Federal Water Policy Message to the Congress.

To the Congress of the United States:

I am today sending to Congress water policy initiatives designed to:

—improve planning and efficient management of Federal water resource programs to prevent waste and to permit necessary water projects which are cost-effective, safe and environmentally sound to move forward expeditiously;

—provide a new, national emphasis on water conservation;

—enhance Federal-State cooperation and improved State water resources planning; and

—increase attention to environmental quality. None of the initiatives would impose any new federal regulatory program for water management.

Last year, I directed the Water Resources Council, the Office of Management and Budget and the Council on Environmental Quality, under the chairmanship of Secretary Cecil Andros, to make a comprehensive review of Federal water policy and to recommend proposed reforms.

This new water policy results from their review, the study of water policy ordered by the Congress in Section 80 of the Water Resources Planning Act of 1974 and our extensive consultations with members of Congress, State, county, city and other local officials and the public.

Water is an essential resource, and over the years, the programs of the Bureau of Reclamation, the Corps of Engineers, the Soil Conservation Service and the Tennessee Valley Authority have helped permit a dramatic improvement in American agriculture, have provided irrigation water essential to the development of the West, and have developed community flood protection, electric power, navigation and recreation throughout the Nation.

I ordered this review of water policies and programs because of my concern that while Federal water resources programs have been of great benefit to our Nation, they are today plagued with problems and inefficiencies. In the course of this water policy review we found that:

—Twenty-five separate Federal agencies-spend more than $10 billion per year on water resources projects and related programs.

—These projects often are planned without a uniform, standard basis for estimating benefits and costs.

—States are primarily responsible for water policy within their boundaries, yet are not integrally involved in setting priorities and sharing in Federal project planning and funding.

—There is a $34 billion backlog of authorized or uncompleted projects.

—Some water projects are unsafe or environmentally unwise and have caused losses of natural streams and rivers, fish and wildlife habitat and recreational opportunities.

The study also found that water conservation has not been addressed at a national level even though we have pressing water supply problems. Of 106 watershed subregions in the country, 21 already have severe water shortages. By the year 2000 this number could increase to 39 subregions. The Nation's cities are also beginning to experience water shortage problems which can only be solved at very high cost. In some areas, precious groundwater supplies are also being depleted at a faster rate than they are replenished. In many cases an effective water conservation program could play a key role in alleviating these problems.

These water policy initiatives will make the Federal government's water programs more efficient and responsive in meeting the Nation's water-related needs. They are designed to build on fundamentally sound statutes and on the Principles and Standards which govern the planning and development of Federal water projects, and also to enhance the role of the States, where the primary responsibilities for water policy must lie. For the first time, the Federal government will work with State and local governments and exert needed national leadership in the effort to conserve water. Above all, these policy reforms will encourage water projects which are economically and environmentally sound and will avoid projects which are wasteful or which benefit a few at the expense of many.

Across the Nation there is remarkable diversity in the role water plays. Over most of the West, water is scarce and must be managed carefully—and detailed traditions and laws have grown up to govern the use of water. In other parts of the country, flooding is more of a problem than drought, and in many areas, plentiful water resources have offered opportunities for hydroelectric power and navigation. In the urban areas of our Nation, water supply systems are the major concern-particularly where antiquated systems need rehabilitation in order to conserve water and assure continued economic growth.

Everywhere, water is fundamental to environmental quality. Clean drinking water, recreation, wildlife and beautiful natural areas depend on protection of our water resources.

Given this diversity, Federal water policy cannot attempt to prescribe water use patterns for the country. Nor should the Federal government preempt the primary responsibility of the States for water management and allocation. For those reasons, these water policy reforms will not preempt State or local water responsibilities. Yet water policy is an important national concern, and the Federal government has major responsibilities to exercise leadership, to protect the environment and to develop and maintain hydroelectric power, irrigated agriculture, flood control and navigation.

The primary focus of the proposals is on the water resources programs of the Corps of Engineers, the Bureau of Reclamation, the Soil Conservation Service and the Tennessee Valley Authority, where annual water program budgets total approximately $3.75 billion. These agencies perform the Federal government's water resource development programs. In addition, a number of Federal agencies with water-related responsibilities will be affected by this water policy.

