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                                                     Calendar No. 706
115th Congress       }                         {             Report
                                 SENATE
 2d Session          }                         {              115-401

======================================================================

 
  TO APPROVE THE SETTLEMENT OF THE WATER RIGHTS CLAIMS OF THE NAVAJO 
  NATION IN UTAH, TO AUTHORIZE CONSTRUCTION OF PROJECTS IN CONNECTION 
                   THEREWITH, AND FOR OTHER PURPOSES

                                _______
                                

               November 29, 2018.--Ordered to be printed

                                _______
                                

    Mr. Hoeven, from the Committee on Indian Affairs, submitted the 
                               following

                              R E P O R T

                         [To accompany S. 664]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Indian Affairs, to which was referred the 
bill (S. 664) to approve the settlement of the water rights 
claims of the Navajo Nation in Utah, to authorize construction 
of projects in connection therewith, and for other purposes, 
having considered the same, reports favorably thereon with an 
amendment in the nature of a substitute and an amendment to the 
title and recommends that the bill, as amended, do pass.

                                PURPOSE

    The Navajo Utah Water Rights Settlement Act of 2018, as 
amended, would settle the Navajo Nation (Nation) water claims 
in the State of Utah (State) and authorize and implement the 
Nation & State Settlement Agreement to quantify 81,500 acre-
feet per year of surface and groundwater from the Upper 
Colorado River Basin in Utah.

                               BACKGROUND

    The Navajo Nation is a tribe whose reservation extends over 
27,000 square miles across the states of Arizona, New Mexico, 
and Utah. In August 2003, the Nation and the Governor of the 
State of Utah executed a Memorandum of Agreement to commence 
settlement discussions.
    The Nation and the State reached a general agreement 
concerning a proposed water rights settlement in 2010. In 2013, 
the Secretary of the Interior appointed a federal negotiations 
team to negotiate terms of a settlement. The terms of the 
Settlement Agreement were finalized by the federal negotiations 
team in 2015. The Navajo Nation Council approved the Settlement 
Agreement on January 16, 2016. The State reiterated its support 
for the Settlement Agreement by a Senate resolution on July 15, 
2015.

                          NEED FOR LEGISLATION

    In 1908, the U.S. Supreme Court held in Winters v. United 
States that when Congress set aside lands for a reservation, it 
also gave Indian tribes the primary rights to streams on their 
reservations. However, Winters did not set forth how to 
quantify water rights beyond ``sufficient water to fulfill the 
reservation's purpose.''
    The issue of quantifying water was resolved in Arizona v. 
California. The Court adopted the practicably irrigable acreage 
standard.\1\ Collectively, these two cases established the 
Indian reserved water rights which may be asserted at any time 
and are not lost through nonuse. While many Indian reservations 
were established for the purpose of settling Indian people into 
agricultural communities, the Federal Government never invested 
sufficient resources into water-delivery systems to fulfill 
that purpose.
---------------------------------------------------------------------------
    \1\This standard is used to determine how much state water Indian 
reservations should receive by determining how many acres of the 
reservation could be reasonably or practically irrigated.
---------------------------------------------------------------------------
    In order to fulfill the United States' trust responsibility 
to Indian tribes, Congress plays an integral role in the Indian 
water rights settlements.

