[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1781.6]

[Page 1072-1075]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1781--RESOURCE CONSERVATION AND DEVELOPMENT (RCD) LOANS AND WATERSHED (WS) LOANS AND ADVANCES--Table of Contents
 
Sec. 1781.6  Loan purposes.

    (a) WS and RCD loans. WS and RCD loans may be used for:
    (1) Water development, storage, treatment and conveyance to farms 
for irrigation and other farm use, including farmstead, livestock, 
orchard, and crop spraying.
    (2) Drainage systems and facilities in farm areas to sustain 
agricultural production or protect farmers and rural residents from 
water damage.
    (3) Agricultural water management practices for annual streamflow 
stabilization, recharging ground water reservoirs, and conserving water 
supplies by management and control of vegetation along waterways and in 
drainage basins.
    (4) Soil conservation and water control facilities such as dikes, 
terraces, detention reservoirs, stream channels, ditches, and other 
special land treatment and stabilization measures needed to protect 
farms and rural residents from water damage, provided such facilities 
cannot be installed or improved

[[Page 1073]]

under, or will not conflict with, other public programs such as those 
administered by the Corps of Engineers.
    (5) Special treatment measures or equipment primarily, though not 
exclusively, for flood prevention such as:
    (i) Facilities and equipment for fire prevention and control.
    (ii) Tree planting and establishment of other vegetative cover for 
stabilizing critical runoff and sediment-producing areas.
    (iii) Structural and vegetative measures to stabilize stream 
channels and gullies.
    (iv) Basic farm conservation practices to control runoff, erosion, 
and sedimentation.
    (6) Installing, repairing, and improving water storage facilities, 
including outlets for immediate and future domestic, municipal and 
industrial water supply and water quality management, and conveying 
water to treatment facilities or distribution systems. When payment of 
loans for such facilities are primarily dependent upon revenues from use 
of water stored the loan approval official must determine the adequacy 
of facility for use of the water before a loan is closed.
    (7) Public water based recreation and fish and wildlife developer 
loans will only be made to public bodies for the local share of cost for 
such developments for which NRCS is providing technical or financial 
assistance from WS or RCD funds. Loans will not be made for developments 
larger or more elaborate than that which is included in the WS or RCD 
plan. Loans may include funds for:
    (i) Construction of necessary water resource improvements such as 
storage capacity in multipurpose and single purpose reservoirs, water 
level control structures in reservoirs and streams, and stream channel 
improvements necessary for the development of the facilities. This may 
include practices for improvement of fish and wildlife habitat and 
environment and related areas and facilities for proper protection and 
management of the development.
    (ii) Essential developments, improvements, equipment and facilities 
for access, public health and safety, and efficient operation management 
and maintenance; such as energy utilities, water supply and waste 
disposal systems, maintenance buildings, fences, cattle guards, roads 
and trails, parking, picnicking, camping, beaches, playgrounds, and 
related shelters and equipment.
    (iii) Special areas and structures such as forest and other 
vegetative cover, marshes, pits, shelters and fish ladders to provide 
protected natural spawning, breeding, nesting, and feeding for fish and 
wildlife.
    (8) Soil and water management for agriculture-related pollutant 
control. Measures to reduce agriculture-related pollutants that 
adversely affect the community and the general public. Measures may 
include, but are not limited to, holding ponds, debris basins, 
diversions, terraces, and community distribution systems.
    (9) Acquiring fee simple title to lands or perpetual easements, or 
rights-of-way for sites for works of improvement or project measures and 
related costs for removal, relocation, or replacement of existing 
improvements including relocation payments for displaced persons, 
business enterprises and facilities, and other related purposes. Funds 
for land acquisition will be limited to costs necessary for WS works of 
improvement or RCD measures. Final construction plans will indicate 
minimum essential lands and rights-of-way to be acquired. In some cases, 
sponsoring local organizations may need to acquire lands in excess of 
actual needs when it is expedient for planned development. If the Rural 
Development State Director determines that the acquisition of excess 
land is necessary or expedient for the orderly development of a WS works 
of improvement, or RCD measure, he may authorize the action subject to 
the following conditions:
    (i) The applicant must agree to sell excess land as soon as 
practicable and apply the proceeds, together with any income from excess 
land, on the debt to RUS.
    (ii) The applicant must furnish legal evidence of authority to 
acquire additional land and dispose of it as agreed.
    (iii) Evidence must be provided to justify acquisition of additional 
land.
    (iv) Easements for land or water resource protection structures must 
be perpetual and must not include clauses

[[Page 1074]]

