[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: 7CFR1781.7]

[Page 1075-1077]
 
                          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. 1781.7  Loan and advance limitations and obligations incurred before loan closing.

    (a) WS and RCD loan limitations. (1) Loans will not be used for:
    (i) Land treatment measures on individual farms except as provided 
in Sec. 1781.6(a)(5)(iv).
    (ii) Buildings and facilities to be used for lodging, dining or 
entertainment purposes.

[[Page 1076]]

    (iii) Building industrial parks or constructing facilities in them, 
or establishing private industrial or commercial enterprises, or 
purchasing land to be used primarily for industrial purposes.
    (iv) Paying costs allocated to structural measures for flood 
prevention.
    (v) Facilities for the production and harvesting of fish and 
wildlife such as hatcheries, rearing ponds, and related facilities other 
than those under natural conditions.
    (vi) Facilities primary for treatment and distribution of water or 
for sewerage, collection and treatment for domestic or industrial use or 
for municipal or community systems.
    (vii) Electric generating, transmission, and distribution 
facilities, except when provided as part of the minimum basic facilities 
for recreation and fish and wildlife developments authorized in 
Sec. 1781.6(a)(7).
    (viii) Storm and sanitary sewers and solid waste disposal facilities 
other than authorized in Sec. 1781.6(b)(1).
    (ix) Payment for a tract of land, easements, or rights-of-ways on 
which NRCS will share the cost if the amount to be paid with loan funds 
exceeds the difference between the NRCS share and the value on which the 
NRCS share is based.
    (x) Purchasing tracts of land primarily for later resale to private 
developers or individuals for agricultural or nonagricultural use.
    (xii) Buildings for residential, commercial, or industrial, use.
    (xiii) Developments on private property primarily for the benefit of 
the individual property owner.
    (xiv) Payment of that part of the cost of facilities, improvements, 
and practices that could be earned by participation in agricultural 
conservation programs unless such cost cannot be covered by purchase 
orders or assignments to material suppliers or contractors. If a loan is 
made for such purposes for which practice or cost share payments exceed 
$500, RUS will obtain an assignment on such payments to be paid on the 
loan.
    (xv) Primarily for water and sewage treatment plants and 
distribution systems.
    (xvi) Drainage facilities primarily for the benefit of other than 
rural areas.
    (xvii) Any single RCD measure that requires a loan of more than 
$500,000.
    (xviii) The total amount of principal outstanding for all WS loans 
made for one or more watershed works of improvement in a single 
watershed project, whether made to one or more sponsoring organizations, 
will not exceed $10,000,000.
    (b) Watershed advance limitations. (1) A WS advance for future water 
supply will not be used for acquiring property rights including lands, 
easements, and rights-of-way; water rights; administration of contracts; 
storage capacity for immediate municipal use; pipelines from the 
reservoir to place of use; or for other uses such as irrigation, fish 
and wildlife, and recreation.
    (2) A WS advance for increasing reservoir capacity for future water 
supply will not exceed 30 percent of the total installation cost of one 
structure.
    (3) A WS advance for site preservation will not exceed that 
determined necessary by NRCS except to purchase land in excess of actual 
needs in accordance with the provisions of Sec. 1781.6(a)(7).
    (4) Before a project agreement is entered into, there must be 
satisfactory evidence that the borrower will develop the site to be 
acquired or will use the future water supply and that revenue will be 
sufficient to meet all scheduled installments.
    (c) Obligations incurred before loan closing. (1) WS loans, WS 
advances, and RCD loans may be used for payment of obligations incurred 
before loan closing when the Rural Development State Director determines 
that:
    (i) The obligations incurred are necessary for planned developments; 
and
    (ii) The obligations are incurred for authorized loan purposes; and
    (iii) Contracts and construction plans meet RUS and NRCS standards; 
and
    (iv) The applicant has legal authority to incur the obligations at 
the time proposed; and
    (v) The Rural Development State Director authorizes such action in a 
letter to the applicant.
    (2) The Rural Development State Director's letter will specifically 
state that the permission is granted on the

[[Page 1077]]

condition that RUS is not committed to make a loan and assumes no 
responsibility for any obligation incurred by the applicant because of 
the permission granted and that the loan will be closed subject to 
compliance with agency regulations including closing instructions of the 
Regional Attorney Office of the General Counsel.