43 Cfr 426

§ 426.2 Definitions.

§ 426.1 Purpose.
These rules and regulations implement certain provisions of Federal reclamation
law that address the ownership and leasing of land on Federal Reclamation
irrigation projects and the pricing of Federal Reclamation project irrigation water,
and establish terms and conditions for the delivery of Federal Reclamation project
irrigation water.

§ 426.2 Definitions.
As used in these rules:
Acreage limitation entitlements mean the ownership and nonfull-cost
entitlements.
Acreage limitation provisions mean the ownership limitations and pricing
restrictions specified in Federal reclamation law, including but not limited to,
Sections 203(b), 204, and 205 of the Reclamation Reform Act of 1982
(43 U.S.C. 390aa et seq.).
Acreage limitation status means whether a landholder is a qualified recipient,
limited recipient, or prior law recipient.
Commissioner means the Commissioner of the Bureau of Reclamation,
U.S. Department of the Interior.
Compensation rate means a water rate applied, in certain situations, to water
delivery to ineligible land that is not discovered until after the delivery has taken
place. The compensation rate is equal to the established full-cost rate that would
apply to the landholder if the landholder was to receive irrigation water on land
that exceeded a nonfull-cost entitlement.
Contract means any repayment or water service contract or agreement between
the United States and a district providing for the payment to the United States of
construction charges and normal operation, maintenance, and replacement costs
under Federal reclamation law, even if the contract does not specifically identify
the portion of the payment that is to be attributed to operation and maintenance
and that portion that is to be attributed to construction. This definition includes
contracts made in accordance with the Distribution System Loans Act, as
amended (43 U.S.C. 421).
Contract rate means the assessment, as set forth in a contract, that is to be paid by
a district to the United States, and recomputed if necessary on a per acre or per
acre foot basis.
Dependent means any natural person within the meaning of the term dependent in
the Internal Revenue Code of 1954 (26 U.S.C. 152) and any subsequent
amendments.
Direct when used in connection with the terms landholder, landowner, lessee,
lessor, or owner, means that the party is the owner of record or holder of title, or
the lessee of a land parcel, as appropriate. However, landholdings of joint

1

§ 426.2 Definitions.
tenants and tenants-in-common will not be considered direct under these
regulations.
Discretionary provisions refer to Sections 390cc through 390hh, except for
390cc(b), of the Reclamation Reform Act of 1982 (43 U.S.C. 390aa et seq.).
District means any individual or any legal entity established under State law that
has entered into a contract or can potentially enter into a contract with the
United States for irrigation water service through federally developed or
improved water storage and/or distribution facilities.
Eligible, except where otherwise provided, means permitted to receive an
irrigation water supply from a Reclamation project under applicable Federal
reclamation law.
Entity, see definition of legal entity.
Excess land means nonexempt land that is in excess of a landowner's maximum
ownership entitlement under the applicable provisions of Federal reclamation
law.
Exempt, except where otherwise provided, means not subject to the acreage
limitation provisions.
Extended recordable contract means a recordable contract whose term was
extended due to moratoriums established in 1976 and 1977 on the sale of excess
land.
Full cost or full-cost rate means an annual rate established by Reclamation that
amortizes the expenditures for construction properly allocable to irrigation
facilities in service, including all operation and maintenance deficits funded,
less payments, over such periods as may be required under Federal reclamation
law, or applicable contract provisions. Interest will accrue on both the
construction expenditures and funded operation and maintenance deficits from
October 12, 1982, on costs outstanding at that date, or from the date incurred in
the case of costs arising subsequent to October 12, 1982. The full-cost rate
includes actual operation, maintenance, and replacement costs required under
Federal reclamation law.
Full-cost charge means the full-cost rate less the actual operation, maintenance,
and replacement costs required under Federal reclamation law.
Indirect, when used in connection with the terms landholder, landowner, lessee,
lessor or owner, means that such party is not the owner of record or holder of
title, or the lessee of a land parcel, but that such party has a beneficial interest in
the legal entity that is the owner of record or holder of title, or the lessee of a
land parcel. Landholdings of joint tenants and tenants-in-common will be
considered indirect under these regulations. A security interest held by lenders,
who are not otherwise considered a landholder of the land in question, in a legal
entity or in a land parcel will not be considered an indirect interest or a
beneficial interest for purposes of these regulations.
Individual means any natural person, including his or her spouse, and including
other dependents; provided that, under prior law, the term individual does not
include a natural person's spouse or dependents.

2

§ 426.2 Definitions.
Ineligible, except where otherwise provided, means not permitted to receive an
irrigation water supply under applicable Federal reclamation law regardless of
the rate paid for such water.
Intermediate entity means an entity that is a part owner of another entity and in
turn is owned by others, either another entity or individuals.
Involuntary acquisition means land that is acquired through an involuntary
foreclosure or similar involuntary process of law, conveyance in satisfaction of
a debt (including, but not limited to, a mortgage, real estate contract or deed of
trust), inheritance, or devise.
Irrevocable election means the execution of the legal instrument that a landholder
subject to prior law provisions submits to become subject to the discretionary
provisions of Federal reclamation law.
Irrevocable elector means a landholder who makes an irrevocable election to
conform to the discretionary provisions of Federal reclamation law.
Irrigable land means land so classified by Reclamation under a specific project
plan for which irrigation water is, can be, or is planned to be provided, and for
which facilities necessary for sustained irrigation are provided or are planned to
be provided.
Irrigation land means any land receiving water from a Reclamation project
facility for irrigation purposes in a given water year, except for land that has
been specifically exempted by statute or administrative action from the acreage
limitation provisions of Federal reclamation law.
Irrigation water means water made available for agricultural purposes from the
operation of Reclamation project facilities pursuant to a contract with
Reclamation.
Landholder means a party that directly or indirectly owns or leases nonexempt
land.
Landholding means the total acreage of nonexempt land directly or indirectly
owned or leased by a landholder.
Lease means any arrangement between a landholder (the lessor) and another party
(the lessee) under which the economic risk and the use or possession of the
lessor's land is partially or wholly transferred to the lessee. If a management
arrangement or consulting agreement is one in which the manager or consultant
performs a service for the landholder for a fee, but does not assume the
economic risk in the farming operation, and the landholder retains the right to
the use and possession of the land, is responsible for payment of the operating
expenses, and is entitled to receive the profits from the farming operation, then
the agreement or arrangement will not be considered to be a lease.
Legal entity or entity for the purpose of establishing application of the acreage
limitation entitlements means, but is not limited to, corporations, partnerships,
organizations, and any business or property ownership arrangements such as
joint tenancies and tenancies-in-common. For purposes of the information
requirements specified in § 426.18 only, trusts will be considered to be legal
entities.
Limited recipient means any legal entity established under State or Federal law
benefiting more than 25 natural persons. In order to become limited recipients,

3

§ 426.2 Definitions.
legal entities must be subject to the discretionary provisions through either
district contract action or irrevocable election.
Nondiscretionary provisions means sections 390cc(b) and 390ii through 390zz-1
of the RRA.
Nonexempt land means either irrigation land or irrigable land that is subject to the
acreage limitation provisions. Areas used for field roads, farm ditches and
drains, tailwater ponds, temporary equipment storage, and other improvements
subject to change at will by the landowner, are included in the nonexempt
acreage. Areas occupied by and currently used for homesites, farmstead
buildings, and corollary permanent structures such as feedlots, equipment
storage yards, permanent roads, permanent ponds, and similar facilities, together
with roads open for unrestricted use by the public are excluded from nonexempt
acreage.
Nonfull-cost entitlement means the maximum acreage a landholder may irrigate
with irrigation water at a nonfull-cost rate.
Nonfull-cost rate means any water rate other than the full-cost rate. Nonfull-cost
rates are paid for irrigation water made available to land in a landholder's
nonfull-cost entitlement.
Nonproject water means water from sources other than Reclamation project
facilities.
Nonresident alien means any natural person who is neither a citizen nor a resident
alien of the United States.
Operation and maintenance costs or O&M costs mean all direct charges and
overhead costs incurred by the United States after the date that Reclamation has
declared a project, or a part thereof, substantially complete to operate, maintain,
provide replacements of, administer, manage, and oversee project facilities and
lands.
Ownership entitlement means the maximum acreage a landholder may directly or
indirectly own and irrigate with irrigation water.
Part owner means an individual or legal entity that has a beneficial interest in a
legal entity, but does not own 100 percent of that legal entity. A lender, who is
not otherwise considered a landholder of the land in question, with a security
interest in a legal entity or land owned by a legal entity shall not be considered a
part owner under these regulations.
Prior law means the Reclamation Act of 1902, and acts amendatory and
supplementary thereto (43 U.S.C. 371 et seq.) that were in effect prior to the
enactment of the RRA, and as amended by the RRA.
Prior law recipient means an individual or legal entity that has not become
subject to the discretionary provisions.
Project means any irrigation project authorized by Federal reclamation law, or
constructed by the United States pursuant to such law, or in connection with a
repayment or water service contract executed by the United States pursuant to
such law, or any project constructed by the United States through Reclamation
for the reclamation of lands. The term project includes any incidental features
of an irrigation project.

4

§ 426.3 Conformance to the discretionary provisions.
Public entity means States, political subdivisions or agencies thereof, and
agencies of the Federal Government.
Qualified recipient means an individual who is a citizen or a resident alien of the
United States or any legal entity established under State or Federal law that
benefits 25 natural persons or less. A married couple may become a qualified
recipient if either spouse is a United States citizen or resident alien. In order to
become qualified recipients, individuals and legal entities must be subject to the
discretionary provisions through either district contract action or irrevocable
election.
Reclamation means the Bureau of Reclamation, U.S. Department of the Interior.
Reclamation fund means a special fund established by the Congress under the
Reclamation Act of 1902, as amended, for the receipts from the sale of public
lands and timber, proceeds from the Mineral Leasing Act, and certain other
revenues.
Recordable contract means a written contract between Reclamation and a
landowner capable of being recorded under State law, providing for the
disposition of land held by that landowner in excess of the ownership
limitations of Federal reclamation law.
Resident alien means any natural person within the meaning of the term as
defined in the Internal Revenue Act of 1954 (26 U.S.C. 7701) as it may be
amended.
RRA means the Reclamation Reform Act of 1982, Public Law 97-293, Title II,
96 Stat. 1263, (43 U.S.C. 390aa et seq.) as amended.
Secretary means Secretary of the U.S. Department of the Interior.
Standard certification or reporting forms mean forms on which landholders
provide complete information about the directly and indirectly owned and
leased nonexempt lands in their landholdings.
Water year means a 365-day period (or 366 days during leap years) whose start
date is specified within a contract between Reclamation and the district or
through some other agreement between Reclamation and the district.
Westwide means the 17 Western States where Reclamation projects are located,
namely: Arizona, California, Colorado, Idaho, Kansas, Montana, Nebraska,
Nevada, New Mexico, North Dakota, Oklahoma, Oregon, South Dakota, Texas,
Utah, Washington, and Wyoming.

§ 426.3 Conformance to the discretionary provisions
(a) Districts that are subject to the discretionary provisions. Unless an
exemption in § 426.16 applies, a district is subject to the discretionary
provisions if:
(1) The district executes a new or renewed contract with Reclamation after
October 12, 1982. The discretionary provisions apply as of the execution
date of the new or renewed contract;
(2) The district amends its contract to conform to the discretionary provisions:
(i) A district may ask Reclamation to amend its contract to conform to the
discretionary provisions;

5

§ 426.3 Conformance to the discretionary provisions.
(ii) The district's request to Reclamation must be accompanied by a duly
adopted resolution dated and signed by the governing board of the
district obligating the district to take, in a timely manner, actions
required by applicable State law to amend its contract; and
(iii)If the requirements of paragraphs (a)(2)(i) and (ii) of this section are
met, then Reclamation will amend the contract, and the district
becomes subject to the discretionary provisions from the date the
district's request was submitted to Reclamation;
(iv) If the district only wants to amend its contracts to become subject to
the discretionary provisions, the amendments need only be to the
extent required to conform to the discretionary provisions; or
(3) The district amends its contract after October 12, 1982, to provide the
district with additional or supplemental benefits. The amendment must
also include the district's conformance to the discretionary provisions:
(i) The discretionary provisions apply as of the date that Reclamation
executes the contract amendment;
(ii) For purposes of application of the acreage limitation provisions
Reclamation considers a contract amendment as providing additional
or supplemental benefits if that amendment:
(A) Requires the United States to expend significant funds;
(B) Requires the United States to commit significant additional water
supplies; or
(C) Substantially modifies contract payments due the United States;
and
(iii)For purposes of application of the acreage limitation provisions
Reclamation does not consider the following contract actions as
providing additional or supplemental benefits:
(A) The construction of facilities for conveyance of irrigation water for
which districts contracted on or before October 12, 1982;
(B) Minor drainage and construction work contracted under a prior
repayment or water service contract;
(C) Operation and maintenance (O&M) amendments;
(D) The deferral of payments provided the deferral is for a period of 12
months or less;
(E) A temporary supply of irrigation water as set forth in § 426.16(d);
(F) The transfer of water on an annual basis from one district to
another, provided that:
(1) Both districts have contracts with the United States;
(2) The rate paid by the district receiving the transferred water:
(i) Is the higher of the applicable water rate for either district;
(ii) Does not result in any increased operating losses to the
United States above those that would have existed in the
absence of the transfer; and
(iii) Does not result in any decrease in capital repayment to the
United States below what would have existed in the
absence of the transfer; and

6

§ 426.3 Conformance to the discretionary provisions.
(3) The recipients of the transferred water pay a rate for the water
that is at least equal to the actual O&M costs or the full-cost
rate in those cases where, for whatever reason, the recipients
would have been subject to such costs had the water not been
considered transferred water;
(G) Contract actions pursuant to the Reclamation Safety of Dams Act
of 1978, as amended (43 U.S.C. 506); or
(H) Other contract actions that Reclamation determines do not provide
additional or supplemental benefits.
(b) Districts that are subject to prior law. Any district which had a contract in
force on October 12, 1982, that required landholders to comply with the
ownership limitations of Federal reclamation law remains subject to prior law
unless and until the district:
(1) Enters into a new or renewed contract requiring it to conform to the
discretionary provisions, as provided in paragraph (a)(1) of this section;
(2) Makes a contract action requiring conformance to the discretionary
provisions, as provided in paragraphs (a)(2) or (3) of this section; or
(3) Becomes exempt, as provided in § 426.16.
(c) Standard RRA contract article.
(1) New or renewed contracts executed after October 12, 1982, or contracts
that are amended to conform to the discretionary provisions before or on
the effective date of these rules must include the following clause:
The parties agree that the delivery of irrigation water or use of
Federal facilities pursuant to this contract is subject to
reclamation law, as amended and supplemented, including but
not limited to the Reclamation Reform Act of 1982
(43 U.S.C. 390aa et seq.).
(2) New or renewed contracts executed after the effective date of these rules,
or contracts that are amended to conform to the discretionary provisions
after the effective date of these rules must include the following clause:
The parties agree that the delivery of irrigation water or use of
Federal facilities pursuant to this contract is subject to Federal
reclamation law, including but not limited to the Reclamation
Reform Act of 1982 (43 U.S.C. 390aa et seq.), as amended and
supplemented, and the rules and regulations promulgated by
the Secretary of the Interior under Federal reclamation law.
(d) The effect of a master contractor's and subcontractor's actions to conform to
the discretionary provisions. If a district provides irrigation water to other
districts through subcontracts and the master contracting district is subject to:
(1) The discretionary provisions, then all subcontracting districts who are
entitled to receive irrigation water must also conform to the discretionary
provisions; or

