Opportunity To Recoup Additional Revenue in the Federal Investment in Water Projects From the Conveyance of Non-Project Water

We conducted a review of the Bureau of Reclamation’s (USBR’s) administration of transfers and conveyances of water. Our objective was to determine whether the transfers and conveyances facilitated by the USBR were done in accordance with applicable laws, regulations, and policies.We could not make a determination because a legal opinion on application of the Warren Act of 1911, which governs conveyance of non-project water through Federal facilities, is needed. In a review of water data for California’s Central Valley Project (CVP) for 2012 to 2015, we found that contractors charged other contractors more than they paid the USBR for water conveyance. Specifically, we found that contractors potentially generated revenue between $192 million and $1 billion on water conveyed under the Warren Act.We found no formal legal opinion on whether the USBR is entitled to revenue generated through water conveyance under the Warren Act, but the language of a subsequent law says that “all moneys or profits . . . derived from the sale or rental of surplus water under the Warren Act . . . shall be credited to the project.” Thus the USBR may have the opportunity to recoup millions of dollars that could be applied toward repayment of the Federal investment in water projects such as the CVP.We recommend that the USBR obtain a legal opinion from the Department’s Office of the Solicitor to determine whether (1) contractors are allowed to collect revenue in excess of costs and make a profit on the conveyance of non-project water through Federal facilities, and (2) any moneys or profits derived from such conveyances must be credited to the project or division of the project to which the construction cost has been charged or to the U.S. Treasury.