The Federal Water Rights Task Force makes the following recommendations in response to the specific questions in Section 389(d)(3) of P.L. 104-127.

Federal water rights may be acquired by reservation of unappropriated water by an Act of Congress for the primary purposes of the National Forests, by the appropriation of unappropriated water under State law for the secondary or other purposes of the National Forests, and by obtaining non-Federal water rights and transferring them to Federal ownership and use in accordance with State law. The Forest Service should assert and use reserved and other existing water rights before considering acquisition of new water rights (A.1). The Forest Service should consider acquiring new water rights only after review of existing water resources (A.2), pursuit of management strategies (A.3), and reliance on state programs that protect instream flows and lake levels (A.4). New federal water rights which are acquired for the secondary purposes of the National Forests must be obtained and exercised in accordance with State law (A.5).

1. Assertion of Federal water right claims in McCarran Proceedings. The United States should assert, when joined as a party in a proceeding pursuant to 43 U.S.C. §666 (the McCarran Amendment), any claims it may have under federal or state law to the use of water for National Forest purposes. The protection of minimum instream flows or lake levels for National Forest purposes, including those related to environmental protection, is a "use of water" for purposes of 43 U.S.C. §666. While these claims should be asserted, these Recommendations take no position on the merits of any particular claim, or on the issue of whether a particular federal or state statute provides an adequate legal basis for a claim. The United States is bound by the quantification of and establishment of priorities for federal and non-federal water rights which are decreed in these proceedings, and may not assert claims to the use of water for National Forest purposes which are inconsistent with such decrees.

2. Review of existing resources. In assessing water-related needs for environmental protection in a National Forest, the Forest Service should determine whether the attainment of that Forest’s purposes may require the use of water in addition to that available to the Forest Service as a result of the exercise of water rights held or claimed by the Forest Service, and whether the exercise of water rights owned or used for non-federal purposes will, as a practical matter, ensure that instream flows will be protected.

3. Pursuit of alternative management strategies. Before considering any acquisition of new Federal water rights for National Forest purposes, the Forest Service should first pursue alternative management strategies which do not require a change in ownership or exercise of water rights, or interfere with the diversion, storage and use of water under state law, but which may provide the environmental protection sought. These alternatives may include (a) Federally funded mitigation activities and programs; (b) voluntary non-Federal mitigation activities and programs; (c) land exchanges; and (d) other non-flow alternatives, including structural measures, that provide environmental benefits without interfering with the diversion, storage, and use of water supplies provided from facilities located on National Forest lands for non-Federal purposes.

4. Reliance on state programs that protect instream flows or lake levels. Where state laws allow water rights, reservations, or conditions to be established for protection of instream flows or minimum lake levels, the Forest Service should use these laws to attain National Forest purposes. It should recognize variations among state instream flow or lake level programs. Where such a state program will, as a practical matter, substantially satisfy a need for water for National Forest purposes, the Forest Service should accept that right as adequate for such purposes whether or not the right, on its face, is held for a different purpose. If a state program provides that instream flow or minimum lake level rights may be held only by the State or a State agency, the Forest Service should take such rights into account in developing its Forest management plans and FLPMA authorizations to the extent they fulfill Forest purposes. In addition, other aspects of some state laws, such as the appurtenancy doctrine, may be relevant to efforts to protect instream flows or lake levels. The Forest Service should retain authority to reopen any of its decisions that rely upon such a right that is subsequently abandoned, relinquished, adversely changed, or not exercised in accordance with its terms.

5. Acquisition of Federal water rights by appropriation or transfer. If other Federal water rights are not sufficient to attain National Forest purposes relating to environmental protection, and if pursuit of alternative management strategies (A.3) or reliance on state programs (A.4) do not fulfill such purposes, the Forest Service should seek to acquire any additional water required for such purposes through appropriation of unappropriated waters under state law or the voluntary sale, exchange, or donation of water rights in accordance with state law. Federal water rights required for the secondary purposes of the National Forests, including those based on FLPMA, NFMA, or MUSYA, can only be acquired and exercised under state law.

6. Objectives for Forest Service acquisition of water or water rights. The Forest Service must have a scientific basis for each proposed acquisition of water or water rights for environmental protection that is based on sound science and a site-specific assessment of the needs of the target species or habitat, and which includes an assessment of the likelihood that the acquisition will have the desired benefit. The Forest Service should monitor and evaluate the actual impacts of such acquisition as implemented.

1. Forest Service must obtain water for National Forest purposes in priority. The Forest Service must attain National Forest purposes through the acquisition of Federal water rights as discussed in A. above, and the exercise of those water rights in priority. This means that Forest Plans and decisions made under such Plans must recognize, plan for, and allow the continued exercise of non-federal water rights which have senior or superior rights to water that would otherwise be available for use for National Forest purposes.

2. Non-federal water rights are vested property rights. The Forest Service must recognize that a) pre-FLPMA water supply facilities, and the water rights associated with such facilities, are "valid existing rights" under § 701 of FLPMA; b) water rights established under State law are property rights for purposes of the Fifth Amendment to the United States Constitution; c) because Congress severed water from the public lands and allowed third parties to obtain vested rights in and to the continued use of water derived from public lands, absent an explicit grant of authority by Congress, the authority of the Forest Service derived from Property Clause of the United States Constitution and land management statutes does not include the ability to use land management authority to reallocate or otherwise obtain for federal use, without the payment of just compensation, water that has been appropriated by or on behalf of non-federal parties.