7

§ 426.3 Conformance to the discretionary provisions.
(2) Prior law, then the subcontracting district can amend its subcontract to
conform to the discretionary provisions without subjecting the master
contractor or any other subcontractor of the master contractor to the
discretionary provisions. If a subcontract that does not include the United
States as a party is amended to conform to the discretionary provisions, or
the subcontract is a new or renewed contract executed after
October 12, 1982, then the amended, new, or renewed subcontract must
include the United States as a party.
(e) The effect on a landholder's status when a district becomes subject to the
discretionary provisions. If a district conforms to the discretionary provisions
and the landholder is:
(1) Other than a nonresident alien or a legal entity that is not established under
State or Federal law, and is:
(i) A direct landholder in that district, then the landholder becomes
subject to the discretionary provisions and the associated acreage
limitation status will apply in any district in which the landholder
holds land; or
(ii) Only an indirect landholder in that and all other discretionary
provisions districts, then the landholder's acreage limitation status is
not affected. Such a landholder can receive irrigation water as a prior
law recipient on indirectly held lands in districts that conform to the
discretionary provisions.
(2) A nonresident alien, or legal entity not established under State or Federal
law, and the landholder is:
(i) A direct landholder, then since such a landholder cannot become
subject to, and has no eligibility under the discretionary provisions:
(A) All direct landholdings in districts that conform to the
discretionary provisions become ineligible; and
(B) Directly held land that becomes ineligible as a result of the
district's action to conform to the discretionary provisions may be
placed under recordable contract as subject to the conditions
specified in § 426.12; or
(ii) An indirect landholder, then such a landholder may receive irrigation
water on land indirectly held in districts conforming to the
discretionary provisions, with the entitlements for such landholder
determined as specified in § 426.8.
(f) Landholder actions to conform to the discretionary provisions.
(1) In the absence of a district's action to conform to the discretionary
provisions, United States citizens, resident aliens, or legal entities
established under State or Federal law, can elect to conform to the
discretionary provisions by executing an irrevocable election. Upon
execution of an irrevocable election:
(i) The elector's entire landholding in all districts shall be subject to the
discretionary provisions;
(ii) The election shall be binding on the elector and his or her landholding,
but will not be binding on subsequent landholders of that land;

8

§ 426.3 Conformance to the discretionary provisions.
(iii)An irrevocable election by a legal entity is binding only upon that
entity and not on the part owners of that entity;
(iv) An irrevocable election by a part owner of a legal entity binds only the
part owner making the election and not the entity or other part owners
of the entity; and
(v) An irrevocable election by a lessor does not affect the status of a
lessee, and vice versa. However, the eligibility and entitlement of
neither a lessor nor a lessee may be enhanced through leasing.
(2) A landholder makes an irrevocable election by completing a Reclamation
issued irrevocable election form:
(i) The elector's original irrevocable election form must be filed by the
district with Reclamation and must be accompanied by a completed
certification form, as specified in § 426.18;
(ii) The elector must file copies of the irrevocable election and
certification forms concurrently with each district where the elector
holds nonexempt land;
(iii)Reclamation will prepare a letter advising the recipient of the approval
or disapproval of the election. Reclamation will base approval upon
whether the election form and the accompanying certification form(s)
indicate the elector's satisfaction of the various requirements of
Federal reclamation law and these regulations;
(iv) If the election is approved, the letter of approval, with a copy of the
irrevocable election form and the original certification form(s), will be
sent by Reclamation to each district where the elector holds land;
(v) The district(s) shall retain the forms; and
(vi) If the irrevocable election is disapproved, the landholder and the
district will be advised by letter along with the reasons for disapproval.
(3) A landholder that only holds land indirectly in a district that has
conformed to the discretionary provisions, other than a nonresident alien
or a legal entity not established under State or Federal law, may make an
irrevocable election also by simply submitting certification forms to all
districts where the landholder holds land subject to the acreage limitation
provisions. An election made in this manner is binding in all districts in
which such elector holds land.
(g) District reliance on irrevocable election form information. The district is
entitled to rely on the information contained in the irrevocable election form.
The district does not need to make an independent investigation of the
information.
(h) Time limits for amendments or elections to conform to the discretionary
provisions. Reclamation will allow at anytime a landholder to elect or a
district to amend its contract to conform to the discretionary provisions. An
irrevocable election that was made after April 12, 1987, but on or before
May 13, 1987, shall be considered effective as of April 12, 1987.

9

§ 426.4 Attribution of land.

§ 426.4 Attribution of land.
(a) Prohibition on increasing acreage limitation entitlements. Except as
specifically provided in these rules, a landholder cannot increase acreage
limitation entitlements or eligibility by acquiring or holding a beneficial
interest in a legal entity. Similarly, the acreage limitation status of an
individual or legal entity that holds or has acquired a beneficial interest in
another legal entity will not be permitted to enlarge the latter legal entity's
acreage limitation entitlements or eligibility.
(b) Attribution of owned land. For purposes of determining acreage to be counted
against acreage limitation entitlements, acreage will be attributed to all:
(1) Direct landowners in proportion to the direct beneficial interest the
landowners own in the land; and
(2) Indirect landowners in proportion to the indirect beneficial interest they
own in the land.
(c) Attribution of leased land. Leased land will be attributed to the direct and
indirect landowners as well as to the direct and indirect lessees in the same
manner as described in paragraphs (b) and (d) of this section.
(d) Attribution of land held through intermediate entities. If land is held by a
direct landholder and a series of indirect landholders, Reclamation will
attribute that land to the acreage limitation entitlements of the direct
landholder and each indirect landholder in proportion to each landholder's
beneficial interest in the entity that directly holds the land.
(e) Leasebacks. Any land a landholder directly or indirectly owns and that is
directly or indirectly leased back will only count once against that particular
landholder's nonfull-cost entitlement.
(f) Effect on an entity of attribution to part owners. For purposes of determining
eligibility, the entire landholding will be attributed to all the direct and
indirect landholders. If the interests in a legal entity are:
(1) Undivided, then all of the indirect part owners must be eligible in order for
the entity to be eligible; or
(2) Divided, in such a manner that specific parcels are attributable to each
indirect landholder, then the entity may qualify for eligibility on those
portions of the landholding not attributable to any part owner who is
ineligible.

§ 426.5 Ownership entitlement.
(a) General. Except as provided in §§ 426.12 and 426.14, all nonexempt land
directly or indirectly owned by a landholder counts against that landholder's
ownership entitlement. In addition, land owned or controlled by a public
entity that is leased to another party counts against the lessee's ownership
entitlement, as specified in § 426.10.
(b) Qualified recipient ownership entitlement. A qualified recipient is entitled to
receive irrigation water on a maximum of 960 acres of owned nonexempt

10

§ 426.5 Ownership entitlement.
land, or the Class 1 equivalent thereof. This entitlement applies on a
westwide basis.
(c) Limited recipient ownership entitlement. A limited recipient is entitled to
receive irrigation water on a maximum of 640 acres of owned nonexempt
land, or the Class 1 equivalent thereof. This entitlement applies on a
westwide basis.
(d) Prior law recipient ownership entitlement.
(1) Ownership entitlements for prior law recipients are determined by whether
the recipient is one individual or a married couple, and for entities by the
type of entity, as follows:
(i) An individual subject to prior law is entitled to receive irrigation water
on a maximum of 160 acres of owned nonexempt land;
(ii) Married couples who hold equal interests are entitled to receive
irrigation water on a maximum of 320 acres of jointly owned
nonexempt land;
(iii)Surviving spouses until remarriage are entitled to receive irrigation
water on that land owned jointly in marriage up to a maximum of
320 acres of owned nonexempt land. If any of that land should be
sold, the applicable ownership entitlement would be reduced
accordingly, but not to less than 160 acres of owned nonexempt land;
(iv) Children are each entitled to receive irrigation water on a maximum of
160 acres of owned nonexempt land, regardless of whether they are
independent or dependent;
(v) Joint tenancies and tenancies-in-common subject to prior law are
entitled to receive irrigation water on a maximum of 160 acres of
owned nonexempt land per tenant, provided each tenant holds an equal
interest in the tenancy;
(vi) Partnerships subject to prior law are entitled to receive irrigation water
on a maximum of 160 acres of owned nonexempt land per partner if
the partners have separable and equal interests in the partnership and
the right to alienate that interest. Partnerships where each partner does
not have a separable interest and the right to alienate that interest are
entitled to receive irrigation water on a maximum of 160 acres of
nonexempt land owned by the partnership; and
(vii) All corporations subject to prior law are entitled to receive irrigation
water on a maximum of 160 acres of owned nonexempt land.
(2) Prior law recipient ownership entitlements specified in this section apply
on a westwide basis unless the land was acquired by the current owner on
or before December 6, 1979. For land acquired by the current owner on or
before that date, prior law ownership entitlements apply on a
district-by-district basis.
(3) For those entities where an equal interest held by the part owners would
result in a 160-acre per part owner entitlement for the entity, if the part
owners interests are not equal then the entitlement of the entity will be
determined by the relative interest held in the entity by each part owner.

11

§ 426.6 Leasing and full-cost pricing.

§ 426.6 Leasing and full-cost pricing.
(a) Conditions that a lease must meet. Districts can make irrigation water
available to leased land only if the lease meets the following requirements.
Land that is leased under a lease instrument that does not meet the following
requirements will be ineligible to receive irrigation water until the lease
agreement is terminated or modified to satisfy these requirements.
(1) The lease is in writing;
(2) The lease includes the effective date and term of the lease, the length of
which must be:
(i) 10 years or less, including any exercisable options; however, for
perennial crops with an average life longer than 10 years, the term may
be equal to the average life of the crop as determined by Reclamation,
and
(ii) In no case may the term of a lease exceed 25 years, including any
exercisable options;
(3) The lease includes a legal description, that is at least as detailed as what is
required on the standard certification and reporting forms, of the land
subject to the lease;
(4) Signatures of all parties to the lease are included;
(5) The lease includes the date(s) or conditions when lease payments are due
and the amounts or the method of computing the payments due;
(6) The lease is available for Reclamation's inspection and Reclamation
reviews and approves all leases for terms longer than 10 years; and
(7) If either the lessor or the lessee is subject to the discretionary provisions,
the lease provides for agreed upon payments that reflect the reasonable
value of the irrigation water to the productivity of the land; except
(8) Leases in effect as of the effective date of these regulations do not need to
meet the criteria specified under paragraphs (a) (3) and (4) of this section,
unless and until such leases are renewed.
(b) Nonfull-cost entitlements.
(1) The nonfull-cost entitlement for qualified recipients is 960 acres, or the
Class 1 equivalent thereof.
(2) The nonfull-cost entitlement for limited recipients that received irrigation
water on or before October 1, 1981, is 320 acres or the Class 1 equivalent
thereof. The nonfull-cost entitlement for limited recipients that did not
receive irrigation water on or prior to October 1, 1981, is zero.
(3) The nonfull-cost entitlement for prior law recipients is equal to the
recipient's maximum ownership entitlement as set forth in § 426.5(d).
However, for the purpose of computing the acreage subject to full cost, all
owned and leased irrigation land westwide must be included in the
computation.
(c) Application of the nonfull-cost and full-cost rates.
(1) A landholder may irrigate at the nonfull-cost rate directly and indirectly
held acreage equal to his or her nonfull-cost entitlement.

12

§ 426.6 Leasing and full-cost pricing.
(2) If a landholding exceeds the landholder's nonfull-cost entitlement, the
landholder must pay the appropriate full-cost rate for irrigation water
delivered to acreage that equals the amount of leased land that exceeds
that entitlement.
(3) In the case of limited recipients, a landholder does not have to lease land
to exceed a nonfull-cost entitlement, since the nonfull-cost entitlement is
less than the ownership entitlement. Therefore, limited recipients must
pay the appropriate full-cost rate for irrigation water delivered to any
acreage that exceeds their nonfull-cost entitlement.
(d) Types of lands that count against the nonfull-cost entitlement.
(1) All directly and indirectly owned irrigation land and irrigation land
directly or indirectly leased for any period of time during 1-water year
counts towards a landholder's nonfull-cost entitlement, except:
(i) Involuntarily acquired land, as provided in §§ 426.12 and 426.14; and
(ii) Land that is leased for incidental grazing or similar purposes during
periods when the land is not receiving irrigation water.
(2) Reclamation's process for determining if a nonfull-cost entitlement has
been exceeded is as follows:
(i) All land counted toward a landholder's nonfull-cost entitlement will be
counted on a cumulative basis during any 1-water year;
(ii) Once a landholder's nonfull-cost entitlement is met in a given water
year, any additional eligible land may be irrigated only at the full-cost
rate; and
(iii)Irrigation land will be counted towards nonfull-cost entitlements on a
westwide basis, even for prior law recipients, regardless of the date of
acquisition.
(e) Selection of nonfull-cost land.
(1) A landholder that has exceeded his or her nonfull-cost entitlement may
select in each water year, from his or her directly held irrigation land, the
land that can be irrigated at a nonfull-cost rate and the land that can be
irrigated only at the full-cost rate. Selections for full-cost or nonfull-cost
land may include:
(i) Leased land;
(ii) Nonexcess owned land;
(iii)Land under recordable contract, unless that land is already subject to
application of the full-cost rate under an extended recordable contract;
or
(iv) A combination of all three.
(2) Once a landholder has received irrigation water on a given land parcel
during a water year, the selection of that parcel as full cost or nonfull-cost
is binding until the landholder has completed receiving irrigation water
westwide for that water year.
(f) Applicability of a full-cost selection to an owner or lessee. If a landowner or
lessee should select land as subject to full-cost pricing, then that land can
receive irrigation water only at the full-cost rate, regardless of eligibility of the
other party to receive the irrigation water at the nonfull-cost rate.