that terminate the easement with the dissolution or abandonment of the 
applicant organization. Loan funds will not be used for an easement that 
deviates in any way from that provided in the standard NRCS form unless 
modifications of it are approved by both NRCS and RUS.
    (10) Acquisition of water supply or water right by purchase or by 
appropriation under local, State, and Federal laws. The loan may include 
funds for the purchase of land on which the water supply or water right 
is presently being used when:
    (i) The water supply or water right cannot be purchased without the 
land; and
    (ii) The value of the land is not the major portion of the cost; and
    (iii) Any excess land thus acquired will be sold as soon as possible 
and the proceeds applied on the loan.
    (11) Purchase of equipment and machinery necessary for development 
and operation of planned WS works of improvement or RCD measures or 
projects including:
    (i) Special-purpose equipment. Purchase or rent special-purpose 
equipment to install or maintain any community facility in categories in 
paragraph (a)(11) of this section or to establish on farms soil and 
water conservation measures such as terraces, ponds, land leveling for 
irrigation or drainage, subsoiling, seeding, tree planting, and removal 
of brush, scattered trees, and stumps, provided:
    (A) Such equipment is not otherwise available when needed.
    (B) There is sufficient need and local demand to justify ownership 
or rental.
    (C) Rates to be charged include, among other things, an allowance 
for depreciation, obsolescence, and replacement based upon the 
recommendations of the equipment manufacturer or the experience of 
contractors engaged in providing services for similar types of work.
    (ii) Forestry equipment and services. Purchase or rent basic 
special-purpose equipment, facilities, certain land or land rights, and 
supplies needed for furnishing services for the establishment, 
improvement, protection, and harvesting of timber (not processing) 
suitable for lumber, pulp, poles or posts; providing that the forest 
program and forest practices benefiting from such services are in 
accordance with approved conservation practices for the development, 
use, and control of water resources on farms and in forests. Special-
purpose equipment may include such items as tractors, bull dozers, 
plows, planters, trucks, loaders, fire-fighting equipment, and sprayers. 
Facilities may include such items as ponds and reservoirs, pipelines, 
buildings for storage of equipment and supplies, nurseries, access 
roads, fire lanes, and lookout towers. Supplies may include such things 
as seed, seedlings, fertilizers, fencing, and pesticides. Land or land-
rights acquisition will be limited to that necessary for sites for 
facilities listed above which are directly related to the forestry 
program. Loans for these purposes may be made only when the equipment, 
supplies, and facilities to be provided:
    (A) Are not readily available when needed.
    (B) Will be justified by local need and demand.
    (C) Will be available to users at rates sufficient to cover loan 
amortization, obsolescence, replacement, operation, and cost of 
supplies.
    (D) Will more efficiently serve the group through cooperative 
effort.
    (12) Refinancing debt obligations of the sponsoring local 
organization that were incurred before application for a WS or RCD loan 
when that is not the primary purpose of the loan and:
    (i) The debt being refinanced was for works of improvement or 
measures for which loan funds could be used; and
    (ii) The debt is a valid obligation of the sponsor; and
    (iii) Creditors will not modify payment terms on existing debts, and 
the organization cannot pay existing debts and a loan from RUS over the 
same period of time; and
    (iv) Long-term debts will not be refinanced unless necessary to 
provide a sound basis for the loan or WS advance and concurrence is 
obtained from the National Office.
    (13) If repayment is based on revenues, loan funds (not WS advances) 
can be used for payment of interest installments until the facility is 
generating

[[Page 1075]]

enough revenue to make accrued interest payments. Loan funds for 
interest payments will not exceed the estimated amount that will accrue 
to the end of the third full calendar year after loan closing without 
prior approval from the National Office.
    (14) Relocation payment to displaced persons, businesses, and farm 
operations and for relocation assistance advisory services in accordance 
with the Uniform Relocation Assistance and Real Property Acquisition 
Policies Act of 1970 (Public Law 91-646, 84 Stat. 1894), the Regulations 
issued by the Secretary of Agriculture under the Act (7 CFR part 21), 
and the Memorandum of Understanding Between NRCS and RUS.
    (15) Services of engineers, architects, attorneys, auditors, 
construction foremen, managers, clerks, and others for organizing, 
planning, surveying, supervising, analyzing, developing, operating, 
managing, and accounting for activities related to loan processing and 
closing and development for which the loan is made.
    (16) Buildings, fences, roads, utilities, facilities, and 
relocation:
    (i) To construct buildings of modest design essential for the 
operation and maintenance of the works of improvement or measure.
    (ii) To provide support facilities and utilities such as gas, 
electricity, water, sewer, and waste disposal.
    (iii) To build or relocate roads, bridges, utilities, fences, and 
other improvements when necessary to acquire rights-of-ways or to 
construct or operate the facility.
    (17) Services and fees. To pay costs for services for any purposes 
listed under this section such as:
    (i) Fees or other legal expenses for establishing a water right 
through appropriation, agreement, permit, or court decree.
    (ii) Purchase of water stock or membership in an incorporated water 
users' association to acquire a water supply.
    (iii) Costs of labor, technical or professional services, and fees 
to be incurred in obtaining the loan and in planning and completing the 
facilities or services to be financed with loan funds.
    (iv) Services such as those listed in paragraph (a)(16) of this 
section.
    (b) RCD loans. Purposes for which RCD loans may be made in addition 
to those included in paragraph (a) of this section are:
    (1) Solid waste management. Lands, equipment and facilities to 
collect, transport, and dispose of solid waste in sanitary landfills for 
which NRCS is providing technical assistance.
    (2) Shifts-in-land use. Lands for uses such as grazing, forestry, 
wildlife, natural areas and parks, greenbelts, and other open spaces.
    (3) Purchase existing facilities. Purchase existing facilities for 
shift-in-land use, soil and water development, conservation, control and 
use when it is determined that purchase is necessary to provide 
efficient service through a facility owned and operated by a public 
agency (or a nonprofit corporation in a rural area), or the owner is 
either unwilling or unable to make improvements, enlargement, or 
extensions needed to provide significant additional or improved service 
for present users or for a new group of users at reasonable rates.
    (c) NRCS watershed advances. NRCS watershed advances are loans that 
may be made from NRCS construction funds for the following purposes 
included in a watershed work plan agreement:
    (1) To pay construction costs including cost of engineering and 
related services for increasing reservoir capacity (including intake and 
outlet structures) for a future water supply for municipal, domestic, 
industrial, or agricultural uses.
    (2) To preserve sites for authorized watershed works of improvement 
by acquiring land, easements, and rights-of-ways or other property 
rights.