3. No legal authority for bypass flow requirements. The Forest Service must recognize that it does not have the legal authority for, and cannot require, as a condition of the grant or renewal of FLPMA authorizations for use of National Forest lands, a) the bypass of water that would otherwise be diverted by or stored in an existing facility for use pursuant to the exercise of a non-Federal water right, or b) that the person or entity making a beneficial use of water relinquish or transfer ownership of a water right. Accordingly, the Forest Service should seek to reach voluntary agreements with holders of non-Federal water rights which, in its judgment, may otherwise be exercised in a manner inconsistent with the attainment of National Forest purposes. To the extent allowed under applicable law, the Forest Service should also participate in water rights proceedings which may relate to non-Federal water rights affecting National Forest lands.

However, the Forest Service may require non-flow related conditions such as: dam safety requirements if other federal or state requirements are not sufficient to protect the public safety; reasonable best management practices relating to the maintenance, repair or replacement of such facilities; conditions relating to the use of such facilities for recreational purposes; or conditions that relate to the stocking or management of fish and wildlife in such facilities that do not affect the diversion, storage and use of water in such facility.

See Section A. above. Also:

1. Forest Service must recognize State instream flow programs. The Forest Service should attain National Forest purposes relating to the protection of minimum instream flows for environmental and watershed management purposes in a manner that recognizes the laws and circumstances of each state where it seeks to acquire water rights for this purpose. Where applicable state law does not allow the Forest Service to hold water rights obtained from willing sellers for this purpose, the Forest Service should first consider whether such law allows an alternative that provides adequate assurance that the federal investment will not be jeopardized or lost and that the acquired right will continue to be exercised for its intended purpose. In the event that existing state law does not allow federal ownership or the alternative just described, the Forest Service and the State should seek to jointly develop a mutually acceptable solution so that the Forest Service can obtain water rights from willing sellers through purchases or exchanges in that State. The City of Boulder Case Study included in Part VIII of this Report provides an example of the use of state instream flow programs to achieve National Forest purposes.

2. Water acquisitions should not adversely affect other interests. The Forest Service should seek to assure that its water acquisitions do not adversely affect market conditions for water and rights thereto, or adversely affect existing water transfer arrangements in a particular area. To the extent required by law, the Forest Service should mitigate social, economic, and environmental impacts that arise as the result of acquisitions for environmental protection on National Forest lands.

3. Forest Service should accept voluntary contributions. The Forest Service should accept and fully utilize voluntary contributions or donations of funds, property, labor, and materials from public and private sources to facilitate protection of National Forest lands.

1. These recommendations are intended to have no effect on existing State laws and regulations. To the extent that customs of water usage are elements of water rights, they may be affected only as the result of voluntary transactions.

1. Recommendations to the Forest Service:

a. Bypass Flow Authority. Because the Forest Service has not been delegated the legal authority to impose bypass flow requirements as a condition of the grant or renewal of land use authorization for existing water facilities on National Forest lands, if the Forest Service determines that such authority is necessary in order to attain the secondary or other purposes of the National Forests, it should request that Congress 1) repeal the relevant provisions of §701(g) and (h) of FLPMA, 2) repeal the relevant provisions of the 43 U.S.C. § 321 and 43 U.S.C. §661, 3) amend 43 U.S.C. §666 to provide for a FLPMA-related exception to the waiver of sovereign immunity, and 4) enact new legislation which both grants it the requested authority and authorizes the expenditure of funds sufficient to provide just compensation for the taking of valid existing rights.

b. System Optimization. Optimization of the operations of water supply facilities that are subject to FLPMA land use authorization requirements can, in some cases, provide environmental benefits without interfering with the diversion, storage, and use of water supplies provided from facilities located on National Forest lands. For example, if a water user has flexibility to meet water demands from a number of sources throughout the year, releases from a particular reservoir could be shifted to a period when the releases would optimize downstream environmental benefits. In addition, depending on applicable state laws and the facts of a particular case, water users can sometimes trade or exchange water supplies in a manner that benefits the aquatic environment of the National Forests. For this option to be feasible, the Forest Plan standards and guidelines must be sufficiently flexible to allow for and accept the results of this type of system optimization. The Cache la Poudre River Case Study included in Part VIII of this Report provides an example of system optimization that protected the exercise and use of non-federal water rights and provided environmental enhancements.

c. Watershed Approach. In the forest planning process, the Forest Service must develop and use stream- or reach-specific standards and guidelines (as opposed to Forest-wide standards) that recognize the existence and plan for the continued use of water related facilities and associated water rights that affect that particular stream or reach. In addition, in circumstances where there are several water supply facilities that affect a particular stream or reach, the Forest Service plan should facilitate coordinated permit proceedings, as this may identify additional opportunities for system optimization.

d. Land Exchanges. The Forest Service should pursue the exchange, based on fair market value, of National Forest lands occupied by water supply facilities, for inholdings or other lands that can be added to the same National Forest.

a. Incentives. Owners of water facilities may be willing to alter their water use practices if incentives to mitigate, protect or enhance aquatic habitat are made available by the federal government in the form of financial assistance or the provision of alternate water supplies. Some incentives, like tax credits, may require new federal legislation. Others may be possible within existing authority. These may include trading credits for water released by water users for storage in, or water from, a federal facility. A broad range of incentives could be made available if the Forest Service and other Executive agencies targeted existing grant and technical assistance programs and other resources to favor cooperating water rights holders.

b. Forest Service Revolving Fund. We recommend that Congress amend 16 U.S.C. § 499 and other applicable law, to direct that revenues from the grant or renewal of FLPMA authorizations for water supply facilities and related recreational or other uses of National Forest lands will be deposited into accounts available, without additional authorization or appropriation, for expenditure by the Forest Service for capital assets or long-term measures that provide environmental protection in the National Forest from which the revenues are derived.