13

§ 426.6 Leasing and full-cost pricing.
(g) Subleased land. Land that is subleased (the lessee transfers possession of the
land to a sublessee) will be attributed to the landholding of the sublessee and
not to the lessee.
(h) Calculating full-cost charges. Reclamation will calculate a district's full-cost
charge using accepted accounting procedures and under the following
conditions.
(1) The full-cost charge does not recover interest retroactively before
October 12, 1982. But, interest on the unpaid balance does accrue from
October 12, 1982, where the unpaid balance equals the irrigation allocated
construction costs for facilities in service plus cumulative federally funded
O&M deficits, less payments.
(2) The full-cost charge will be determined:
(i) As of October 12, 1982, for contracts entered into before that date
regardless of amendments to conform to the discretionary provisions;
and
(ii) At the time of contract execution for new and renewed contracts
entered into on or after October 12, 1982.
(3) For repayment contracts, the full-cost charge will fix equal annual
payments over the amortization period. For water service contracts, the
full-cost charge will fix equal payments per acre-foot of projected water
deliveries over the amortization period.
(4) If there are additional construction expenditures, or if the cost allocated to
irrigation changes, then a new full-cost charge will be determined.
(5) Reclamation will notify the respective districts of changes in the full-cost
charge at the time the district is notified of other payments due the United
States.
(6) In determining full-cost charges, the following factors will be considered:
(i) Amortization period. The amortization period for calculating the
full-cost charge is the remaining balance of:
(A) For contracts entered into before October 12, 1982, the contract
repayment period as of October 12, 1982;
(B) For contracts entered into on or after October 12, 1982, the
contract repayment period;
(C) For water service contracts, the period from October 12, 1982, or
the execution date of the contract, whichever is later, to the
anticipated date of project repayment; and
(D) In cases where water services rates are designed to completely
repay applicable Federal expenditures in a specific time period,
that time period may be used as the amortization period for
full-cost calculations related to these expenditures; but, in no case
will the amortization period exceed the project payback period
authorized by the Congress;
(ii) Construction costs. For determining full cost, construction costs
properly allocable to irrigation are those Federal project costs for
facilities in service that have been assigned to irrigation within the
overall allocation of total project construction costs. Total project

14

§ 426.6 Leasing and full-cost pricing.
construction costs include all direct expenditures necessary to install or
implement a project, such as:
(A) Planning;
(B) Design;
(C) Land;
(D) Rights-of-way;
(E) Water-rights acquisitions;
(F) Construction expenditures;
(G) Interest during construction; and
(H) When appropriate, transfer costs associated with services provided
from other projects;
(iii) Facilities in service. Facilities in service are those facilities that are in
operation and providing irrigation services;
(iv) Operation and maintenance (O&M) deficits funded. O&M deficits
funded are the annual O&M costs including project-use pumping
power allocated to irrigation that have been federally funded and that
have not been paid by the district;
(v) Payments received. In calculating the payments that have been
received, all receipts and credits applied to repay or reduce allocated
irrigation construction costs in accordance with Federal reclamation
law, policy, and applicable contract provisions will be considered.
These may include:
(A) Direct repayment contract revenues;
(B) Net water service contract income;
(C) Contributions;
(D) Ad valorem taxes; and
(E) Other miscellaneous revenues and credits excluding power and
municipal and industrial (M&I) revenues;
(vi) Interest rates. Interest rates to be used in calculating full-cost charges
will be determined by the Secretary of the Treasury as follows:
(A) For irrigation water delivered to qualified recipients, limited
recipients receiving water on or before October 1, 1981, and
extended recordable contract land owned by prior law recipients,
the interest rate for expenditures made on or before
October 12, 1982, will be the greater of 7.5 percent per annum or
the weighted average yield of all interest-bearing marketable issues
sold by the Treasury during the fiscal year when the expenditures
were made by the United States. The interest rate for expenditures
made after October 12, 1982, will be the arithmetic average of:
(1) The computed average interest rate payable by the Treasury
upon its outstanding marketable public obligations that are
neither due nor callable for redemption for 15 years from the
date of issuance at the beginning of the fiscal year when the
expenditures are made; and

15

§ 426.6 Leasing and full-cost pricing.
(2) The weighted average yield on all interest-bearing marketable
issues sold by the Treasury during the fiscal year preceding the
fiscal year the expenditures are made;
(B) For irrigation water delivered to limited recipients not receiving
irrigation water on or before October 1, 1981, and prior law
recipients, except for land owned subject to extended recordable
contract, the interest rate will be determined as of the fiscal year
preceding the fiscal year the expenditures are made, except that the
interest rate for expenditures made before October 12, 1982, will
be determined as of October 12, 1982. The interest rate will be
based on the arithmetic average of:
(1) The computed average interest rate payable by the Treasury
upon its outstanding marketable public obligations that are
neither due nor callable for redemption for 15 years from the
date of issuance; and
(2) The weighted average yield on all interest-bearing marketable
issues sold by the Treasury.
(C) Landholders who were prior law recipients and become subject to
the discretionary provisions after April 12, 1987, are eligible for
the full-cost interest rate specified in paragraph (h)(6)(vi)(A) of
this section, unless they are limited recipients that did not receive
irrigation water on or before October 1, 1981, in that case they
remain subject to the full-cost interest rate specified in paragraph
(h)(6)(vi)(B) of this section.
(i) Direct and proportional charges for full-cost water. In situations where water
delivery charges are contractually or customarily levied on a per-acre basis,
full-cost assessments will be made on a per-acre basis. In situations where
water delivery charges are contractually or customarily levied on a per
acre-foot basis, one of the following methods must be used to make full-cost
assessments:
(1) Assessments will be based on the actual amounts of water used in
situations where measuring devices are in use, to the satisfaction of
Reclamation, to reasonably determine the amounts of irrigation water
being delivered to full-cost and nonfull-cost land; or
(2) In situations where, as determined by Reclamation, measuring devices are
not a reliable method for determining the amounts of water being
delivered to full-cost and nonfull-cost land, then water charges must be
based on the assumption that equal amounts of water per acre are being
delivered to both types of land during periods when both types of land are
actually being irrigated.
(j) Disposition of revenues obtained through full-cost water pricing.
(1) Legal deliveries. If irrigation water has been delivered in compliance with
Federal reclamation law and these regulations, then:
(i) That portion of the full-cost rate that would have been collected if the
land had not been subject to full cost will be credited to the annual
payments due under the district's contractual obligation;

16

§ 426.7 Trusts.
(ii) Any O&M revenues collected over and above those required under the
district's contract will be credited to the project O&M account; and
(iii)The remaining full-cost revenues will be credited to the Reclamation
fund unless otherwise provided by law, with any capital component of
the full-cost rate credited to project repayment, if applicable.
(2) Illegal deliveries. Revenues resulting from the assessment of
compensation charges for illegal deliveries of irrigation water will be
deposited into the Reclamation fund in their entirety, and will not be
credited toward any contractual obligation, or O&M or repayment account
of the district or project. For purposes of these regulations only, this does
not include revenues from any charges that may be assessed by the district
to cover district operation, maintenance, and administrative expenses.

§ 426.7 Trusts.
(a) Definitions for purposes of this section:
Grantor revocable trust means a trust that holds irrigable land or irrigation
land that may be revoked at the discretion of the grantor(s), or terminated by
the terms of the trust, and revocation or termination results in title to the
land held in trust reverting either directly or indirectly to the grantor(s).
Irrevocable trust means a trust that holds irrigable land or irrigation land and
does not allow any individual, including the grantor or beneficiaries, the
discretion to decide when or under what conditions the trust terminates, and
that upon termination the title to the land held in trust transfers either
directly or indirectly to a person(s) or entity(ies) other than the grantor(s).
Otherwise revocable trust means a trust that holds irrigable land or irrigation
land and that may be revoked at the discretion of the grantor(s) or other
parties, or terminated by the terms of the trust, and revocation or termination
results in the title to the land held in trust transferring either directly or
indirectly to a person(s) or entity(ies) other than the grantor(s).
(b) Attribution of land held by a trust. The acreage limitation entitlements of a
trust are only limited by the acreage limitation entitlements of the trustees,
grantors, or beneficiaries to whom land held by the trust must be attributed as
provided for in § 426.4. The entitlements of the parties to whom trusted land
is attributed are determined according to §§ 426.5, 426.6, and 426.8, and other
applicable provisions of Federal reclamation law and these regulations.
Reclamation attributes nonexempt land held by a trust to the following parties:
(1) For land held in an irrevocable trust, the land is attributed to the
beneficiaries in proportion to their beneficial interest in the trust.
However, this attribution is only made if the criteria listed in paragraphs
(b)(1) (i) and (ii) of this section are met. If the trust fails to meet any
portion of these criteria, Reclamation attributes the land held in the trust to
the trustee.
(i) The trust is in written form and approved by Reclamation; and
(ii) The beneficiaries of the trust and the beneficiaries' respective interests
are identified within the trust document.
17

§ 426.7 Trusts.
(2) For land held in a grantor revocable trust, the land is attributed to the
grantor according to the grantor's acreage limitation status and the land's
eligibility immediately prior to its transfer to the trust. However, this
attribution is only made if the criteria listed in paragraphs (b)(2) (i), (ii),
(iii), and (iv) of this section are met. If the trust fails to meet any portion
of these criteria, the land held in trust will be ineligible to receive
irrigation water until all of the criteria are met. The only exception is if
the trust's and grantor's standard certification or reporting forms indicate
that the land held by the trust has been attributed to the trust's grantor(s).
(i) The trust meets the criteria specified in paragraph (b)(1) of this
section;
(ii) The grantor(s) of all land held by the trust is (are) identified within the
trust document;
(iii)The conditions under which the trust may be revoked or terminated are
identified within the trust document; and
(iv) The recipient(s) of the trust land upon revocation or termination is
(are) identified within the trust document.
(3) For land held in an otherwise revocable trust, the land is attributed to the
beneficiaries in proportion to their beneficial interests in the trust.
However, this attribution is only made if the trust meets the criteria
specified in paragraph (b)(1) of this section and the trust meets the
additional criteria specified in paragraph (b)(2) of this section.
(i) If Reclamation cannot determine who will hold the land in trust upon
termination or revocation of the trust, or who is the grantor(s) of the
land held in trust, then irrigation water will not be made available to
the land held in trust until the trust satisfies the additional criteria listed
in paragraph (b)(2) of this section.
(ii) If the trust fails to meet the criteria listed in paragraph (b)(1) of this
section, but does meet the additional criteria listed in paragraphs (b)(2)
(ii) through (iv) of this section, then the land is attributed to the trustee.
(c) Class beneficiaries. For purposes of identifying beneficiaries, a class of
beneficiaries specified within the trust document will be acceptable, as long as
the trust document is specific as to the beneficial interest to which each
member of the class will be entitled and the members of the class are
identifiable.
(1) Attribution during any given water year will be provided only to class
beneficiaries that are natural persons and established legal entities. For
purposes of administering the acreage limitation provisions, attribution to
unborn or deceased persons, or entities not yet established, will not be
allowed.
(2) If a trust includes a class of beneficiaries to which land subject to the
acreage limitation provisions will be attributed, the trustee and each of the
beneficiaries will be required to submit standard certification or reporting
forms annually. The submittal of verification forms, as provided in
§ 426.18(l), will not be applicable to such trusts.

18

§ 426.8 Nonresident aliens and foreign entities.
(d) Application of full-cost rate to land held by grantor revocable trusts. If a
grantor revocable trust that meets the criteria specified in paragraph (b)(2) of
this section is revised by the grantor in a manner that precludes attribution of
the land held in trust to the grantor:
(1) Before April 20, 1988, Reclamation will not assess full-cost rates for the
land held by the revised trust for the period before it was revised; or
(2) On or after April 20, 1988, Reclamation will charge the full-cost rate for
irrigation water delivered to any land held by the trust that exceeds the
grantor's nonfull-cost entitlement, commencing December 23, 1987, until
the trust agreement is revised to make it an irrevocable trust or an
otherwise revocable trust.

§ 426.8 Nonresident aliens and foreign entities.
(a) Definitions for purposes of this section:
Domestic entity means a legal entity established under State or Federal law.
Foreign entity means a legal entity not established under State or Federal law.
(b) Restriction on receiving irrigation water. Notwithstanding any other
provision of Federal reclamation law or these regulations, a nonresident alien
or foreign entity that directly holds land in a district that is subject to the
discretionary provisions is not eligible to receive irrigation water on such land.
Nonresident aliens and foreign entities may hold land indirectly in
discretionary districts and both directly and indirectly in prior law districts and
receive irrigation water on such land, subject to their acreage limitation
entitlements.
(c) Entitlements for nonresident aliens and foreign entities. Except as provided in
paragraph (d) of this section, all nonresident aliens and foreign entities will be
considered prior law recipients, and shall have entitlements and eligibility
only as prior law recipients as specified in §§ 426.5(d) and 426.6(b)(3).
(d) Exception to prior law entitlement application.
(1) If a nonresident alien is a citizen of or a foreign entity is established in a
country that has one of the following treaties with the United States or is a
member of the listed organization, then that nonresident alien or foreign
entity will not be restricted to prior law entitlements, provided the eligible
landholding subject to the acreage limitation provisions is held indirectly:
(i) Friendship, Commerce and Navigation Treaty;
(ii) Bilateral Investment Treaty;
(iii)North American Free Trade Agreement;
(iv) Canada--United States Free Trade Agreement; or
(v) Organization for Economic Cooperation and Development.
(2) Nonresident aliens and foreign entities that meet the criteria listed in
paragraph (d)(1) of this section will be required to provide proof of
citizenship or documentation certifying the country in which the entity in
question was established. Districts will retain such documentation in the
landholder's file.

19

§ 426.9 Religious or charitable organizations.
(3) If a nonresident alien or foreign entity meets the criteria listed in
paragraph (d)(1) of this section, and only holds eligible land subject to the
acreage limitation provisions indirectly, then the nonresident alien may be
treated as a United States citizen or the foreign entity may be treated as a
domestic entity for purposes of application of the acreage limitation
provisions for the land held indirectly.
(i) The nonresident alien or foreign entity may submit an irrevocable
election to conform to the discretionary provisions as provided for in
§ 426.3(f). Conformance to the discretionary provisions through the
submittal of a certification form will not be allowed as specified in
§ 426.3(f)(3).
(ii) Upon Reclamation's approval of the irrevocable election, a nonresident
alien will be treated as having the ownership entitlement of a qualified
recipient as described in § 426.5(b), for any land held indirectly. A
foreign entity will be treated as a qualified recipient or a limited
recipient as determined by the number of natural persons who are
beneficiaries of the entity as specified by the definitions found in
§ 426.2, and the subsequent entitlement as provided in § 426.5(b) or
(c), for any land held indirectly. The applicable nonfull-cost
entitlements will be determined as described in § 426.6(b).
(iii)Reclamation will not approve irrevocable elections submitted by a
nonresident alien or a foreign entity that holds any land directly in any
prior law district.
(iv) Reclamation will not approve irrevocable elections submitted by a
nonresident alien that is not a citizen of or foreign entity that has not
been established in a country that has a treaty or international
membership as specified in paragraph (d)(1) of this section.