                              BILL SUMMARY

    The bill, as amended, would authorize a negotiated 
settlement agreement of the Nation's reserved water rights 
claim with the State. The bill authorizes $198,300,000 from the 
federal government to fund the Navajo Water Development Trust 
Fund (Fund). This Fund would be used by the Nation to plan, 
design, and construct approved water development projects. The 
State would contribute $8,000,000 into the Fund, in 
installments, at the discretion of the Secretary of the 
Interior, in each of the three years following the execution of 
the agreement by the Secretary.
    The bill also authorizes $11,100,000 from the federal 
government to be deposited into the Navajo Operations, 
Maintenance, and Repair (OM&R) trust account for the Nation's 
approved water development projects. An additional $1,000,000 
will be authorized from the federal government to fund 
programmatic costs, including the preparation of a hydrographic 
survey of historic and existing water uses on the Nation to be 
filed with the adjudication court. Finally, the bill will 
allocate 81,500 acre-feet per year from the San Juan River in 
the State of Utah to the Nation.
    The bill uses a fund-based approach to resolving Indian 
water rights settlements.\2\ This simplified settlement 
replaces the Department of the Interior's construction 
obligations with a water development fund for the Navajo Nation 
to use to build water projects on an as-needed basis with the 
goal of avoiding likely cost overruns related to planning, 
design, and construction of several water development projects. 
This approach also indemnifies the United States against any 
future financial liability or responsibility for these 
projects.
---------------------------------------------------------------------------
    \2\Alan Mikkelsen, U.S. Dep't of the Interior, Bureau of 
Reclamation, Stephen E. Boyd, U.S. Dep't of Justice, Letter to House 
Committee on Natural Resources (Sept. 7, 2018).
---------------------------------------------------------------------------

                          LEGISLATIVE HISTORY

    On March 15, 2017, Senator Hatch introduced S. 664. The 
bill was referred to the Indian Affairs Committee. On December 
6, 2017, the Committee held a legislative hearing on the bill.
    In the Department of the Interior's written testimony, the 
Deputy Commissioner of the Bureau of Reclamation, Alan 
Mikkelsen stated:

          The Department supports the goals of the settlement, 
        which include quantifying the reserved water rights 
        attached to the Utah portion of the Navajo reservation 
        and facilitating the development of essential municipal 
        water systems that will provide a reliable quantity and 
        quality water supply for the communities within the 
        Reservation, which currently lacks the sort of basic 
        services that most Americans take for granted. The 
        Department is working with the Nation and sponsor of S. 
        664 to ensure this bill meets these goals while 
        adhering to the Criteria and Procedures that guide the 
        Department's participation in Indian water rights 
        settlements.

    On October 3, 2018, by voice vote, the Committee ordered 
the bill, as amended, to be reported favorably to the Senate.
    Amendments. One amendment, in the nature of a substitute, 
was offered by Senator Hoeven, on behalf of Senator Hatch. This 
substitute amendment did the following:
    The substitute amendment addressed concerns raised by the 
Department of the Interior regarding cost overruns. 
Historically, cost overruns have caused delays into fully 
implementing Indian water rights settlements. The Department of 
Interior prefers establishing a trust fund so that interest 
earned in the account can be applied to future increased costs 
of implementing the Indian water rights settlement. 
Additionally, the substitute amendment--
           Establishes the Navajo Water Development 
        Trust Fund and the Navajo OM&R Account. The Navajo 
        Water Development Trust Fund is authorized to receive 
        $198.3 million from the federal government and the 
        Navajo OM&R Account is authorized to receive $11.1 
        million from the federal government;
           Stipulates that depletions that occur on 
        allotted land are accounted for as a depletion by the 
        Nation, including any water use existing on an 
        allotment as of the date of the enactment of the bill, 
        reasonable domestic and stock water uses, and any water 
        rights that may be decreed in the general stream 
        adjudication.
           Prohibits the Nation from infringing upon 
        the reasonable domestic and stock water use of an 
        allottee.
           Preserves the rights of public domain 
        allottees to make claims in the general stream 
        adjudication;
           Requires that off-reservation usage and 
        leasing be in accordance with the agreement and 
        approved by the Secretary of the Interior,
           Specifies that if a conflict exists between 
        the bill and the settlement agreement that the text of 
        the bill will control; and
           Makes other grammatical and technical 
        changes to the bill.
    Prior Congresses. In the 114th Congress, Senator Hatch 
introduced S. 3482, on November 17, 2016. The bill was referred 
to the Committee. No further action was taken.