I am charging Secretary Andrus with the lead responsibility to see that these initiatives are carried out promptly and fully. With the assistance of the Office of Management and Budget and the Council on Environmental Quality, he will be responsible for working with the other Federal agencies, the Congress, State and local governments and the public to assure proper implementation of this policy and to make appropriate recommendations for reform in the future.

SPECIFIC INITIATIVES IMPROVING FEDERAL WATER RESOURCE PROGRAMS

The Federal government has played a vital role in developing the water resources of the United States. It is essential that Federal water programs be updated and better coordinated if they are to continue to serve the nation in the best way possible. The reforms I am proposing are designed to modernize and improve the coordination of federal water programs. In addition, in a few days, I will also be sending to the Congress a Budget amendment proposing funding for a number of new water project construction and planning starts. These projects meet the criteria I am announcing today. This is the first time the Executive Branch has proposed new water project starts since Fiscal Year 1975, four years ago.

The actions I am taking include:

• A directive to the Water Resources Council to improve the implementation of the Principles and Standards governing the planning of Federal water .projects. The basic planning objectives of the Principles and Standards—national economic development and environmental quality—should be retained and given equal emphasis. In addition, the implementation of the Principles and Standards should be improved by:

—adding water conservation as a specific component of both the economic and environmental objectives;

—requiring the explicit formulation and consideration of a primarily nonstructural plan as one alternative whenever structural water projects or programs are planned;

—instituting consistent, specific procedures for calculating benefits and costs in compliance with the Principles and Standards and other applicable planning and evaluation requirements. Benefit-cost analyses have not been uniformly applied by Federal agencies, and in some cases benefits have been improperly recognized, "double-counted" or included when inconsistent with federal policy or sound economic rationale. I am directing the Water Resources Council to prepare within 12 months a manual which ensures that benefits and costs are calculated using the best techniques and provides for consistent application of the Principles and Standards and other requirements;

—ensuring that water projects have been planned in accordance with the Principles and Standards and other planning requirements by creating, by Executive Order, a project review function located in the Water Resources Council. A professional staff will ensure an impartial review of pre-construction project plans for their consistency with established planning and benefit-cost analysis procedures and applicable requirements. They will report on compliance with these requirements to agency heads, who will include their report, together with the agency recommendations, to the Office of Management and Budget. Project reviews will be completed within 60 days, before the Cabinet officer makes his or her Budget request for the coming fiscal year. Responsibility will rest with the Cabinet officer for Budget requests to the Office of Management and Budget, but timely independent review will be provided. This review must be completed within the same budget cycle in which the Cabinet Officer intends to make Budget requests so that the process results in no delay.

—The manual, the Principles and Standards requirements and the independent review process will apply to all authorized projects (and separable project features) not yet under construction.

^. Establishment of the following criteria for setting priorities each year among the water projects eligible for funding or authorization, which will form the basis of my decisions on specific water projects:

—Projects should have net national economic benefits unless there are environmental benefits which clearly more than compensate for any economic deficit. Net adverse environmental consequences should be significantly outweighed by economic benefits. Generally, projects with higher benefit/cost ratios and fewer adverse environmental consequences will be given priority within the limits of available funds.

—Projects should have widely distributed benefits.

—Projects should stress water conservation and appropriate non-structural measures.

—Projects should have no significant safety problems involving design, construction or operation.

—There should be evidence of active public support including support by State and local officials.

—Projects will be given expedited consideration where State governments assume a share of costs over and above existing cost-sharing.

—There should be no significant international or inter-governmental problems.

—Where vendible outputs are involved preference should be given to projects which provide for greater recovery of Federal and State costs, consistent with project purposes.

—The project's problem assessment, environmental impacts, costs and benefits should be based on up-to-date conditions (planning should not be obsolete).

—Projects should be in compliance with all relevant environmental statutes.

—Funding for mitigation of fish and wildlife damages should be provided concurrently and proportionately with construction funding.