§ 426.9 Religious or charitable organizations.
(a) Definitions for purposes of this section:
Central organization means the organization to which all subdivisions, such
as parishes, congregations, chapters, etc., ultimately report.
Religious or charitable organization means an organization or each
congregation, chapter, parish, school, ward, or similar subdivision of a
religious or charitable organization that is exempt from paying Federal taxes
under Sec. 501 of the Internal Revenue Code of 1954, as amended.
(b) Acreage limitation status of religious or charitable organizations that are
subject to the discretionary provisions.
(1) Religious or charitable organizations or their subdivisions that are subject
to the discretionary provisions have qualified recipient status, if:
(i) The organization's or subdivision's agricultural produce and proceeds
from the sales of such produce are used only for charitable purposes;
(ii) The organization or subdivision, itself, operates the land; and
(iii)No part of the net earnings of the organization or subdivision accrues
to the benefit of any private shareholder or individual.

20

§ 426.10 Public entities.

(2) If Reclamation determines that a religious or charitable organization or
any of its subdivisions does not meet the criteria listed in paragraph (b)(1)
of this section, then:
(i) If the central organization has not met the criteria, Reclamation will
treat the entire organization, including all subdivisions, as a single
entity; or
(ii) If a subdivision has not met the criteria, only that subdivision and any
subdivisions of it will be treated as a single entity and not the central
organization or other subdivisions of the central organization; and
(iii)In order to ascertain the acreage limitation status, Reclamation
determines the total number of members in both the organization that
has not met the criteria and in any subdivisions that are under that
organization. If Reclamation determines that total number equals:
(A) More than 25 members, then Reclamation treats that organization
and every subdivision under that organization as a single legal
entity with a limited recipient status; or
(B) 25 members or less, then Reclamation treats that organization and
every subdivision under that organization as a single legal entity
with a qualified recipient status.
(c) Acreage limitation status of prior law religious or charitable organizations or
subdivisions.
(1) Religious or charitable organizations and each of their subdivisions are
treated as separate prior law corporations, if neither the district nor that
religious or charitable organization or its subdivisions elect to conform to
the discretionary provisions.
(2) Reclamation will treat the entire organization, including all subdivisions,
as a single prior law corporation, if the central organization or any
subdivisions do not meet the criteria specified in paragraph (b)(1) of this
section.
(d) Affiliated farm management between a religious or charitable organization
and a more central organization of the same affiliation. Reclamation permits
a subdivision of a religious or charitable organization to retain its status as an
individual entity while cooperating with a more central organization of the
same affiliation in farm operation and management. Reclamation permits
affiliated farm management regardless of whether the subdivision is the owner
of the land being operated.

§ 426.10 Public entities.
(a) Application of the acreage limitation provisions to public entities.
Reclamation does not subject public entities to the acreage limitation
provisions of Federal reclamation law with respect to land that Reclamation
determines public entities farm primarily for nonrevenue producing functions.
However, public entities are required to meet certification and reporting
requirements as specified in § 426.18.
21

§ 426.11 Class 1 equivalency
(b) Sale of public land. Reclamation does not require public entities to seek price
approval before they sell nonexempt lands. Once sold, Reclamation can make
irrigation water available to such land if the purchaser meets RRA eligibility
requirements.
(c) Leasing of public land. Public entities can lease irrigation land that they own
or control to eligible landholders. Land leased from a public entity counts
towards the lessee's ownership and nonfull-cost entitlement.

§ 426.11 Class 1 equivalency.
(a) General application. Class 1 equivalency determinations will establish, on a
district-wide basis, the acreage of land with lower productive potential
(Classes 2, 3, and 4) that would be equivalent in productive potential to the
most suitable land (Class 1) in the local agricultural economic setting.
(1) Reclamation establishes equivalency factors by comparing the weighted
average farm size required to produce a given level of income on each of
the lower classes of land with the farm size required to produce that
income level on Class 1 land.
(2) For equivalency purposes, Reclamation will classify all irrigable land as
Class 1, 2, or 3; no other classifications are permissible for irrigable land.
Class 4 and special-use land classes will be allocated to one of these three
classes on a case-by-case basis.
(3) Once the Class 1 equivalency determinations have been made, individual
landowners with land classified as 2 or 3 for equivalency purposes will
have the right to adjust their actual landholding acreage to its Class 1
equivalent acreage.
(4) In a district subject to prior law, Class 1 equivalency can be applied only
to landholders who are subject to the discretionary provisions.
(5) Requests for equivalency determinations will be scheduled by region, with
the regional director of each Reclamation region having responsibility for
such scheduling. Generally, requests will be honored on a
first-come-first-served basis. However, if requests exceed the region's
ability to fulfill them expeditiously, priority will be given on the basis of
greatest immediate need.
(b) Who may request a Class 1 equivalency determination? Only districts may
request Class 1 equivalency determinations. Upon the request of any district
subject to the acreage limitation provisions, Reclamation will make a Class 1
equivalency determination for that district. Equivalency determinations can
be made only on a district-wide basis.
(c) Definition of Class 1 land.
(1) Class 1 land is defined and will be classified as that irrigable land within
a particular agricultural economic setting that:
(i) Most completely meets the various parameters and specifications
established by Reclamation for irrigable land classes;
(ii) Has the relatively highest level of suitability for continuous, successful
irrigation farming; and
22

§ 426.11 Class 1 equivalency.
(iii)Is estimated to have the highest relative productive potential measured
in terms of net income per acre (reflecting both productivity and costs
of production). The equivalency analysis will establish the acreage of
each of the lower classes of land which is equal in productive potential
(measured in terms of net farm income) to 1 acre of Class 1 land.
(2) All land that Reclamation has not classified, or for which Reclamation has
not yet performed the necessary economic studies, will be considered
Class 1 land for the purposes of determining entitlements under these rules
until such time as the necessary classifications or studies have been
completed.
(d) Determination of land classes. The extent and location of Class 1 land and
land in lower land classes in a district have been, or will be, determined by
Reclamation.
(1) Reclamation will take into account the influence of economic and physical
factors upon the productive potential of the land lying within the district.
These factors will include, but are not limited to the following and their
effect on agricultural practices:
(i) The physical and chemical characteristics of the soil;
(ii) Topography;
(iii) Drainage status;
(iv) Costs of production;
(v) Land development costs;
(vi) Water quality and adequacy;
(vii) Elevation;
(viii) Crop adaptability; and
(ix) Length of growing season.
(2) Acceptable levels of detail for land classification studies to be utilized in
making Class 1 equivalency determinations for a given district will be
evaluated on the basis of the physical and agricultural economic
characteristics of the area. For districts where the sole purpose of the land
classification study is for a Class 1 equivalency determination, the level of
detail of the land classification to be made will never be greater than that
required to make a Class 1 equivalency determination.
(3) Reclamation will pay for at least a portion of the costs associated with the
land classification study. The amount to be paid by Reclamation will be
determined as follows:
(i) Reclamation has provided basic land classification data as part of the
project development process since 1924. Accordingly, if Reclamation
determines that acceptable land classification data are not available for
making requested Class 1 equivalency determinations and if the
project was authorized for construction since 1924, such data will be
made available at Reclamation's expense; or
(ii) For each district located in projects authorized for construction prior to
1924, Reclamation will pay 50 percent of the costs and the district
must pay 50 percent of the costs of new land classification studies
required to make accurate Class 1 equivalency determinations.

23

§ 426.11 Class 1 equivalency.
(4) When basic land classification data are available for a district, but the
district does not agree with the accuracy or asserts that the data have
become outdated, the district may request, and Reclamation may perform,
a reclassification under the authority contained in the Reclamation Project
Act of 1939 (43 U.S.C. 485), with the following conditions:
(i) The requesting district will pay 50 percent of the costs of performing
such reclassifications and 100 percent of the costs of all other studies
involved in the equivalency process; and
(ii) The results of such reclassifications will be binding upon the
requesting district and Reclamation.
(e) Additional studies required for Class 1 equivalency determinations.
Economic studies related to Class 1 equivalency determinations will measure
net farm income by land classes within the district.
(1) Net farm income will be determined by considering the disposable income
accruing to the farm operator's labor, management, and equity from the
sale of farm crops and livestock produced on irrigated land, after all fixed
and variable costs of production, including costs of irrigation service, are
accounted for.
(2) Net farm income will be the measure of productivity to establish
equivalency factors reflecting the acreage of each of the lower classes of
land which is equal in productive potential to 1 acre of Class 1 land.
(3) The cost of performing new or additional economic studies and
computations inherent in the equivalency process will be the responsibility
of the requesting district.
(f) Use of Class 1 equivalency with the acreage limitation provisions. Class 1
land and land in lower classes will be identified on a district basis by
Reclamation using a standard approach in which the land classification for the
entire district is considered. Equivalency factors will then be computed for the
district and applied to specific tracts within individual landholdings. If
adequate land classification data are not available, they will be developed as
specified in paragraph (d) of this section using standard procedures
established by Reclamation.
(1) For purposes of ownership entitlement, Class 1 equivalency will not be
applied until a final determination has been made by Reclamation
concerning the district's request for equivalency.
(i) Reclamation will protect excess landowners' property interests by
ensuring that equivalency determinations are completed in advance of
maturity dates on recordable contracts, provided the district requests
an equivalency determination at least 6 months prior to the maturity of
the recordable contract, the district fulfills its obligations under this
section, and the district notifies Reclamation 6 months in advance of
the maturity dates for the need for an expedited review.
(ii) Once the determination has been made, owners of land subject to
recordable contracts may withdraw land from such recordable
contracts in order to reach their ownership entitlement in Class 1
equivalent acreage.

24

§ 426.12 Excess land.
(iii)The requirement that land under recordable contract be sold at a price
approved by Reclamation does not apply to land which is withdrawn
from a recordable contract and included as part of a landowner's
nonexcess landholding as a result of an equivalency determination.
(iv) In cases of equivalency determination disputes, Reclamation will not
undertake the sale of the reasonable increment of the excess land under
a matured recordable contract which could be affected by a
reclassification, provided the dispute is determined by Reclamation not
to be an attempt to thwart the sale of excess land.
(2) For purposes of nonfull-cost entitlement, Class 1 equivalency will not be
applied until a final determination has been made by Reclamation on a
district's request for equivalency.
(i) During the time when such determinations are pending, the full-cost
rate will be assessed based on a landholder's nonfull-cost entitlement
as determined in the absence of Class 1 equivalency.
(ii) Following Reclamation's final determination, Reclamation will
reimburse the district for any full-cost charges that would not have
been assessed had Class 1 equivalency been in place from the date of
the district's request. Districts will return such reimbursements to the
appropriate landholders.
(3) A landholder with holdings in more than one district is entitled to
equivalency only in those districts which have requested equivalency (or
are already subject to equivalency). That part of the landholding in a
district or districts not requesting equivalency will be counted as Class 1
land for purposes of overall entitlement.
(g) Prior equivalency determinations. In districts where equivalency was a
provision of project authorization, those equivalency factor determinations
will be honored as originally calculated unless the district requests a
reclassification.

§ 426.12 Excess land.
(a) The process of designating excess and nonexcess land. If a landowner owns
more land than the landowner's ownership entitlement, all of the landowner's
nonexempt land must be designated as excess and nonexcess as follows:
(1) The landowner designates which land is excess and which is nonexcess in
accordance with the instructions on the appropriate certification or
reporting forms; or
(2) If a landowner fails to designate his or her land as excess or nonexcess on
the appropriate certification or reporting forms:
(i) And all of the landowner's nonexempt land is in only one district:
(A) If the district's contract with Reclamation includes designation
procedures, then the land is designated according to those
procedures; or
(B) If the district's contract with Reclamation does not include
designation procedures, then:
25

§ 426.12 Excess land.
(1) Reclamation will notify the landowner and the district that the
landowner must designate the land as excess and nonexcess on
the appropriate certification or reporting forms within
30-calendar days of the notification;
(2) If the landowner fails to make the designation within
30-calendar days of notification, the district will make the
designation within 30-calendar days thereafter; or
(3) If the district does not make the designation within its
30-calendar days, Reclamation will make the designation; or
(ii) If the landowner owns nonexempt land in more than one district, then
Reclamation will notify the landowner and the districts that the
landowner has 60-calendar days from the date of notification to make
the designation. If the landowner does not make the designation in the
60-calendar days, Reclamation will make the designation.
(b) Changing excess and nonexcess land designations.
(1) Landowners must file with the district(s) in which the land is located and
with Reclamation the designation of excess and nonexcess land. The
designation of land as excess is binding on the land. However, the
landowner may change the designation under the following circumstances
without Reclamation's approval if:
(i) The excess land becomes eligible to receive irrigation water because
the landowner becomes subject to the discretionary provisions as
provided in § 426.3;
(ii) A recordable contract is amended to remove excess land when the
landowner's entitlement increases because the landowner becomes
subject to the discretionary provisions as provided in paragraph (j)(5)
of this section; or
(iii)The excess land becomes eligible to receive irrigation water as a result
of Class 1 equivalency determinations, as provided in § 426.11.
(2) No other redesignation of excess land is allowable without the approval of
Reclamation in accordance with established Reclamation procedures.
Reclamation will not approve a redesignation request if:
(i) The purpose of the redesignation is for achieving, through repeated
redesignation, an effective farm size in excess of that permitted by
Federal reclamation law; or
(ii) The landowner sells some or all of his or her land that is currently
classified as nonexcess.
(3) When a redesignation involves an exchange of nonexcess land for excess
land, a landowner must make an equal exchange of acreage (or Class 1
equivalent acreage) through the redesignation.
(c) Land that becomes excess when a district first contracts with Reclamation.
(1) If a landowner owned irrigable land on the execution date of the district's
first water service or repayment contract, and the execution date was on or
before October 12, 1982, the landowner's excess land is ineligible until the
landowner:

26

§ 426.12 Excess land.
(i) Becomes subject to the discretionary provisions and the landowner
designates the excess land, up to his or her ownership entitlement, as
nonexcess as provided for in paragraph (b)(1)(i) of this section;
(ii) Places such excess land under a recordable contract, provided the
period for executing recordable contracts under the district's contract
has not expired;
(iii)Sells or transfers such excess land to an eligible buyer at a price and on
terms approved by Reclamation; or
(iv) Redesignates the land as nonexcess with Reclamation's approval as
provided for in paragraph (b)(2) of this section.
(2) If the landowner owned irrigable land on the execution date of the
district's first water service or repayment contract and the execution date is
after October 12, 1982, the landowner's excess land is ineligible until the
landowner:
(i) Places such excess land under a recordable contract, provided the
period for executing recordable contracts under the district's contract
has not expired;
(ii) Sells or transfers such excess land to an eligible buyer at a price and on
terms approved by Reclamation; or
(iii)Redesignates the land as nonexcess with Reclamation's approval as
provided for in paragraph (b)(2) of this section.
(d) Land acquired into excess after the district has already contracted with
Reclamation.
(1) If a landowner acquires land after the date the district first entered into a
repayment or water service contract that was nonexcess to the previous
owner and is excess to the acquiring landowner, the first repayment or
water service contract was executed on or before October 12, 1982, and:
(i) Irrigation water was physically available when the landowner acquires
such land, then the land is ineligible to receive such water until:
(A) The landowner becomes subject to the discretionary provisions and
the landowner designates the excess land, up to his or her
ownership entitlement, as nonexcess as provided for in
paragraph (b)(1)(i) of this section;
(B) The landowner sells or transfers such land to an eligible buyer at a
price and on terms approved by Reclamation;
(C) The sale from the previous landowner is canceled; or
(D) The landowner redesignates the land as nonexcess with
Reclamation's approval as provided for in paragraph (b)(2) of this
section; or
(ii) Irrigation water was not physically available when the landowner
acquired the land, then the land is ineligible to receive water until:
(A) The landowner becomes subject to the discretionary provisions and
the landowner designates the excess land, up to his or her
ownership entitlement, as nonexcess as provided for in
paragraph (b)(1)(i) of this section;

27

§ 426.12 Excess land.
(B) The landowner sells or transfers the land to an eligible buyer at a
price and on terms approved by Reclamation;
(C) The sale from the previous landowner is canceled;
(D) The landowner places the land under recordable contract when
water becomes available; or
(E) The landowner redesignates the land as nonexcess with
Reclamation's approval as provided for in paragraph (b)(2) of this
section.
(2) If a landowner acquires land after the date the district first entered into a
repayment or water service contract that was nonexcess to the previous
owner and is excess to the acquiring landowner, the first repayment or
water service contract was executed after October 12, 1982, and:
(i) Irrigation water was physically available when the landowner acquired
such land, then the land is ineligible until:
(A) The landowner sells or transfers the land to an eligible buyer at a
price and on terms approved by Reclamation;
(B) The sale from the previous landowner is canceled; or
(C) The landowner redesignates the land as nonexcess with
Reclamation's approval as provided for in paragraph (b)(2) of this
section; or
(ii) Irrigation water was not physically available when the landowner
acquired such land, then the land is ineligible to receive water until:
(A) The landowner sells or transfers the land to an eligible buyer at a
price and on terms approved by Reclamation;
(B) The sale from the previous landowner is canceled;
(C) The landowner redesignates the land as nonexcess with
Reclamation's approval as provided for in paragraph (b)(2) of this
section; or
(D) The landowner places the land under recordable contract when
water becomes available.
(e) If the status of land is changed by law or regulations.
(1) If the district had a contract with Reclamation on or before
October 12, 1982, and eligible land became excess because the
landowner's entitlement changed from being based on a district-by-district
basis to a westwide basis, then such formerly eligible land is ineligible
until:
(i) The landowner places such land under recordable contract. The
recordable contract does not need to include the sales price approval
clause and application of the deed covenant provision will not be
required; or
(ii) The landowner sells or transfers such land to an eligible buyer. The
sales price does not need Reclamation's approval.
(2) If the district had a contract with Reclamation on or before
October 12, 1982, and the landowner was a nonresident alien or a legal
entity not established under State or Federal law, who directly held

28

§ 426.12 Excess land.
eligible land and such land is no longer eligible to receive water, then such
formerly eligible land is ineligible until:
(i) The landowner places such land under recordable contract. The
recordable contract does not need to include the sales price approval
clause and application of the deed covenant provision will not be
required; or
(ii) The landowner sells or transfers such land to an eligible buyer. The
sales price does not need Reclamation's approval.
(3) If the district first entered a contract with Reclamation after
October 12, 1982, and land would have been eligible before October 12,
1982, but is now ineligible because the landowner is a direct landholder
and either a nonresident alien or a legal entity not established under State
or Federal law, then such land that would have been eligible remains
ineligible until:
(i) If the landowner acquired such land before the date of the district's
contract:
(A) The landowner places such land under a recordable contract
requiring Reclamation sales price approval; or
(B) Sells or transfers the land to an eligible buyer subject to
Reclamation sales price approval; or
(ii) If the landowner acquired such land after the date of the district's
contract, the landowner sells or transfers such land to an eligible buyer
subject to Reclamation sales price approval.
(4) Eligible nonexcess land that is indirectly owned on or before
December 18, 1996 by a nonresident alien or a legal entity not established
under State or Federal law, and that becomes ineligible because of § 426.8
is ineligible until:
(i) The landowner places such land under recordable contract. The
recordable contract does not need to include the sales price approval
clause and application of the deed covenant provision will not be
required; or
(ii) The landowner sells or transfers such land to an eligible buyer. The
sales price does not need Reclamation's approval.
(f) Excess land that is acquired without price approval. If a landowner acquires
land that is subject to Reclamation price approval, without obtaining such
approval, the land is ineligible to receive water until:
(1) The sales price is reformed to conform to the price approved by
Reclamation and is eligible to receive irrigation water in the landowner's
ownership entitlement; or
(2) Such landowner sells or transfers the land to an eligible buyer at a price
approved by Reclamation.
(g) Excess land that is disposed of and subsequently reacquired. Districts may
not make available irrigation water to excess land disposed of by a landholder
at a price approved by Reclamation, whether or not under a recordable
contract, if the landholder subsequently becomes a direct or indirect

29

§ 426.12 Excess land.
landholder of that land through either a voluntary or involuntary action,
unless:
(1) The landholder became or contracted to become a direct or indirect
landholder of that land prior to December 18, 1996, and the land in
question is otherwise eligible to receive irrigation water;
(2) Such land becomes exempt from the acreage limitations of Federal
reclamation law;
(3) The landholder pays the full-cost rate for any irrigation water delivered to
the landholder's formerly excess land that is otherwise eligible to receive
irrigation water. If a landholder is a part owner of a legal entity that
becomes the direct or indirect landholder of the land in question, then the
full-cost rate will be applicable to the proportional share of irrigation
water delivered to the land that reflects the part owner's interest in that
legal entity; or
(4) The deed covenant associated with the sale has expired as provided for in
paragraph (i) of this section.
(h) Application of the compensation rate for irrigating ineligible excess land with
irrigation water. Reclamation will charge the following for irrigation water
delivered to ineligible excess land in violation of Federal reclamation law and
these regulations:
(1) The appropriate compensation rate for irrigation water delivered; and
(2) any other applicable fees as specified in § 426.20.
(i) Deed covenants.
(1) All land that is acquired from excess status after October 12, 1982, must
have the following covenant (that runs with the land) placed in the deed
transferring the land to the acquiring party in order for the land to be
eligible to receive irrigation water except as otherwise specified in these
regulations. The covenant must be in the deed regardless of whether or
not the land was under recordable contract.
This covenant is to satisfy the requirements in 209(f)(2) of
Pub. L. 97-293 (43 U.S.C. 390, et seq.). This covenant expires
on (date). Until the expiration date specified herein, sale price
approval is required on this land. Sale by the landowner and
his or her assigns of these lands for any value that exceeds the
sum of the value of newly added improvements plus the value
of the land as increased by the market appreciation unrelated to
the delivery of irrigation water will result in the ineligibility of
this land to receive Federal project water, provided however:
(i) The terms of this covenant requiring price approval shall
not apply to this land if it is acquired into excess status
pursuant to a bona fide involuntary foreclosure or similar
involuntary process of law, conveyance in satisfaction of
a debt (including, but not limited to, a mortgage, real
estate contract, or deed of trust), inheritance, or devise
(hereinafter Involuntary Conveyance). Thereafter, this

30

§ 426.12 Excess land.
land may be sold to a landholder at its fair market value
without regard to any other provision of the Reclamation
Reform Act of 1982 enacted on
October 12, 1982, (43 U.S.C. 390aa et seq.), or to
Section 46 of the Act entitled ``an Act to adjust water
rights charges, to grant certain relief on the Federal
irrigation projects, and for other purposes,'' enacted
May 25, 1926 (43 U.S.C. 423e);
(ii) If the status of this land changes from nonexcess into
excess after a mortgage or deed of trust in favor of a
lender is recorded and the land is subsequently acquired
by a bona fide Involuntary Conveyance by reason of a
default under that loan, this land may thereupon or
thereafter be sold to a landholder at its fair market value;
(iii) The terms of this covenant requiring price approval shall
not apply to the sales price obtained at the time of the
Involuntary Conveyances described in
subparagraphs (i) and (ii), nor to any subsequent
voluntary sales by a landholder of this land after the
Involuntary Conveyances or any subsequent Involuntary
Conveyance;
(iv) Upon the completion of an Involuntary Conveyance,
Reclamation shall reconvey or otherwise terminate this
covenant of record;
(v) However, the deed covenant shall not be reconveyed or
otherwise terminated if the involuntarily acquiring
landowner is the landowner who sold this land from
excess status, unless that landowner is a financial
institution as defined in § 426.14(a) of the Acreage
Limitation Rules and Regulations (43 CFR Part 426); and
(vi) The party whose excess ownership originally required the
placement of this covenant may not receive Federal
reclamation project irrigation water on the land subject to
this covenant as a direct or indirect landowner or lessee,
unless an exception provided for in § 426.12(g) is met.
Note: 1. Clauses (v) and (vi) of this covenant shall only be required on those
covenants placed in deeds transferring land after January 1, 1998.
Note: 2. The date that the covenant expires shall be 10 years from the date
the land was first transferred from excess to nonexcess status.
(2) A landholder may purchase or otherwise voluntarily acquire into
nonexcess status, land subject to a deed covenant, at a price approved by
Reclamation if the land is within the landholder's ownership entitlement.
(3) Upon expiration of the terms of the deed covenant, a landowner may resell
such land at fair market value. A landowner may not sell more of such
land in his or her lifetime than an amount equal to his or her ownership

31

§ 426.12 Excess land.
entitlement. Once the landowner reaches this limit, any additional excess
land or land subject to a deed covenant the landowner acquires is
ineligible to receive irrigation water, until such land is sold to an eligible
buyer at a price approved by Reclamation.
(4) If a landholder acquires land burdened by such a deed covenant through
involuntary foreclosure or similar involuntary process of law, conveyance
in satisfaction of a debt, including, but not limited to, a mortgage, real
estate contract, or deed of trust, inheritance, or devise, and is not the party
whose excess ownership originally required placement of the deed
covenant, then Reclamation must terminate the deed covenant upon the
landholder's request. The provisions in paragraph (i)(1)(v) of this section
and § 426.14(e) address termination of deed covenants for landholders
whose excess ownership originally required placement of the deed
covenant.
(j) Recordable contracts.
(1) Qualifications for recordable contracts. A landowner can make excess
land eligible to receive irrigation water by entering into a recordable
contract with the United States if the landowner qualifies under applicable
provisions of:
(i) The district's contract with Reclamation;
(ii) Federal reclamation law; and
(iii)These regulations.
(2) Clauses to be included in recordable contracts. A recordable contract
must include:
(i) A clause whereby the landowner agrees to dispose of the excess land
to an eligible buyer, excluding mineral rights and easements, under
terms and conditions of the sale, in accordance with § 426.13; and
within the period allowed for the disposition of excess land, that must
be within 5 years from the date that the recordable contract is executed
by Reclamation (except for the Central Arizona Project wherein the
time period is 10 years from the date water becomes available to the
land); and
(ii) A clause granting power of attorney to Reclamation to sell the land
held under the recordable contract, if the landholder has not already
sold the land by the recordable contract's maturation.
(3) Date Reclamation can make irrigation water available. Reclamation can
make available irrigation water to land that the landowner plans to place
under a recordable contract on the day that Reclamation receives the
landowner's written request to execute a recordable contract. The
landowner has 20-working days in which to execute the recordable
contract from the date Reclamation sends the recordable contract to the
landowner. Reclamation, in its discretion, may extend this period upon
the landowner's request.
(4) Water rate. The rate for irrigation water delivered to land placed under
recordable contract will be determined as follows:

32

§ 426.12 Excess land.

(5)

(6)

(7)

(8)

(i) If both the landowner and any lessee are prior law recipients, land
placed under a recordable contract can receive irrigation water at a
contract rate that does not cover full operation and maintenance
(O&M) costs;
(ii) If either landowner or any lessee is subject to the discretionary
provisions, the water rate applicable to the recordable contract must
cover, at a minimum, all O&M costs; or
(iii)If a landholder leases land subject to a recordable contract and is in
excess of his or her nonfull-cost entitlement, the lessee may select such
land as the land on which the full-cost rate will be charged for the
delivery of irrigation water, unless the land is already subject to the
full-cost rate because of an extended recordable contract.
Amending a recordable contract to include less acreage.
(i) Reclamation permits a landowner to amend a recordable contract to
transfer land out of a recordable contract to nonexcess status, if:
(A) The landowner has an increased ownership entitlement because of
becoming subject to the discretionary provisions; or
(B) Land becomes eligible by implementation of Class 1 equivalency,
if the landowner amends the recordable contract prior to
performance of appraisal.
(ii) Landholders must receive Reclamation's approval to amend recordable
contracts.
(A) The disposition period for any land remaining under a recordable
contract will not change because of an amendment to remove some
land.
(B) For land removed from a recordable contract based on
paragraph (j)(5)(i) of this section, any requirement for application
of a deed covenant will no longer be applicable.
Sale of land by Reclamation. If the landowner does not dispose of the
excess land held under recordable contract within the period specified in
the recordable contract, Reclamation will sell that land. Reclamation will
not sell the land if the landowner complies with all requirements for sale
of excess land under these rules within the period specified, regardless if
Reclamation gives final approval of the sale within that period or after.
Delivery of water when a recordable contract has matured. Reclamation
can make available irrigation water at the current applicable rate, pursuant
to paragraph (j)(4) of this section, to excess land held under a matured
recordable contract until Reclamation sells the land.
Procedures Reclamation follows in selling excess land. If Reclamation
must sell excess land, the following procedures will be used:
(i) If Reclamation determines it to be necessary, a qualified surveyor will
make a land survey. The United States will pay for the survey
initially, but such costs will be added to the approved sales price for
the land. The United States will be reimbursed for these costs from the
sale of the land;

33

§ 426.13 Excess land appraisals.
(ii) Reclamation will appraise the value of the excess land, in the manner
prescribed by § 426.13, to determine the appropriate sales price. The
United States will pay for the appraisal initially, but such costs will be
added to the approved sales price for the land. The United States will
be reimbursed for these costs from the sale of the land; and
(iii)Reclamation will advertise the sale of the property in farm journals
and in newspapers within the county in which the land lies, and by
other public notices as deemed advisable. The United States will pay
for the advertisements and notices initially, but such costs will be
added to the approved sales price for the land. The United States will
be reimbursed for these costs from the sale of the land. The notices
must state:
(A) The minimum acceptable sales price for the property (which equals
the appraised value plus the cost of the appraisal, survey, and
advertising);
(B) That Reclamation will sell the land by auction for cash, or on terms
acceptable to the landowner, to the highest eligible bidder whose
bid equals or exceeds the minimum acceptable sales price; and
(C) The date of the sale (which must not exceed 90 calendar days from
the date of the advertisement and notices);
(iv) The proceeds from the sale of the land will be paid:
(A) First, to the landowner in the amount of the appraised value;
(B) Second, to the United States for costs of the survey, appraisal,
advertising, etc.; and
(C) Third, any remaining proceeds will be credited to the Reclamation
fund or other funds as prescribed by law; and
(v) Reclamation will close the sale of the excess land when parties
complete all sales arrangements. Reclamation will execute a deed
conveying the land to the purchaser. Reclamation will not require the
purchaser to include a covenant in the deed, as specified in paragraph
(i) of this section, that restricts any further resale of the land.