                      SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    ``Navajo Utah Water Rights Settlement Act of 2018.''

Section 2. Purposes

    The primary purpose of the Act is to authorize and 
implement the Navajo Nation/State of Utah Settlement Agreement 
and to permanently settle the Navajo Nation's water rights 
claims in Utah.

Section 3. Definitions

    This section provides definitions to key terms in the Act.

Section 4. Ratification of Agreement

    This section states that Congress ratifies the Settlement 
Agreement, which would quantify the water rights of the Navajo 
Nation in Utah and establish the conditions that must be met to 
make the Agreement effective, including funding for water 
development on the Navajo Reservation in Utah. In addition, 
Congress authorizes the Secretary of the Interior to execute 
the Settlement Agreement on behalf of the United States and to 
amend the Agreement as necessary to conform to the Act.

Section 5. Navajo water rights

    This section states that Congress confirms that the Navajo 
Nation shall have the right to use and deplete up to 81,500 
acre-feet per year from water sources in Utah, and that these 
rights are held in trust by the United States and are not 
subject to forfeiture or abandonment. Further, the water rights 
of allottees on or adjacent to the Reservation in Utah must be 
satisfied out of the Nation's rights. The Nation may allocate, 
distribute, and lease its water rights for off-reservation use 
in accordance with the agreement, with the approval of the 
Secretary of the Interior. But the Nation is prohibited from 
objecting in the general stream adjudication or any other 
applicable forum to the quantification of reasonable domestic 
and stock uses of the water from this settlement on an 
allotment.

Section 6. Navajo trust accounts

    This section sets forth that, using the appropriations 
authorized in Section 7, the Secretary of the Interior is 
authorized to establish the Navajo Utah Settlement Trust Fund 
(Fund) that includes two accounts, to plan, design, and 
construct the water diversion and delivery of the Navajo water 
development projects.

Section 7. Authorization of appropriations

    This section authorizes appropriations of $198,300,000 to 
the Fund for the planning, design and construction of approved 
water development projects, and within that Fund, authorizes 
appropriations of $11,100,000 for the Navajo OM&R Account of 
the Fund. Additionally, the bill authorizes $1,000,000 to fund 
programmatic costs, including the preparation of a hydrographic 
survey of historic and existing water uses on the Reservation 
to be filed with the adjudication court. The State shall 
contribute $8,000,000 to the Secretary of the Interior for 
deposit into the Fund.

Section 8. Conditions precedent

    This section establishes conditions that must be met for 
the settlement and the waivers to become effective, including 
the appropriation of funds authorized in Section 7, the 
execution of the waivers, and the entry of a final judgment and 
decree by the adjudication court. These conditions must occur 
by October 31, 2030 unless the parties to the Agreement extend 
the deadline.

Section 9. Waivers and releases

    This section dictates the waivers and releases that must be 
executed in order for the settlement to be binding and 
effective. Because tribal water rights are held in trust by the 
United States, Congress must affirmatively state what claims 
are settled and disposed of by the Act.

Section 10. Miscellaneous provisions

    This section sets forth the expression of Congress' intent 
that nothing in this Act shall establish a standard for the 
qualifications of the water rights of any other tribe or to 
quantify or adversely affect the water rights of any tribe 
other than the Navajo Nation.

Section 11. Relation to allottees

    This section clarifies that nothing in this Act or the 
agreement shall affect the rights or claims of allottees, or 
the United States, acting in capacity as trustee for or on 
behalf of allottees, for water rights or damages related to 
lands allotted by the United States to allottees.

Section 12. Antideficiency

    This section states that the United States shall not be 
liable for any failure to carry out any obligation or activity 
authorized by this Act if adequate appropriations are not 
provided expressly by Congress to carry out the purposes of 
this Act.

