uses of such water. All moneys received from such contracts shall be deposited in the Treasury of United States as miscellaneous receipts."

The Corps' Chief Counsel acknowledges that "Section 6's primary requirement is that the water withdrawn must be 'surplus water.'" According to a 1986 memorandum by the Army General Counsel, the Corps had previously adopted a narrow interpretation of the meaning of the term "surplus" and of its authority under section 6. Under the Corps' previous interpretation, if reservoir water was being used for authorized purposes, or could be used for such purposes, then the water could not be considered "surplus" and section 6 did not authorize reallocation of the water for otherwise unauthorized purposes.

Now, however, the Corps takes a much broader view of its authority under section 6. While still acknowledging that, under the statute, the water must be "surplus water," the Corps' Chief Counsel goes on to state: "Congress chose not to define this term in the statute, instead leaving the determination of what qualifies as surplus water to the Army." The Chief Counsel then asserts the following basis for his conclusion that the City of Washington contract is authorized under section 6:

"The determination that the Corps made in executing the contract was the very determination that Section 6 authorized the Corps to make: that the use of the waters to be withdrawn for municipal water supply, in combination with other uses of the lake's waters, represented a proper balance of project purposes." We question whether this determination is sufficient to satisfy the express requirement of of section 6 of the Flood Control Act. /2/ As noted above, m i use is not among the authorized purposes of the Thurmond Reservoir. As we read the statute, contracts for such use may be justified under section 6 of the Flood Control Act only if the water is "surplus" to the needs of authorized purposes.

As noted above, the Corps' Chief Counsel acknowledges that, under section 6, water withdrawn for m i use must be "surplus water." However, the Chief Counsel never proceeds to state, or even to suggest, that the Corps, on whatever reasonable basis it might choose, has determined that the water is, in fact, surplus-- that it is not currently needed to satisfy authorized project purposes.

He does not provide any factual basis for what appears to be a requisite statutory determination, nor indeed, does he even assert that the water for the City of Washington is unneeded for authorized purposes. Rather, the Chief Counsel bases his justification for the contract on a different- - and less restrictive-- determination than the one specified in section 6 of the Flood Control Act. The basis for the Chief Counsel's claim of authority appears to be the Corps' determination "that the use of the waters to be withdrawn for municipal water supply, in combination with other uses of the lake's waters, represented a proper balance of project purposes."

However, municipal water supply is not among the authorized purposes of the Thurmond Reservoir. In our view-- and the Corps' Chief Counsel apparently does not dispute the point-- under section 6, the Corps may not contract for any m i use of reservoir water unless it first determines that the water is "surplus" to the needs of authorized project purposes.

Thus, the Corps acknowledges that, under section 6, the water allocated for m i use must be "surplus water." However, there is no evidence that the Corps has made the requisite determination that the water is, in fact, surplus. The less restrictive requirement on which the Corps appears to rely-- that withdrawal of water for m i use "represents a proper balance of project purposes"-- is, in our view, insufficient to satisfy the express requirement of 6.

Accordingly, on the basis of the present record, we believe that the City of Washington contract is not authorized under section 6 of the Flood Control Act. /3/

CONCLUSION

On the basis of the foregoing discussion, we believe the Water Supply Act of 1958, which appears to be concerned only with increasing water supply capacity through reservoir construction or expansion, does not permit the reallocation of water from a reservoir's authorized purposes to otherwise unauthorized purposes. Therefore, in our view, that act does not provide authority for the water supply contracts we have reviewed.

We also believe that, while section 6 of the Flood Control Act of 1944 does authorize the use of water for otherwise unauthorized project purposes, the water that is used must be surplus, i.e., not needed for authorized uses. The Corps acknowledges that, under section 6, the water must be "surplus water." However, there is no evidence that the Corps has made a determination that the m i water supplied under its contract with the City of Washington is, in fact, surplus. Rather, the Corps apparently seeks to justify the contract on the basis of a less restrictive requirement-- one that is insufficient to satisfy the express requirement of section 6. Accordingly, we believe that, in the absence of a determination that the water is, in fact, surplus to authorized purposes, the City of Washington contract may not be justified under section 6 of the Flood Control Act.