§ 426.13 Excess land appraisals.
(a) When does Reclamation appraise the value of a landowner's land?
Reclamation appraises excess land or land burdened by a deed covenant upon
a landowner's request or when required by Reclamation. If a landowner does
not request an appraisal within 6 months of the maturity date of a recordable
contract, Reclamation, in its discretion, can initiate the appraisal.
(b) Procedures Reclamation uses to determine the sale price of excess land or
land burdened by a deed covenant. Reclamation complies with the following
procedures to determine the sale price of excess land and land burdened by a
deed covenant, except if a landholder owns land subject to a recordable
contract that was in force on October 12, 1982, or other pertinent contract that
was in force on that date, and these regulations would be inconsistent with
provisions in such a contract:

34

§ 426.13 Excess land appraisals.
(1) Appraisals of land. Reclamation will base all appraisals of land on the fair
market value of the land at the time of appraisal without reference to the
construction of the irrigation works. Reclamation must use standard
appraisal procedures including: the income, comparable sales, and cost
methods, as applicable. Reclamation will consider nonproject water
supply factors as provided in paragraph (c)(1) of this section as
appropriate; and
(2) Appraisal of improvements to land. Reclamation will assess the
contributory fair market value of improvements to land, as of the date of
appraisal, using standard appraisal procedures.
(c) Appraisals of nonproject water supplies.
(1) The appraiser will consider nonproject water supply factors, where
appropriate, including:
(i) Ground water pumping lift;
(ii) Surface water supply;
(iii)Water quality; and
(iv) Trends associated with paragraphs (c)(1) (i) through (iii) of this
section, where appropriate.
(2) Reclamation will develop the nonproject water supply and trend
information with the assistance of:
(i) The district in which the land is located, if the district desires to
participate;
(ii) Landowners of excess land or land burdened by a deed covenant and
prospective buyers who submit information either to the district or
Reclamation; and
(iii)Public meetings and forums, at the discretion of Reclamation.
(3) Data submitted may include:
(i) Historic geologic data;
(ii) Changing crops and cropping patterns; and
(iii)Other factors associated with the nonproject water supply.
(4) If Reclamation and the district cannot reach agreement on the nonproject
water supply information within 60-calendar days, Reclamation will
review and update the trend information as it deems necessary and make
all final determinations considering the data provided by Reclamation and
the district. Reclamation will provide these data to the appraisers who
must consider the data in the appraisal process, and clearly explain how
they used the data in the valuation of the land.
(d) The date of the appraisal. The date of the appraisal will be the date of last
inspection by the appraiser(s) unless there is a prior signed instrument, such as
an option, contract for sale, agreement for sale, etc., affecting the property. In
those cases, the date of appraisal will be the date of such instrument.
(e) Cost of appraisal. If the appraisal is:
(1) The land's first appraisal, the United States will initially pay the costs of
appraising the value of the land, but such costs will be added to the
approved sale price for the land. The United States will reimburse itself
for these costs from the sale of the land;

35

§ 426.14 Involuntary acquisition of land.
(2) Not the land's first appraisal, the landowner requesting the appraisal must
pay any costs associated with the reappraisal, unless the value set by the
reappraisal differs by more than 10 percent, in which case the United
States will pay for the reappraisal; or
(3) Associated with a sales price reformation as specified in § 426.12(f)(1),
the landowner requesting the appraisal must pay any costs associated with
the appraisal.
(f) Appraiser selection. Reclamation will select a qualified appraiser to appraise
the excess land or land burdened by a deed covenant, except as specified
within paragraph (g) of this section.
(g) Appraisal dispute resolution. The landowner who requested the appraisal
may request that the United States conduct a second appraisal of the excess
land or land burdened by a deed covenant if the landowner disagrees with the
first appraisal. The second appraisal will be prepared by a panel of three
qualified appraisers, one designated by the United States, one designated by
the district, and the third designated jointly by the first two. The appraisal
made by the panel will fix the maximum value of the excess land and will be
binding on both parties after review and approval as provided in paragraph (h)
of this section.
(h) Review of appraisals of excess land or land burdened by a deed covenant.
Reclamation will review all appraisals of excess land or land burdened by a
deed covenant for:
(1) Technical accuracy and compliance with these rules and regulations;
(2) Applicable portions of the ``Uniform Appraisal Standards for Federal
Land Acquisition-Interagency Land Acquisition Conference 1973,'' as
revised in 1992;
(3) Reclamation policy; and
(4) Any detailed instructions provided by Reclamation setting conditions
applicable to an individual appraisal.

§ 426.14 Involuntary acquisition of land.
(a) Definitions for purposes of this section.
Financial institution means a commercial bank or trust company, a private
bank, an agency or branch of a foreign bank in the United States, a thrift
institution, an insurance company, a loan or finance company, or the Farm
Credit System.
Involuntarily acquired land means land that is acquired through an
involuntary foreclosure or similar involuntary process of law, conveyance in
satisfaction of a debt (including, but not limited to, a mortgage, real estate
contract or deed of trust), inheritance, or devise.
(b) Ineligible excess land that is involuntarily acquired. Reclamation cannot
make available irrigation water to land that was ineligible excess land before
the new landowner involuntarily acquired it, unless:
(1) The land becomes nonexcess in the new landowner's ownership; and

36

§ 426.14 Involuntary acquisition of land.
(2) The deed to the land contains the 10-year covenant requiring Reclamation
sale price approval, and that deed commences when the land becomes
eligible to receive irrigation water.
(3) If either of these conditions is not met, the land remains ineligible excess
until sold to an eligible buyer at an approved price, and the seller places
the 10-year covenant requiring Reclamation price approval, as specified in
§ 426.12(i), in the deed transferring title to the land to the buyer.
(c) Land that was held under a recordable contract and is acquired involuntarily.
Reclamation can make available irrigation water to land held under a
recordable contract that is involuntarily acquired under the terms of the
recordable contract to the extent the land continues to be excess in his or her
landholding, if the landowner:
(1) assumes the recordable contract; and
(2) executes an assumption agreement provided by Reclamation.
(3) This land will remain eligible to receive irrigation water for the longer of
5 years from the date that the land was involuntarily acquired, or for the
remainder of the recordable contract period. The sale of this land shall be
under terms and conditions set forth in the recordable contract and must be
satisfactory to and at a price approved by Reclamation.
(d) Mortgaged land. Reclamation treats mortgaged land that changed from
nonexcess status to excess status after the mortgage was recorded, and which
is subsequently acquired by a lender through an involuntary foreclosure or
similar process of law, or by a bona fide conveyance in satisfaction of a
mortgage, in the following manner:
(1) If the new landowner designates the land as excess in his or her holding,
then:
(i) The land is eligible to receive irrigation water for a period of 5 years or
until transferred to an eligible landowner, whichever occurs first;
(ii) During the 5-year period Reclamation will charge a rate for irrigation
water equal to the rate paid by the former owner, unless the land
becomes subject to full-cost pricing through leasing; and
(iii)The land is eligible for sale at its fair market value without a deed
covenant restricting its future sales price; or
(2) If the new landowner is eligible to designate the land as nonexcess and he
or she designates the land as nonexcess, the land will be treated in the
same manner as any other nonexcess land and will be eligible for sale at
its fair market value without a deed covenant restricting its future sales
price.
(e) Nonexcess land that becomes excess when acquired involuntarily.
(1) Reclamation can make irrigation water available for a period of 5 years to
a landowner who involuntarily acquires land that becomes excess in the
involuntarily acquiring landowner's holding provided the land was
nonexcess to the previous owner and:
(i) The acquiring landowner never previously held such land as ineligible
excess land or under a recordable contract;
(ii) The acquiring landholder is a financial institution; or

37

§ 426.14 Involuntary acquisition of land.
(iii)The acquiring landowner previously held the land as ineligible excess
or under a recordable contract and §§ 426.12(g)(1), (3), or (4) applies.
(2) The following will be applicable in situations that meet the criteria
specified under paragraph (e)(1) of this section:
(i) Reclamation will charge a rate for irrigation water delivered to such
land equal to the rate paid by the former owner, except Reclamation
will charge the full-cost rate if:
(A) The land becomes subject to full-cost pricing through leasing; or
(B) If the involuntarily acquired land is eligible to receive irrigation
water only because § 426.12(g)(3) applies and the deed covenant
has not expired;
(ii) The new landowner may not place such land under a recordable
contract;
(iii)The new landowner may request that Reclamation remove a deed
covenant as provided in § 426.12(i)(4), and may sell such land at any
time without price approval and without the deed covenant. However,
the deed covenant will not be removed and the terms of the deed
covenant will be fully applied if the new landowner is the landowner
who sold the land in question from excess status, except for:
(A) Financial institutions; or
(B) Landowners for which § 426.12(g) (1) or (2) apply; and
(iv) Such land will become ineligible to receive irrigation water 5 years
after it was acquired and will remain ineligible until sold to an eligible
buyer or redesignated as provided for in paragraph (f) of this section.
(f) Redesignation of excess land to nonexcess. Landholders who designate
involuntarily acquired land as excess as provided for in paragraphs (d)(1) and
(e)(1) of this section and want to redesignate the land as nonexcess, must
utilize the redesignation process specified under § 426.12(b)(2).
(1) However, such redesignations will not be approved if the water rate
specified in paragraphs (d)(1)(ii) or (e)(2)(i) of this section is less than
what would have been charged for water deliveries to the land in question
if the landholder that involuntarily acquired the land had originally
designated the land as nonexcess.
(2) Such landholders may utilize the redesignation process, if they remit to
Reclamation the difference between the rate paid and the rate that would
have been paid, if the land had been designated as nonexcess when
involuntarily acquired, for all irrigation water delivered to the land in
question while the land was designated as excess.
(g) Effect of involuntarily acquiring land subject to the discretionary provisions.
A landowner does not automatically become subject to the discretionary
provisions if the landowner acquires irrigation land involuntarily which was
formerly subject to the discretionary provisions. However, a landholder that
is subject to the prior law provisions will become subject to the discretionary
provisions upon involuntarily acquiring land if:
(1) The land is located in a district that is subject to the discretionary
provisions;

38

§ 426.15 Commingling.
(2) The landholder in question will be the direct landowner of the land; and
(3) The landholder in question declares the land as nonexcess.
(h) Land acquired by inheritance or devise. If a landowner receives irrigation
land through inheritance or devise, the 5-year eligibility period for receiving
irrigation water on the newly acquired land per paragraphs (c)(3) and (e) of
this section begins on the date of the previous landowner's death.

§ 426.15 Commingling.
(a) Definition for purposes of this section:
Commingled water means irrigation water and nonproject water that use the
same facilities.
(b) Application of Federal reclamation law and these regulations to prior
commingling provisions in contracts. If a district entered into a contract with
Reclamation prior to October 1, 1981, and that contract has provisions
addressing commingled water situations, those provisions stay in effect for the
term of that contract and any renewals of it.
(c) Establishment of new commingling provision in contracts. New, amended, or
renewed contracts may provide that irrigation water can be commingled with
nonproject water as follows:
(1) If the facilities used for the commingling of irrigation water and
nonproject water are constructed without funds made available pursuant to
Federal reclamation law, the provisions of Federal reclamation law and
these regulations will apply only to the landholders who receive irrigation
water, provided:
(i) That the water requirements for eligible lands can be established; and
(ii) The quantity of irrigation water to be used is less than or equal to the
quantity necessary to irrigate eligible lands.
(2) If the facilities used for commingling irrigation water and nonproject
water are funded with monies made available pursuant to Federal
reclamation law, landholders who receive nonproject water will be subject
to Federal reclamation law and these regulations unless:
(i) The district collects and pays to the United States an incremental fee
which reasonably reflects an appropriate share of the cost to the
Federal Government, including interest, of storing or delivering the
nonproject water; and
(ii) The fee will be established by Reclamation and will be in addition to
the district's obligation to pay for capital, operation, maintenance, and
replacement costs associated with the facilities required to provide the
service
(3) If paragraphs (c)(2) (i) and (ii) of this section are met, the provisions of
Federal reclamation law and these regulations will be applicable to only
those landholders who receive irrigation water. Accordingly, the
provisions of Federal reclamation law and these regulations will not be
applicable to landholders who receive nonproject water delivered through

39

§ 426.16 Exemptions and exclusions.
facilities funded with monies made available pursuant to Federal
reclamation law if those paragraphs are met.
(d) When Federal reclamation law and these regulations do not apply. Federal
reclamation law and these regulations do not apply to landholders receiving
irrigation water from federally financed facilities if the irrigation water is
acquired by an exchange and that exchange results in no material benefit to
the recipient of the irrigation water.