                                                 November 28, 2018.
Hon. John Hoeven,
Chairman, Committee on Indian Affairs,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 664, the Navajo Utah 
Water Rights Settlement Act of 2018.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Aurora 
Swanson.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

                   COST AND BUDGETARY CONSIDERATIONS

S. 664--Navajo Utah Water Rights Settlement Act of 2018

    Summary: S. 664 would secure up to 81,500 acre-feet of 
water annually for the Navajo Nation by ratifying a settlement 
being negotiated between the United States, the state of Utah, 
and the Navajo Nation. The bill would authorize the 
appropriation of $209 million to capitalize the Navajo Utah 
Settlement Trust Fund, an interest-bearing fund established 
under the bill. After the parties meet certain conditions, the 
federal government would transfer ownership of the fund 
(including any earned interest that is appropriated to the 
fund) to the nation for constructing projects to deliver water 
to the reservation of the Navajo Nation in Utah. The bill also 
would direct the Bureau of Reclamation (BOR) to survey water 
use on the reservation. Using information from BOR, CBO 
estimates that enacting those provisions would cost $242 
million over the 2019-2023 period, assuming appropriation of 
the authorized and necessary amounts.
    Enacting S. 664 would affect direct spending by increasing 
offsetting receipts because the state of Utah would be required 
to contribute $8 million to the trust fund; therefore pay-as-
you-go procedures apply. However, because the federal 
government would record a federal expenditure of the fund's 
balance when ownership of the fund is transferred to the Navajo 
Nation, there would be no net effect on direct spending over 
the 2019-2023 period. Enacting the bill would not affect 
revenues.
    CBO estimates that enacting S. 664 would not increase 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 664 contains intergovernmental mandates as defined in 
the Unfunded Mandates Reform Act (UMRA). CBO cannot determine 
whether the cost of those mandates would exceed the annual 
threshold established in UMRA ($80 million in 2018, adjusted 
annually for inflation). S. 664 contains no private-sector 
mandate as defined in UMRA.
    Basis of estimate: For this estimate, CBO assumes that S. 
664 will be enacted by the end of 2018. The bill would 
authorize the appropriation of specific amounts but does not 
specify in which year any appropriation should be provided. CBO 
has estimated how much would need to be provided each year 
based on information from BOR. CBO expects all of the following 
conditions to be met by 2023:
           The parties have finalized and executed the 
        settlement including amendments required to conform 
        with the bill,
           Utah has contributed $8 million to the trust 
        fund and enacted the necessary legislation,
           All parties have executed waivers and 
        releases of claims as required under the bill, and
           The court has confirmed the water rights of 
        the Navajo Nation in accordance with the bill.
    In addition, CBO assumes that the amounts authorized to be 
appropriated to capitalize the fund (with adjustments to 
account for anticipated inflation as required by the bill) 
would be appropriated over the 2019-2023 period. In 2023, BOR 
would publish a statement of findings in the Federal Register 
that the conditions have been met and the ownership of the 
trust fund would be transferred to the Navajo Nation.

Spending subject to appropriation

    CBO estimates that implementing the bill would cost $242 
million over the 2019-2023 period, assuming appropriation of 
the authorized and necessary amounts.
    Survey of Water Use. S. 664 would authorize the 
appropriation of $1 million for costs to implement the bill and 
for conducting a survey of historic and existing water use on 
the portion of the reservation located within Utah. CBO 
estimates that the survey would take about three years to 
complete and would cost $1 million over the 2019-2023 period.
    Navajo Utah Settlement Trust Fund. S. 664 would establish 
the Navajo Utah Settlement Trust Fund, which would consist of 
two interest-bearing accounts--the Navajo Water Development 
Projects Account and the Navajo Operation, Maintenance and 
Replacement (OM&R) Account. To capitalize those accounts, the 
bill would authorize the appropriation of $198 million for 
constructing water projects and $11 million for OM&R for a 
total of $209 million. CBO estimates that the authorized 
appropriations would increase by $15 million because of the 
authorized adjustments for anticipated inflation. Amounts 
deposited into the fund would be credited with interest 
earnings if those earnings are appropriated to the trust fund.
    Under the bill, the federal government would retain 
ownership of amounts deposited into the trust fund until 2023, 
when all the settlement conditions are expected to be 
satisfied. At that time, the federal government would transfer 
the ownership of the trust fund to the Navajo Nation, and the 
amount in the fund (including any appropriated interest 
earnings) would be considered a federal expenditure. Based on 
CBO's projections of interest rates and the assumed timing of 
appropriations, CBO estimates those interest earnings would 
total $17 million. Accordingly, CBO estimates the total amount 
transferred would be $241 million.
    The federal government would retain fiduciary 
responsibility over the amounts until they are needed by the 
Navajo Nation to plan, design, construct, and maintain water 
projects, but those expenditures would not affect the federal 
budget.

