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of water, such as coal slurry pipelines, impounded vs. natural flow considerations, the role of the Corps of Engineers, effect on Federal reserved rights and the question of the long range legal effects of this Memorandum are just some of the issues that need to be carefully evaluated and resolved before implementing any hastily conceived marketing program.

Mr. Chairman and Members of the Committee, we appreciate the opportunity to present our feelings along with those of the Honorable Governor Richard Kneip of the State of South Dakota. We sincerely hope

the Congress of the United States will be able to have the aforementioned

Memorandum invalidated.

+

1975, between the Department of the Interior, acting

for this purpose through the Bureau of Reclamation, hereinafter called

"the Bureau," and the State of South Dakota, acting for this purpose

2 ...

through the Department of Natural Resources Development, hereinafter called "the Department;"

WITNESSETH:

WHEREAS, the following statements are made by way of

explanation:

(1) The parties desire to set down certain premises for marketing water for industriaï use in South Dakuia maut availabic ilum the storage capacity provided in Lake Oahe for irrigation but not required for extended time periods, a primary objective of such premises is to promote Federal-State coordination of resource development;

(2) The Secretary of the Interior and the Secretary of the Army entered into a Memorandum of Understanding on February 24, 1975, hereinafter called "the Interior-Army Agreement," giving the Department of the Interior the primary Federal marketing responsibility for industrial water sales from Lake Oahe and the five other main-stem Missouri River storage reservoirs;

(3) The Assistant Secretary of the Interior for Water and Power in a letter of March 25, 1975, to the Governor of South Dakota offered to the State of South Dakota the first choice to contract for water to be used in South Dakota, covered by the Interior-Army Agreement;

Preliminary Draft for
Discussion Purposes - 5/14/75

(4) The Bureau has authority under Federal laws to assess

water service charges for storage water used for industrial purposes from Lake Oahe, and the Department has authority under State water laws to assess charges for certain waters used within the State of South

Dakota;

NOW, THEREFORE, it is agreed as follows:

1. The Department of the Interior and the Department of the Army will approve the annual diversions of an amount of water for industrial use from the storage capacity provided in the six main-stem Missouri River reservoirs. Such amount shall be available within a time period to be determined by the Secretaries of the Interior and the Army.

2. The Bureau will refer applications received from prospective Ladustrial water contractors to the Department for the purpose of acquiring a conditional water permit and establishing an application priority date.

3. The Department will require prospective industrial water contractors to obtain a water service contract with the Bureau prior to the issuance of a final water permit.

4. The Bureau will enter into a water service contract with prospective industrial water contractors who shall receive a

conditional or final water permit from the Department for the industrial use of water to be diverted from Lake Oahe, subject to the conventional and required water service conditions and the following:

(a) The quantity of water to be diverted shall be a part

of the total amount of water available as stipulated in

Preliminary Draft for
Discussion Purposes

(b) The term of the water service contract shall not

5/14/75

...exceed 40 years and may include a development period for the

purpose of allowing the contractor time to finalize plans for
the use of the industrial water. The development period shall,
to the extent practicable, correspond to the development periods
currently allowed in conditional water permits granted by the
Department.

(c) The water service contractor shall pay the Bureau at
a rate per year for each acre-foot of water which can annually
be made available under the water service contract, such rate
to be hereafter determined by the Secretaries of the Interior
and the Army: Provided, That if a development period is included,
the ammual standby charge during the development period shall
be computed at a rate for each acre-foot which could annually
be made available under the water service contract after the
development period, such rate to be hereafter determined by
the Secretaries of the Interior and the Army.

(d) No water shall be diverted prior to filing with the
Council on Environmental Quality of an appropriate Final
Environmental Impact Statement under the National Environmental
Policy Act of 1969.

5. As an alternative to 4. above, the Bureau and the Department

may enter into a contract wherein the Bureau would market a block of

water to the Department and the Department would market such water directly

6. Where administrative action by the Department will be delayed, the Bureau may enter into a water service contract, under the conditions above prescribed in subparagraphs 4a, 4b, 4c and 4d, with any party who has agreed to be bound by all applicable State and Federal laws.

7. This Memorandum of Understanding shall have a term coterminous with the Interior-Army Agreement as it now exists and if extended such extension shall also apply to this Memorandum of Understanding.

8. Contracts executed for industrial water service pursuant to provisions above described shall not be affected by termination of

this Memorandum of Understanding.

By

Bureau ví Reclamation

By

Chairman, South Dakota Board of

Natural Resources