§ 426.16 Exemptions and exclusions.
(a) Army Corps of Engineers (Corps) projects.
(1) If Reclamation determines that land receives its agricultural water from a
Corps project, Reclamation will exempt that land from specific provisions
of Federal reclamation law, including the RRA, unless:
(i) Federal law explicitly designates, integrates, or incorporates that land
into a Federal Reclamation project; or
(ii) Reclamation provides project works for the control or conveyance of
the agricultural water supply from the Corps project to that land.
(2) Upon such determination, Reclamation will:
(i) Notify the district of its exemption status;
(ii) Require the district's agricultural water users to continue, under
contracts made with Reclamation, to repay their share of construction,
operation and maintenance, and contract administration costs of the
Corps project allocated to conservation or irrigation storage; and
(iii)At the request of the district delete provisions of the district's
repayment or water service contract that imposes acreage limitation for
those lands served by Corps projects.
(b) Repayment of construction obligations. The acreage limitation provisions do
not apply to land in a district after the district has repaid, in accordance with
the district's contract with Reclamation, all obligated construction costs for
project facilities.
(1) Payments by periodic installments over the contract repayment term, as
well as lump-sum and accelerated payments, if allowed by the district's
contract with Reclamation, will qualify the district to become exempt.
(2) If a district has a contract with the United States providing for individual
landowner repayment of construction charges allocated to land, and the
landowner has repaid all obligated construction costs allocated for that
landowner's land, that landowner will become exempt from the acreage
limitation provisions.
(3) Upon payout Reclamation will:
(i) Notify the district, and individual landowner in cases of individual
landowner payout, of the exemption from the acreage limitation
provisions;
(ii) Notify the district or individual landowner that the exemption does not
relieve the district or individual landowner of the obligation to

40

§ 426.16 Exemptions and exclusions.
continue to pay, on an annual basis, O&M costs applicable to the
district or landowner;
(iii)Upon request by the owner of land for which repayment has occurred,
provide a certificate from Reclamation acknowledging that the land is
free of the acreage limitation provisions of Federal reclamation law;
(iv) Except as provided for in § 426.19(e), no longer apply the certification
and reporting requirements to the district, if the entire district is
exempt, or to exempt landowners as specified in paragraph (b)(2) of
this section; and
(v) Consider on a case-by-case basis continuation of the exemption if
additional construction funds for the project are requested.
(c) Rehabilitation and Betterment loans. If Reclamation makes a Rehabilitation
and Betterment loan (pursuant to the Rehabilitation and Betterment Act of
October 7, 1949, as amended, 43 U.S.C. 504) to a project that was authorized
under Federal reclamation law prior to the submittal of the loan request, by or
for the district, Reclamation:
(1) Considers the loan as a loan for maintenance, including replacements that
cannot be financed currently;
(2) Does not consider the loan in determining whether the district has
discharged its obligation to repay the construction cost of project facilities
used to make irrigation water available for delivery to land in the district;
and
(3) Will not allow such a loan to serve as the basis for reinstating acreage
limitation provisions in a district that has completed payment of its
construction obligation, nor serve as the basis for increasing the
construction obligation of the district and thereby extending the period
during which acreage limitation provisions will apply.
(d) Temporary supplies of water. If Reclamation announces availability of
temporary supplies of water resulting from an unusually large water supply,
not otherwise storable for project purposes, or from infrequent and otherwise
unmanaged floodflows of short duration a district may request that
Reclamation make such supplies available to excess land. However, such
water deliveries must not have an adverse effect on other authorized project
purposes. Upon approval of the district's request, Reclamation will notify the
requesting district of the availability of the temporary supply of water under
the following conditions:
(1) The contract for the temporary supply of water will be for 1 year or less in
accordance with prior policies and practices;
(2) The acreage limitation provisions will not be applicable to the temporary
supply of water;
(3) An applicable price for the water, if any, will be established; and
(4) Such other conditions as Reclamation may include.
(e) Isolated tracts. If a landowner requests that Reclamation determine that
portions of his or her owned land are isolated tracts that can be farmed
economically only if included in a farming operation that already exceeds the

41

§ 426.17 Small Reclamation projects.
landowners ownership entitlement, and Reclamation makes such a
determination, then Reclamation:
(1) Will exempt such land from the ownership limitations of Federal
reclamation law; and
(2) Will assess the full-cost rate for any irrigation water delivered to the
isolated tract that exceeds the landowner's nonfull-cost entitlement.
(f) Indian trust or restricted lands.
(1) Indian trust or restricted lands are excluded from application of the
acreage limitation provisions.
(2) Indian tribes and tribal entities operating on Indian trust or restricted lands
are excluded from application of the water conservation provisions.

§ 426.17 Small Reclamation projects.
(a) Effect of the RRA on loan contracts made under the Small Reclamation
Projects Act.
(1) If a district entered into a loan contract under the Small Reclamation
Projects Act of 1956 (43 U.S.C. 422) (SRPA) on or after
October 12, 1982, the contract is subject to the provisions of the SRPA, as
amended by Section 223 of the RRA and as amended by Title III of
Pub. L. 99-546.
(2) If a district entered into an SRPA loan contract prior to October 12, 1982,
and the district:
(i) Did not amend the loan contract to conform to the SRPA, as amended
by Section 223 of the RRA, prior to October 27, 1986, then the
acreage provisions of the contract continue in effect, unless the
contract is amended to conform to the SRPA as amended by
section 307 of Pub. L. 99-546.
(ii) Amended the loan contract to conform to the SRPA, as amended by
Section 223 of the RRA, prior to October 27, 1986, the contract is
subject to the increased acreage provisions provided in Section 223 of
the RRA. Reclamation cannot alter, modify or amend any other
provision of the SRPA loan contract without the consent of the
non-Federal party.
(b) Other sections of these regulations that apply to SRPA loans. No other
sections of these regulations apply to SRPA loans, except as specified in
§ 426.3(a)(3)(ii) and paragraph (d) of this section.
(c) Effect of SRPA loans in determining whether a district has repaid its
construction obligations on a water service or repayment contract. If a
district has a water service or repayment contract in addition to an SRPA
contract, Reclamation does not consider the SRPA loan:
(1) In determining whether the district has discharged its construction cost
obligation for the project facilities;
(2) As a basis for reinstating acreage limitation provisions in a district that has
completed payment of its construction cost obligation(s); or

42

§ 426.18 Landholder information requirements.
(3) As a basis for increasing the construction obligation of the district and
extending the period during which acreage limitation provisions will apply
to that district.
(d) Districts that have an SRPA loan contract and a contract as defined in
§ 426.2. If a district has an SRPA loan contract and a contract as defined in
§ 426.2, the SRPA contract does not supersede the RRA requirements
applicable to such contracts.

§ 426.18 Landholder information requirements.
(a) Definition for purposes of this section:
Irrigation season means the period of time between the district's first and last
water delivery in any water year.
(b) Who must provide information to Reclamation? All landholders and other
parties involved in the ownership or operation of nonexempt land must
provide Reclamation, as required by these regulations or upon request, any
records or information, in a form suitable to Reclamation, deemed reasonably
necessary to implement the RRA or other provisions of Federal reclamation
law.
(c) Required form submissions.
(1) Landholders who are subject to the discretionary provisions must annually
submit standard certification forms, except as provided in paragraph (l) of
this section.
(2) Landholders who make an irrevocable election must submit the standard
certification forms with their irrevocable election in the year that they
make the election.
(3) Landholders who are subject to prior law must annually submit standard
reporting forms, except as provided in paragraph (l) of this section.
(4) Landholders who qualify under an exemption as specified in paragraph (g)
of this section need not submit any forms.
(d) Required information. Landholders must declare on the appropriate
certification or reporting forms all nonexempt land that they hold directly or
indirectly westwide and other information pertinent to their compliance with
Federal reclamation law.
(e) District receipt of forms and information. Landholders must submit the
appropriate, completed form(s) to each district in which they directly or
indirectly hold irrigation land.
(f) Certification or reporting forms for wholly owned subsidiaries. The ultimate
parent legal entity of a wholly owned subsidiary or of a series of wholly
owned subsidiaries must file the required certification or reporting forms. The
ultimate parent legal entity must disclose all direct and indirect landholdings
of its subsidiaries as required on such forms.
(g) Exemptions from submitting certification and reporting forms.
(1) A landholder is exempt from submitting the certification and reporting
forms only if:

43

§ 426.18 Landholder information requirements.
(i) The landholder's district has Category 1 status, as specified in
paragraph (h) of this section, and the landholder is a:
(A) Qualified recipient who holds a total of 240 acres westwide or less;
or
(B) Limited recipient or a prior law recipient who holds a total of
40 acres westwide or less.
(ii) The landholder's district has Category 2 status, as specified in
paragraph (h) of this section, and the landholder is a:
(A) Qualified recipient who holds a total of 80 acres westwide or less;
or
(B) Limited recipient or a prior law recipient who holds a total of
40 acres westwide or less.
(2) A wholly owned subsidiary is exempted from submitting certification or
reporting forms, if its ultimate parent legal entity has properly filed such
forms disclosing the landholdings of each of its subsidiaries.
(3) In determining whether certification or reporting is required for purposes
of this section:
(i) Class 1 equivalency factors as determined in § 426.11 shall not be
used; and
(ii) Indirect landholders need not count involuntarily acquired acreage
designated as excess by the direct landowner.
(h) District categorization.
(1) For purposes of this section each district has Category 2 status, unless the
following criteria have been met. If the district has met both criteria, it
will be granted Category 1 status.
(i) The district has conformed by contract to the discretionary provisions;
and
(ii) The district is current in its financial obligations to Reclamation.
(2) Reclamation considers a district current in its financial obligation if as of
September 30, the district is current in its:
(i) Financial obligations specified in its contract(s) with Reclamation; and
(ii) Payment obligations established by the RRA, and these rules.
(i) Application of Category 1 status. Once a district achieves Category 1 status,
it will only be withdrawn if the Regional Director determines the district is not
current in its financial obligations as specified in paragraph (h)(2) of this
section. The withdrawal of Category 1 status will be effective at the end of
the current water year and can be restored only as provided under
paragraph (h) of this section. With the withdrawal of Category 1 status, the
district will have a Category 2 status.
(j) Submissions by landholders holding land in both a Category 1 district and a
Category 2 district. If a qualified recipient holds land in a Category 1 district,
then the 240-acre forms threshold will be applicable in determining if the
landholder must submit a certification form to that Category 1 district. If the
same qualified recipient also holds land in a Category 2 district, then the
80-acre forms threshold will be applicable in determining if the landholder
must submit a certification form to the Category 2 district.

44

§ 426.18 Landholder information requirements.
(k) Notification requirements for landholders whose ownership or leasing
arrangements change after submitting forms. If a landholder's ownership or
leasing arrangements change in any way:
(1) During the irrigation season, the landholder must:
(i) Notify the district office, either verbally or in writing within
30-calendar days of the change; and
(ii) Submit new forms to all districts in which the landholder holds
nonexempt land, within 60-calendar days of the change.
(2) Outside of the irrigation season, then the landholder must submit new
standard certification or reporting forms to all districts in which
nonexempt land is held prior to any irrigation water deliveries following
such changes.
(l) Notification requirements for landholders whose ownership or leasing
arrangements have not changed. If a landholder's ownership or leasing
arrangements have not changed since last submitting a standard certification
or reporting form, the landholder can satisfy the annual certification or
reporting requirements by submitting a verification form instead of a standard
form. On that form the landholder must verify that the information contained
on the last submitted standard certification or reporting form remains accurate
and complete.
(m) Actions taken if required submission(s) is not made.
(1) If a landholder does not submit required certification or reporting form(s),
then:
(i) The district must not deliver, and the landholder is not eligible to
receive and must not accept delivery of, irrigation water in any water
year prior to submission of the required certification or reporting
form(s) for that water year; and
(ii) Eligibility will be regained only after all required certification or
reporting forms are submitted by the landholder to the district.
(2) If one or more part owners of a legal entity do not submit certification or
reporting forms as required:
(i) The entire entity will be ineligible to receive irrigation water until such
forms are submitted; or
(ii) If the documents forming the entity provide for the part owners'
interest to be separable and alienable, then only that portion of the land
attributable to the noncomplying part owners will be ineligible to
receive irrigation water.
(n) Actions taken by Reclamation if a landholder makes false statements on the
appropriate certification or reporting forms. If a landholder makes a false
statement on the appropriate certification or reporting form(s) Reclamation
can prosecute the landholder pursuant to the following statement which is
included in all certification and reporting forms:
Under the provisions of 18 U.S.C. 1001, it is a crime punishable by
5 years imprisonment or a fine of up to $10,000, or both, for any
person knowingly and willfully to submit or cause to be submitted

45

§ 426.19 District responsibilities.
to any agency of the United States any false or fraudulent
statement(s) as to any matter within the agency's jurisdiction.
False statements by the landowner or lessee will also result in loss
of eligibility. Eligibility can only be regained upon the approval of
the Commissioner.
(o) Information requirements and Office of Management and Budget approval.
The information collection requirements contained in this section have been
approved by the Office of Management and Budget under
44 U.S.C. 3501 et seq. and assigned control numbers 1006-0005 and
1006-0006. The information is being collected to comply with
Sections 206, 224(c), and 228 of the RRA. These sections require that, as a
condition to the receipt of irrigation water, each landholder in a district which
is subject to the acreage limitation provisions of Federal reclamation law, as
amended and supplemented by the RRA, will furnish to his or her district
annually a certificate/report which indicates that he or she is in compliance
with the provisions of Federal reclamation law. Completion of these forms is
required to obtain the benefit of irrigation water. The information collected
on each landholding will be summarized by the district and submitted to
Reclamation in a form prescribed by Reclamation.
(p) Protection of forms pursuant to the Privacy Act of 1974. The Privacy Act of
1974 (5 U.S.C. 552) protects the information submitted in accordance with
certification and reporting requirements. As a condition to execution of a
contract, Reclamation requires the inclusion of a standard contract article
which provides for district compliance with the Privacy Act of 1974 and
43 CFR Part 2, Subpart D, in maintaining the landholder certification and
reporting forms.

§ 426.19 District responsibilities.
A district that delivers irrigation water to nonexempt land under a contract with
the United States must:
(a) Provide information to landholders concerning the requirements of Federal
reclamation law and these regulations;
(b) Provide Reclamation, as required by these regulations or upon request, and in
a form suitable to Reclamation, records and information as Reclamation may
deem reasonably necessary to implement the RRA and other provisions of
Federal reclamation law;
(c) Be responsible for payments to Reclamation of all appropriate charges
specified in these regulations. Districts must collect the appropriate charges
from each landholder based on the landholder's acreage limitation status,
landholdings, and entitlements, and must not average the costs over the entire
district, unless the charges prove uncollectible from the responsible
landholders;
(d) Distribute, collect, and review landholder certification and reporting forms;

46

§ 426.20 Assessment of administrative costs.
(e) File and retain landholder certification and reporting forms. Districts must
retain superseded landholder certification and reporting forms for 6 years;
thereafter, districts may destroy such superseded forms, except:
(1) Districts must keep on file the last fully completed standard certification
or reporting form, in addition to the current verification form; or
(2) If Reclamation specifically requests a district to retain superseded forms
beyond 6 years.
(f) Comply with the requirements of the Privacy Act of 1974, with respect to
landholder certification and reporting forms;
(g) Annually summarize information provided on landholder certification and
reporting forms on separate summary forms provided by Reclamation and
submit these forms to Reclamation on or before the date established by the
appropriate regional director;
(h) Withhold deliveries of irrigation water to any landholder not eligible to
receive irrigation water under the certification or reporting requirements or
any other provision of Federal reclamation law and these regulations; and
(i) Return to Reclamation, for deposit as a general credit to the Reclamation fund,
all revenues received from the delivery of water to ineligible land. For
purposes of these regulations only, this does not include revenues from any
charges that may be assessed by the district to cover district operation,
maintenance, and administrative expenses.