• Preparation of a legislative proposal for improving cost-sharing for water projects. Improved cost-sharing will allow States to participate more actively in project decisions and will remove biases in the existing system against non-structural flood control measures. These changes will help assure project merit. This proposal, based on the study required by Section 80 of P.L. 93-251, has two parts:

—participation of States in the financing of federal water project construction. For project purposes with vendible outputs (such as water supply or hydroelectric power), States would contribute 10% of the costs, proportionate to and phased with federal appropriations. Revenues would be returned to the States proportionate to their contribution. For project purposes without vendible outputs (such as flood control), the State financing share would be 5%. There would be a cap on State participation per project per year of 1/4 of 1% of the State's general revenues so that a small State would not be precluded from having a very large project located in it. Where project benefits accrue to more than one State, State contributions would be calculated accordingly, but if a benefiting State did not choose to participate in cost-sharing, its share could be paid by other participating States. This State cost-sharing proposal would apply on a mandatory basis to projects not yet authorized. However, for projects in the authorized backlog, States which voluntarily enter into these cost-sharing arrangements will achieve expedited Executive Branch consideration and priority for project funding, as long as other project planning requirements are met. Soil Conservation Service projects will be completely exempt from this State cost-sharing proposal.

—equalizing cost-sharing for structural and non-structural flood control alternatives. There is existing authority for 80%20% Federal/non-Federal cost-sharing for non-structural flood control measures (including in-kind contributions such as land and easements). I will begin approving non-structural flood control projects with this funding arrangement and will propose that a parallel cost-sharing requirement (including in-kind contributions) be enacted for structural flood control measures, which currently have a multiplicity of cost-sharing rules.

Another policy issue raised in Section 80 of P.L. 93-251 is that of the appropriate discount rate for computing the present value of future estimated economic benefits of water projects. After careful consideration of a range of options I have decided that the currently legislated discount rate formula is reasonable, and I am therefore recommending that no change be made in the current formula. Nor will I recommend retroactive changes in the discount rate for currently authorized projects.

WATER CONSERVATION

Managing our vital water resources depends on a balance of supply, demand and wise use. Using water more efficiently is often cheaper and less damaging to the environment than developing additional supplies. While increases in supply will still be necessary, these reforms place emphasis on water conservation and make clear that this is now a national priority.

In addition to adding the consideration of water conservation to the Principles and Standards, the initiatives I am taking include:

• Directives to all Federal agencies with programs which affect water supply or consumption to encourage water conservation, including:

—making appropriate community water conservation measures a condition of the water supply and wastewater treatment grant and loan programs of the Environmental Protection Agency, the Department of Agriculture and the Department of Commerce;

—integrating water conservation requirements into the housing assistance programs of the Department of Housing and Urban Development, the Veterans Administration and the Department of Agriculture;

—providing technical assistance to farmers and urban dwellers on how to conserve water through existing programs of the Department of Agriculture, the Department of Interior and the Department of Housing and Urban Development;

—requiring development of water conservation programs as a condition of contracts for storage or delivery of municipal and industrial water supplies from federal projects;

—requiring the General Services Administration, in consultation with affected agencies, to establish water conservation goals and standards in Federal buildings and facilities;

—encouraging water conservation in the agricultural assistance programs of the Department of Agriculture and the Department of Interior which affect water consumption in water-short areas; and

—requesting all Federal agencies to examine their programs and policies so that they can implement appropriate measures to increase water conservation and re-use.

• A directive to the Secretary of the Interior to improve the implementation of irrigation repayment and water service contract procedures under existing authorities of the Bureau of Reclamation. The Secretary will:

—require that new and renegotiated contracts include provisions for recalculation and renegotiation of water rates every five years. This will replace the previous practice of 40-year contracts which often do not reflect inflation and thus do not meet the beneficiaries' repayment obligations;

—under existing authority add provisions to recover operation and maintenance costs when existing contracts are renegotiated, or earlier where existing contracts have adjustment clauses;

—more precisely calculate and implement the "ability to pay" provision in existing law which governs recovery of a portion of project capital costs.

• Preparation of legislation to allow States the option of requiring higher prices for municipal and industrial water supplies from Federal projects in order to promote conservation, provided that State revenues in excess of Federal costs would be returned to municipalities or other public water supply entities for use in water conservation or rehabilitation of water supply systems.

FEDERAL-STATE COOPERATION

States must be the focal point for water resource management. The water reforms are based on this guiding principle. Therefore, I am taking several initiatives to strengthen Federal-State relations in the water policy area and to develop a new, creative partnership. In addition to proposing that States increase their roles and responsibilities in water resources development through cost-sharing, the actions I am taking include:

• Proposing a substantial increase from $3 million to $25 million annually in the funding of State water planning under the existing 50%-50% matching program administered by the Water Resources Council. State water planning would integrate water management and implementation programs which emphasize water conservation and which are tailored to each State's needs including assessment of water delivery system rehabilitation needs and development of programs to protect and manage groundwater and instream flows.

