A bill providing for the coordinated operation of the Central Valley project and the State water project in California.

Title I: Coordinated Operations - Directs the Secretary of the Interior to operate the Central Valley project, in conjunction with the California water project, in conformity with State water quality standards for the San Francisco Bay/Sacramento-San Joaquin Delta and Estuary, except as specified.

Requires that the water supplied at the intake of the Contra Costa Canal be of equal quality to the standards contained in a 1978 California Water Resources Control Board decision. Declares that such requirement does not authorize or require the relocation of the Contra Costa Canal intake.

Designates salinity control and additional water quality objectives costs as nonreimbursable. Directs the Secretary to conduct a cost allocation study of the Central Valley project, implementing such allocations by the start of 1988.

Directs the Secretary to execute and implement a coordinated operation agreement with the State of California for the Central Valley and State Water Project, subject to specified conditions. Permits the Secretary to terminate such agreement only after congressional notification.

Prohibits the Secretary from contracting for the delivery of more than 75 percent of the firm annual yield of the Central Valley Project not currently committed under long-term contracts until one year after the Secretary has transmitted to the Congress a feasibility report on the "Refuge Water Supply Investigations, Central Valley Basin, California." Directs the Secretary to include provisions in new or amended contracts that: (1) allow for the adjustment of rates and the redetermination of ability to pay; and (2) ensure that operation and maintenance cost deficits be repaid with interest.

Title II: Suisun Marsh Preservation Agreement - Authorizes the Secretary to implement the agreement between the Department of the Interior, the State of California and the Suisun Resources Conservation District (dated November 1, 1985). Sets forth conditions under which the costs of implementing such agreement will be shared by the Bureau of Reclamation and the California Department of Water Resources. Authorizes appropriations for the implementation of such agreement.

Title III: Small Reclamation Projects Act - Amends the Small Reclamation Projects Act of 1956 to emphasize the use of the program for the rehabilitation and betterment of existing projects for purposes of significant conservation of water, energy and the environment, and for purposes of water quality control. Increases the filing fee for project applications. Provides that Federal funds cannot be used as matching funds to meet cost-sharing requirements. Requires organizations to contribute at least 25 percent of the allowable costs of projects. (Such percentage may be lowered to no less than ten percent at the Secretary's discretion).

Requires the Secretary to transmit to the Congress with each loan proposal a certification of successful irrigability of project lands and an investigation of soil characteristics which might result in toxic or hazardous irrigation return flows.

Includes as a factor in determining grants for projects the cost-sharing requirements allocable to flood control.

Reduces the repayment period on project loans from 50 to 40 years. Requires that market rates of interest apply to the interest-bearing portions of loans. Requires loan recipients whose farms are in excess of 320 acres to pay full cost for water.

Directs the Secretary to transfer to the Fish and Wildlife Service or to the National Marine Fisheries Service any funds necessary to conduct investigations required for planning and construction of projects.

Authorizes additional appropriations, effective October 1, 1986, for projects under such Act. Prohibits more than 20 percent of such additional funds from being used in any State. Authorizes the Secretary to waive the 20 percent limitation, beginning five years after enactment of this Act, if the purposes of the Small Reclamations Projects Act of 1956 have been met. Requires the Secretary to report such waivers to the Congress. States that such waivers shall become effective only if after 60 legislative days the Congress fails to pass a joint resolution of disapproval.

Directs the Secretary and the Secretary of Agriculture to jointly report to specified congressional committees, within 120 days of enactment of this Act, on the effect of the Small Reclamation Projects Act of 1956 on the programs of the Department of Agriculture dealing with the production of surplus commodities.

Title IV: Validation of Contracts - Amends the Federal Power Act to provide that no charge shall be assessed for the use of any Government dam or structure if the Secretary has entered into a contract with a licensee which covers projects for which a license was issued prior to January 1, 1985, and if the contract contains provisions for the following: (1) a powerplant may be built by the licensee using irrigation facilities constructed by the United States; (2) the powerplant shall remain in the exclusive control, possession, and ownership of the licensee; and (3) all revenue from the powerplant shall remain the property of such licensee. Specifies the contracts to which such amendment applies.