Changes in direct spending

    S. 664 would require the state of Utah to contribute $8 
million to the trust fund in three installments once the 
settlement is finalized and executed by the parties. CBO 
estimates that the state would pay those installments of $2.67 
million in 2020, 2021, and 2022 and that those amounts would be 
recorded in the federal budget as offsetting receipts. CBO 
estimates that enacting that provision would have no net effect 
on direct spending over the 2019-2023 period because the total 
amount contributed by the state to the trust fund would be 
transferred to the Navajo Nation in 2023.
    Pay-As-You-Go considerations: The Statutory Pay-As-You-Go 
Act of 2010 establishes budget-reporting and enforcement 
procedures for legislation affecting direct spending or 
revenues. The net changes in outlays that are subject to those 
pay-as-you-go procedures are shown in the following table.
    Increase in long-term direct spending and deficits: CBO 
estimates that enacting S. 664 would not increase direct 
spending or on-budget deficits in any of the four consecutive 
10-year periods beginning in 2029.
    Mandates: S. 664 contains intergovernmental mandates as 
defined in UMRA. Specifically, the bill would:
           Ratify the Navajo Water Rights Settlement 
        Agreement to the extent that the agreement does not 
        conflict with provisions in the bill. Because the 
        agreement has not been finalized by the tribe and the 
        state of Utah, actions the parties could take to 
        complete the agreement would be limited to those 
        allowed under the bill. Such a restriction is a mandate 
        under UMRA.
           Require the state of Utah to contribute $8 
        million to a trust fund to be administered by the U.S. 
        Department of the Interior.
           Prevent the Navajo Nation from raising 
        claims to some water rights and claims for certain 
        damage to water, land, and other resources resulting 
        from the loss of water or water rights.
    The cost of the mandates would include the state's payment 
to the trust fund as well as the forgone value of awards and 
settlements of claims that the Navajo Nation would be prevented 
from raising under the bill. Because both the number of claims 
that could be barred or terminated and the value of forgone 
compensation stemming from those claims are uncertain, CBO has 
no basis for estimating the cost of the mandate. Therefore, CBO 
cannot determine whether the cost of the intergovernmental 
mandate would exceed the annual threshold established in UMRA 
for such mandates ($80 million in 2018, adjusted annually for 
inflation).
    S. 664 contains no private-sector mandates as defined in 
UMRA.

                        EXECUTIVE COMMUNICATIONS

    The Committee has received no communication from the 
Executive Branch regarding S. 664.

               REGULATORY AND PAPERWORK IMPACT STATEMENT

    Paragraph 11(b) of rule XXVI of the Standing Rules of the 
Senate requires each report accompanying a bill to evaluate the 
regulatory and paperwork impact that would be incurred in 
carrying out the bill. The Committee believes that S. 664 will 
have a minimal impact on regulatory or paperwork requirements.

                        CHANGES IN EXISTING LAW

    In accordance with Committee Rules, subsection 12 of rule 
XXVI of the Standing Rules of the Senate is waived.

                                  [all]