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<br />Article 38 provides that no interest in the contract lS <br />transferable without the consent of the United States. First, this <br />does not preclude the transfer of water conserved by lID under <br />state law. Second, any objection under it would have to come from <br />the United States not junior rightholders. <br /> <br />4. Section 8 of the Reclamation Act of 1902 does not <br />prohibit the transfer of conserved water. <br /> <br />The appurtenancy language of Section 8 has been interpreted by <br />the Supreme Court, not as a restriction, but as an affirmation of <br />private ownership of water rights developed by projects under the <br />1902 Act. Under both state and federal law, lID has the right to <br />change its use of water. Indeed, the federal government long has <br />permitted and approved transfer of federal reclamation water. <br />Further, this lIappurtenancy" language of Section 8 of the 1902 Act <br />is not contained in the applicable section (Section 18) of the <br />Boulder Canyon Project Act. Moreover, the United States Supreme <br />Court has explicitly held that lID's rights "are to be interpreted <br />in the light of state law,lI which determines the "content and <br />characteristics" of the rights. Finally, state law (Water Code <br />Section 1011) provides that water conserved and transferred by lID <br />is deemed used within lID. <br /> <br />5. Section 5 of the Boulder Canyon Proiect Act does not <br />restrict lID from transferrinq conserved water to the Authority. <br /> <br />Section 5 of the Boulder Canyon Project Act contains the <br />congressional authorization for the Secretary to make water <br />allocation and delivery contracts. However, close reading of <br />California v. United States, 438 US 645 (1978), and other decisions <br />reveals that the United States Supreme Court has limited the <br />federal preemption of state law to state actions inconsistent with <br />a prior congressional directive. In unmistakable language, the <br />United States Supreme Court has held state law controls the use of <br />water once the Secretary has released the water for diversion. <br />Federal law does not follow the water after it is released by the <br />Secretary except as to the terms in the contract essential to <br />effectuate congressional directives. <br /> <br />U.S. Supreme Court decisions suggest that subcontracting is <br />permissible, since the only contract required is one to obtain <br />water from Lake Mead. Since state, and not federal law, determines <br />the characteristics, and thus, the transferability of water <br />available under lID's rights, lID is not prohibited from <br />transferring conserved water to the Authority. Therefore, the <br />Secretary of the Interior would follow two major policies: (1) <br />traditional federal deference to state law, and (2) a federal <br />policy that supports conservation and transfer of water. <br /> <br />5 <br />