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In the late 19th century, insufficient rainfall caused western settlers in the United States to use irrigation for farming, and pressure escalated for the federal government to create and manage irrigation and reservoir storage projects. The U.S. Congress was already investing in the nation's growing infrastructure: Roads, navigable rivers, harbors, canals, and railroads were being built, maintained, and/or developed. Westerners especially needed the government to invest in regional irrigation projects, and this movement showed its strength when irrigation platforms were debated during the presidential election in 1900. It was therefore only two years later that the Bureau of U.S. Reclamation Service would be created.

In 1924, Congress authorized the building of the Hoover Dam in Boulder Canyon, Nevada, using federal funding.

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On July 17, 1902, Congress passed the Reclamation Act, which required that water users repay construction costs from which they received benefits, and was created to study the need for and institute water development projects in federal lands across the western states. Secretary of the Interior Ethan Allen Hitchcock then established the U.S. Reclamation Service within the U.S. Geological Survey (USGS) to operate solely on the revenue from federal land sales, but since Texas had no federal land, it was not included in any reclamation projects until 1906, when Congress passed a special act to include it. In 1903, the Roosevelt Dam and the Salt River Project was the first major project under this new Act, and ultimately made Phoenix, Arizona, a thriving agricultural and urban site.

In 1907, the Secretary of the Interior separated the Reclamation Service from the USGS, and created an independent bureau within the Department of the Interior with Frederick Haynes Newell appointed as its first director. These first years have been called the Irrigation Age; however, many of the bureau's early water projects were fraught with problems—land was purchased that was unfeasible for irrigation; many early settlers were inexperienced in the use of irrigation; some lands were overirrigated, requiring expensive drainage plans; irrigation customers were unable to repay their loans from exorbitant preparation and construction costs; settlements were abandoned; shady land dealings and speculation created an atmosphere of mistrust; and many projects were created in farmlands only suitable for low-value crops.

In 1923, the agency was renamed the Bureau of Reclamation, and one year later, Congress authorized building of the Hoover Dam in Boulder Canyon, Nevada. This monumental project required large appropriations; and for the first time, the Bureau began to receive substantial federal funding, but only after a lengthy public debate about supporting public power versus its private-sector creation and supervision. Called the Multi-Purpose Era, huge projects followed one after another including Boulder Dam, the Columbia Basin, the Colorado–Big Thompson, and the California Central Valley Projects. These largest water facilities started during the Great Depression and lasted until the decades after World War II. From 1941–47, civilian public service labor was used for extensive western water projects that had been interrupted by the war.

Grassroots Opposition

The last major construction projects occurred in the 1960s, when the American environmental movement gained influence to develop considerable grassroots groups opposed to the water development projects. In 1976, when the Teton Dam failed as it was filled for the first time, it barely tarnished the Bureau's international status; however, it was America's growing environmental movement, in addition to President Carter's criticism of water projects, that many believe most affected the Bureau of Reclamation's direction and planned projects across the western United States. During the late 1980s, the bureau reorganized all plans for projects planned up to 40 years before stating that “the arid West essentially has been reclaimed.”

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