We recognize that the opinions expressed here are at odds with the views of the Corps concerning the scope of its authority with respect to both the Water Supply Act and the Flood Control Act. We also appreciate the Corps' desire to provide for municipal water supply needs. However, we question whether the statutory scheme represented by the Water Supply Act and the Flood Control Act provides the Corps with the authority necessary to justify the contracts we have reviewed.

In our view, under the current statutory scheme, the Corps may supply municipal water from existing reservoirs only under the following circumstances: /4/

1. Municipal water supply was included in the original construction of the reservoir and the municipality agreed to pay the cost before such construction or expansion.

2. The reservoir will be expanded to include municipal water supply and the municipality agrees to pay the cost of expansion for such purpose.

3. The Corps has determined that the water to be reallocated to meet otherwise unauthorized municipal water supply needs is surplus to authorized reservoir purposes.

In addition, Congress could enact specific legislation adding municipal water supply as a project purpose for an individual reservoir or (as in the case of the first City of McCormick contract) reallocate reservoir water to serve the water supply needs of particular municipalities. Further, Congress could, of course, adopt appropriate amendments to the Water Supply Act and the Flood Control Act to expressly provide the Corps with the broad discretion it now claims to reallocate water to meet otherwise unauthorized municipal water supply needs.

In view of the Corps' contrary interpretation of the scope of its authority under the Water Supply Act and the Flood Control Act, the Congress may wish to determine whether, under the existing statutory scheme, municipal water supply needs are being satisfied in accordance with congressional expectations.

We hope the foregoing is helpful to you. Unless you publicly announce its contents earlier, we plan no further distribution of this opinion until 30 days from this date.

/1/ The act also authorizes the allocation of up to 30 percent of the cost of construction of a reservoir project to include anticipated future demand for municipal water. In this case, local interests are not required to contract for the water prior to construction. The Corps does not state that such capacity was added to the reservoirs.

/2/ In support of his contention that the Corps' contract with the City of Washington was authorized under section 6, the Chief Counsel refers to a memorandum from the Army General Counsel, dated March 13, 1986, which dealt with contracts for m i water withdrawals from Lake Sakakawea (Garrison Dam) on the main stem of the Missouri River. In that memorandum, the Army General Counsel pointed out that none of the water from Lake Sakakawea intended for irrigation was being used for that purpose. Therefore, she concluded that this unused water could be considered surplus within the meaning of section 6 of the Flood Control Act. The Army General Counsel went on to assert that, under section 6, the Secretary of the Army has authority "equivalent" to the authority of the Secretary of the Interior pursuant to the Reclamation Project Act of 1939. Under section 9(c) of the Reclamation Project Act, the Secretary of the Interior is authorized to enter into contracts for municipal water supply, subject to the requirement that "no contract relating to municipal water supply ... shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes." We question the validity of this assertion by the Army General Counsel. See in franote 2.

/3/ We also question the Army General Counsel's assertion, on which the Corps' Chief Counsel heavily relies, that under section 6, the Corps has authority "equivalent" to the authority of the Secretary of the Interior pursuant to the Reclamation Project Act. As the legislative history of the Flood Control Act, quoted by the Army General Counsel, makes clear, while section 6 conferred on the Secretary of the Army powers comparable to those conferred on the Secretary of the Interior, those powers could be exercised only when the waters were surplus. 90 Cong. Rec. 4134 (1944). Moreover, the Chief Counsel does not appear to base his claim of authority for the contract on the requirement of the Reclamation Project Act. does not refer to any determination, nor does he even assert, that withdrawal of the water "will not impair the efficiency of the reservoir's other purposes. Rather, his claim is purportedly based on the determination that withdrawal of the water "represented a proper balance of project purposes.

/4/ The act, also authorizes the allocation of up to 30 percent of the cost of construction of a reservoir project to include anticipated future demand for municipal water. In thus case, local interests are not required to contract for the water prior to construction.