• Preparation of legislation to provide $25 million annually in 50%-50% matching grant assistance to States to implement water conservation technical assistance programs. These funds could be passed through to counties and cities for use in urban or rural water conservation programs. This program will be administered by the Water Resources Council in conjunction with matching grants for water resources planning.

• Working with Governors to create a Task Force of Federal, State, county, city and other local officials to continue to address water-related problems. The administrative actions and legislative proposals in this Message are designed to initiate sound water management policy at the national level. However, the Federal government must work closely with the States, and with local governments as well, to continue identifying and examining water-related problems and to help implement the initiatives I am announcing today. This Task Force will be a continuing guide as we implement the water policy reforms and will ensure that the State and local role in our Nation's water policy is constant and meaningful.

• An instruction to Federal agencies to work promptly and expeditiously to inventory and quantify Federal reserved and Indian water rights. In several areas of the country, States have been unable to allocate water because these rights have not been determined. This quantification effort should focus first on high priority areas, should involve close consultation with the States and water users and should emphasize negotiations rather than litigation wherever possible.

ENVIRONMENTAL PROTECTION

Water is a basic requirement for human survival, is necessary for economic growth and prosperity, and is fundamental to protecting the natural environment. Existing environmental statutes relating to water and water projects generally are adequate, but these laws must be consistently applied and effectively enforced to achieve their purposes. Sensitivity to environmental protection must be an important aspect of all water-related planning and management decisions. I am particularly concerned about the need to improve the protection of instream flows and to evolve careful management of our nation's precious groundwater supplies, which are threatened by depletion and contamination.

My initiatives in this area include the following:

• A directive to the Secretary of the Interior and other Federal agency heads to implement vigorously the Fish and Wildlife Coordination Act, the Historic Preservation Act and other environmental statutes. Federal agencies will prepare formal implementing procedures for the Fish and Wildlife Coordination Act and other statutes where appropriate. Affected agencies will prepare reports on compliance with environmental statutes on a project-by-project basis for inclusion in annual submissions to the Office of Management and Budget.

• A directive to agency heads requiring them to include designated funds for environmental mitigation in water project appropriation requests to provide for concurrent and proportionate expenditure of mitigation funds.

• Accelerated implementation of Executive Order No. 11988 on floodplain management. This Order requires agencies to protect floodplains and to reduce risks of flood losses by not conducting, supporting or allowing actions in floodplains unless there are no practicable alternatives. Agency implementation is behind schedule and must be expedited.

• A directive to the Secretaries of Army, Commerce, Housing and Urban Development and Interior to help reduce flood damages through acquisition of flood-prone land and property, where consistent with primary program purposes.

• A directive to the Secretary of culture to encourage more effective soil and water conservation through watershed programs of the Soil Conservation Service by:

—working with the Fish and Wildlife Service to apply fully the recently adopted stream channel modification guidelines;

—encouraging accelerated land treatment measures prior to funding of structural measures on watershed projects, and making appropriate land treatment measures eligible for Federal cost-sharing;

—establishing periodic post-project monitoring to ensure implementation of land treatment and operation and maintenance activities specified in the work plan and to provide information helpful in improving the design of future projects.

• A directive to Federal agency heads to provide increased cooperation with States and leadership in maintaining instream flows and protecting groundwater through joint assessment of needs, increased assistance in the gathering and sharing of data, appropriate design and operation of Federal water facilities, and other means. I also call upon the Governors and the Congress to work with Federal agencies to protect the fish and wildlife and other values associated with adequate instream flows. New and existing projects should be planned and operated to protect instream flows, consistent with State law and in close consultation with States. Where prior commitments and economic feasibility permit, amendments to authorizing statutes should be sought in order to provide for streamflow maintenance.

CONCLUSION

These initiatives establish the goals and the framework for water policy reform. They do so without impinging on the rights of States and by calling for a closer partnership among the Federal, State, county, city and other local levels of government. I want to work with the Congress, State and local governments and the public to implement this policy. Together we can protect and manage our nation's water resources putting water to use for society's benefit, preserving our rivers and streams for future generations of Americans, and averting critical water shortages in the future through adequate supply, conservation and wise planning.

JIMMY CARTER

The White House,

June 6, 1978.