§ 426.20 Assessment of administrative costs.
(a) Assessment of administrative costs for delivery of water to ineligible land.
Reclamation will assess a district administrative costs as described in
paragraph (e) of this section if the district delivers irrigation water to land that
was ineligible because the landholders did not submit certification or reporting
forms prior to the receipt of irrigation water in accordance with § 426.18; or to
ineligible excess land as provided in § 426.12.
(1) Reclamation will apply the assessment on a yearly basis in each district for
each landholder that received irrigation water in violation of § 426.18, or
for each landholder that received irrigation water on ineligible land as
specified above.
(2) In applying the assessment to legal entities, compliance by an entity will
be treated independently from compliance by its part owners or
beneficiaries.
(3) The assessment in paragraph (a) of this section will be applied
independently of the assessment specified in paragraph (b) of this section.
(b) Assessment of administrative costs when form corrections are not made.
Reclamation will assess a district for the administrative costs described in
paragraph (e) of this section, unless the district provides Reclamation with
requested reporting or certification form corrections within 60-calendar days
of the date of Reclamation's written request. If Reclamation receives the
required corrections within this 60-calendar day time period, Reclamation will
consider the requirements of § 426.18 satisfied.

47

§ 426.21 Interest on underpayments.
(1) Reclamation will apply the assessment on a yearly basis in each district for
each landholder that received irrigation water and for whom the district
does not provide corrected forms within the applicable 60-calendar day
time period.
(2) In applying the assessment to legal entities, compliance by an entity will
be treated independently from compliance by its part owners or
beneficiaries.
(3) The assessment in paragraph (b) of this section will be applied
independently of the assessment specified in paragraph (a) of this section.
(c) Party responsible for paying assessments. Districts are responsible for
payment of Reclamation assessments described under paragraphs (a) and (b)
of this section.
(d) Disposition of assessments. Reclamation will deposit to the general fund of
the United States Treasury, as miscellaneous receipts, administrative costs
assessed and collected under paragraphs (a) and (b) of this section.
(e) Amount of the assessment. The administrative costs assessment required
under paragraphs (a) and (b) of this section is set at $290 1 . Reclamation will
review the associated costs at least once every 5 years, and will adjust the
assessment amount, if needed, to reflect new cost data. Notice of the revised
assessment for administrative costs will be published in the Federal Register
in December of the year the data are reviewed.

§ 426.21 Interest on underpayments.
(a) Definition of underpayment. For the purposes of this section underpayment
means the difference between what a landholder owed for the delivery of
irrigation water under Federal reclamation law and what that landholder paid.
(b) Collection of interest on underpayments. If a landholder has incurred an
underpayment, Reclamation will collect from the appropriate district such
underpayment with interest. Interest accrues from the original payment due
date until the district pays the amount due. The original payment due date is
the date the district should have paid the United States for water delivered to
the landholder.
(c) Underpayment interest rate. The Secretary of the Treasury determines the
interest rate charged the district based on the weighted average yield of all
interest-bearing marketable issues sold by the Department of the Treasury
during the period of underpayment.

1

Effective January 1, 2004, the amount of the administrative fee was increased to $290
from $260.

48

§ 426.22 Public participation.

§ 426.22 Public participation.
(a) Notification of contract actions. Except for proposed contracts having a
duration of 1 year or less for the sale of surplus water or interim irrigation
water, Reclamation will:
(1) Provide notice of proposed irrigation or amendatory irrigation contract
actions 60-calendar days prior to contract execution by publishing
announcements in general circulation newspapers in the affected area;
(2) Issue announcements in the form of news releases, legal notices, official
letters, memoranda, or other forms of written material; and
(3) Directly notify individuals and entities who made a timely written request
for such notice to the appropriate Reclamation regional or local office.
(b) Notification of modification of a proposed contract. In the event that
modifications are made to a proposed contract the regional director must:
(1) Provide copies of revised proposed contracts to all parties who requested
copies of the proposed contract in response to the initial notice; and
(2) Determine whether or not to republish the notice or to extend the comment
period. The regional director must consider, among other factors:
(i) The significance of the impact(s) of the modification to possible
affected parties; and
(ii) The interest expressed by the public over the course of contract
negotiations.
(c) Information that Reclamation will include in published announcements. Each
published announcement will include, as appropriate:
(1) A brief description of the proposed contract terms and conditions being
negotiated;
(2) Date, time, and place of meetings, workshops, or hearings;
(3) The address and telephone number to which inquiries and comments may
be addressed to Reclamation; and
(4) The period of time during which Reclamation will accept comments.
(d) Public availability of proposed contracts. Anyone can get copies of a
proposed contract from the appropriate regional director or his or her
designated public contact when the proposed contracts become available for
review and comment, as specified in the published announcement.
(e) Opportunities for public participation.
(1) Reclamation can provide, as appropriate: meetings, workshops, or
hearings to provide local information. Advance notice of meetings,
workshops, or hearings will be provided to those parties who make timely
written request for such notice. Request for notice of meetings,
workshops, or hearings should be sent to the appropriate Reclamation
regional or local office.
(2) Reclamation or the district can invite the public to observe any contract
proceedings.
(3) All public participation procedures will be coordinated with those
involved with National Environmental Policy Act compliance, if
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§ 426.23 Recovery of operation and maintenance (O&M) costs.
Reclamation determines that the contract action may or will have
“significant'' environmental effects.
(f) Individuals authorized to negotiate the terms of contract proposals. Only
persons authorized to act on behalf of the district may negotiate the terms and
conditions of a specific contract proposal.
(g) Agency use of comments submitted during the period provided for comment or
made at hearings.
(1) Reclamation will review and summarize for use by the contract approving
authority, testimony presented at any public hearing or any written
comments submitted to the appropriate Reclamation officials at locations
and within the comment period, as specified in the advance published
announcement.
(2) Reclamation will make available to the public all written correspondence
regarding proposed contracts under the terms and procedures of the
Freedom of Information Act (5 U.S.C. 552), as amended.

§ 426.23 Recovery of operation and maintenance
(O&M) costs.
(a) General. All new, amended, and renewed contracts shall provide for payment
of O&M costs as specified in this section.
(b) Amount of O&M costs a district must pay if it executes a new or renewed
contract. If a district executes a new or renewed contract after
October 12, 1982, then that district must pay all of the O&M costs that
Reclamation allocates to irrigation.
(c) Amount of O&M costs a district must pay if it amends its contract to conform
to the discretionary provisions. If a district has a contract executed prior to
October 12, 1982, and the district amends the contract after October 12, 1982,
as provided for in § 426.3(a)(2) to conform to the discretionary provisions,
then the following applies:
(1) The district must pay all of the O&M costs that Reclamation allocates to
irrigation;
(2) If in the year the amendment is executed, the district's contract rate was
more than the O&M costs allocated to the district in that year then that
positive difference at the time of the contract amendment must continue to
be factored into the contract rate and annually paid to the United States.
This would be in addition to any adjusted O&M cost that results from
paragraph (c)(1) of this section. The positive difference would be factored
into the contract rate for the remainder of the term of the contract; and
(3) The district will not be required to pay an increased amount toward the
construction costs of a project as a condition of the district's agreeing to a
contract amendment pursuant to paragraph (c) of this section.
(d) Amount of O&M cost a district must pay if it amends its contract to provide
supplemental or additional benefits. If a district amends its contract after

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§ 426.23 Recovery of operation and maintenance (O&M) costs.
October 12, 1982, to provide supplemental or additional benefits, as provided
for in § 426.3(a)(3), then the following must be complied with:
(1) The district must pay all of the O&M costs that Reclamation allocates to
irrigation;
(2) If in the year the amendment is executed, the district's contract rate was
more than the O&M costs allocated to the district in that year then that
positive difference at the time of the contract amendment must continue to
be factored into the contract rate and annually paid to the United States.
This would be in addition to any adjusted O&M cost that results from
paragraph (d)(1) of this section. The positive difference would be factored
into the contract rate for the remainder of the term of the contract; and
(3) The district must pay any increases in the amount paid annually toward the
construction costs of a project that the United States requires the district to
pay as a condition of agreeing to provide the district with supplemental
and additional benefits.
(e) Amount of O&M a district pays under a prior contract. For a district whose
prior contract was executed prior to October 12, 1982, the district must pay all
of the O&M costs allocated by Reclamation to irrigation unless the contract
specifically provides contrary terms.
(f) Amount of O&M that Reclamation charges an irrevocable elector.
(1) Regardless of any terms to the contrary within a prior contract with a
district, a landholder who makes an irrevocable election, as provided for in
§ 426.3(f) must pay, annually, his or her proportionate share of all O&M
costs allocated by Reclamation to irrigation. The irrevocable elector's
proportionate share is based upon the ratio of:
(i) The amount of land in the district held by the irrevocable elector that
received irrigation water to the total amount of land in the district that
received irrigation water; or
(ii) The amount of irrigation water in the district received by the
irrevocable elector to the total amount of irrigation water that the
district delivered.
(2) The district(s) where the irrevocable elector's landholding is located must
collect from the irrevocable elector an amount equal to the irrevocable
elector's proportionate share of all O&M costs allocated by Reclamation to
irrigation and the following apply:
(i) If in the year the election is executed, the district's contract rate was
more than the O&M costs allocated to the district in that year, then that
positive difference at the time of the contract amendment must
continue to be factored into the contract rate. This would be in
addition to any adjusted O&M cost that results from paragraph (f)(1)
of this section. The positive difference would be factored into the
contract rate for the remainder of the term of the contract; and
(ii) Such collections must be forwarded annually to the United States.
(g) Amount of O&M that Reclamation charges if a landholder is subject to
full-cost pricing. In a district subject to prior law, if a landholder is subject to
full-cost pricing the district must ensure that all O&M costs are included in

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§ 426.24 Reclamation decisions and appeals..
any full-cost assessment, regardless of whether the landholder is subject to the
discretionary provisions. The revenues from such full-cost assessments must
be collected and submitted to the United States.

§ 426.24 Reclamation decisions and appeals.
(a) Reclamation decisions.
(1) Decisionmaker for Reclamation's final determinations. The appropriate
regional director makes any final determination that these regulations
require or authorize. If Reclamation's final determination is likely to
involve districts, or landholders with landholdings located in more than
one region, the Commissioner designates one regional director to make
that final determination.
(2) Notice to affected parties. The appropriate regional director will transmit
any final determination to any district and landholder, as appropriate,
whose rights and interests are directly affected.
(3) Effective date for regional director's final determinations. A regional
director's decisions will take effect the day after the expiration of the
period during which a person adversely affected may file a notice of
appeal unless a petition for stay is filed together with a timely notice of
appeal.
(b) Appeal of final determinations.
(1) Appeal Submittal. Any district or landholder whose rights and interests
are directly affected by a regional director's final determination can submit
a written notice of appeal. Such notice of appeal must be submitted to the
Commissioner of Reclamation within 30-calendar days from the date of
the regional director's final determination.
(2) Submittal of supporting information. The affected party will have
60-calendar days from the date that the regional director issues a final
determination to submit a supporting brief or memorandum to the
Commissioner. The Commissioner may extend the time for submitting a
supporting brief or memorandum, if:
(i) the affected party submits a request to the Commissioner in a timely
manner;
(ii) the request includes the reason why additional time is needed; and
(iii)the Commissioner determines the appellant has shown good cause for
such an extension and the extension would not prejudice Reclamation.
(3) Requests for stay of the final determination pending appeal.
(i) The Commissioner will determine whether to stay a regional director's
final determination within 30 days after receiving a properly filed
petition for stay if the requesting party:
(A) Submits a request for stay in writing to the Commissioner, with, or
in advance of, the notice of appeal, and states the grounds upon
which the party requests the stay; and
(B) Demonstrates that the harm that a district or landholder would
suffer if the Commissioner does not grant the stay outweighs the

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§ 426.24 Reclamation decisions and appeals..

(c)

(d)

(e)

(f)

(g)

1

interest of the United States in having the final determination take
effect pending appeal.
(ii) A decision, or that portion of the decision, for which a stay is not
granted will become effective immediately after the Commissioner
denies or partially denies the petition for stay, or fails to act within
30 days after receiving the request.
(iii)A Commissioner's decision on a petition for a stay or any other
Commissioner decision is appealable.
Appeal of Commissioner's decision.
(1) Appeal to the Office of Hearing and Appeals. A party can appeal the
Commissioner's decision to the Secretary by writing to the Director,
Office of Hearings and Appeals (OHA), U.S. Department of the Interior.
For an appeal to be timely, OHA must receive the appeal within
30-calendar days from the date of mailing of the Commissioner's decision.
(2) Rules that govern appeals to OHA. 43 CFR Part 4, Subpart G, and other
provisions of 43 CFR Part 4, where applicable, govern the OHA appeal
process, except for the accrual of underpayment interest as specified in
paragraph (e) of this section.
Effective date of an appeal decision. Reclamation will apply decisions made
by the Commissioner or by OHA under paragraphs (b) and (c) of this section
as of the date of the violation or other problem that was addressed in the
regional director's final determination. If, during the appeal process, irrigation
water has been delivered to land subsequently found to be ineligible, for other
than RRA forms submittal violations, the compensation rate may be applied to
such deliveries retroactively.
Accrual of interest on underpayments during appeal. Interest on any
underpayments, as provided in § 426.21, continues to accrue during an appeal
of a regional director's final determination, an appeal of the Commissioner's
decision, or judicial review of final agency action. Underpayment interest
accrual will continue even during a stay under paragraphs (b)(4) or (c)(3) of
this section.
Status of appeals made prior to the effective date of these regulations.
(1) Appeals to the Commissioner of a regional director's final determination
which were decided by the Commissioner or his or her delegate prior to
the effective date of these regulations are hereby validated.
(2) Appeals to the Commissioner of final determinations made by a regional
director and appeals to OHA, which are pending on appeal as of the
effective date of these regulations will be processed and decided in
accordance with the regulations in effect immediately prior to the effective
date of these regulations.
Addresses. All requests for stays, appeals, or other communications to the
United States under this section must be addressed as follows:
(1) Commissioner, Bureau of Reclamation, Office of Policy,
Attention: 84-53000 1 , P.O. Box 25007, Denver, Colorado 80225.

Effective April 2, 2006, this mail code was changed to 84-53000 from D-5200.

53

§ 426.25 Reclamation audits.
(2) Director, Office of Hearings and Appeals, Department of the Interior;
801 North Quincy Street, Arlington, Virginia, 22203

§ 426.25 Reclamation audits.
Reclamation will conduct reviews of a district's administration and enforcement
of and landholder compliance with Federal reclamation law and these
regulations. These reviews may include, but are not limited to:
(a) Water district reviews;
(b) In-depth reviews; and
(c) Audits.

§ 426.26 Severability.
If any provision of these regulations or the application of these rules to any person
or circumstance is held invalid, then the sections of these rules or their
applications which are not held invalid will not be affected.

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