(a) When need arises in the State for water-supply storage or storage for streamflow regulation for quality control, either or both of which can be provided by a federally constructed reservoir, and cost of storage is nonreimbursable when used for streamflow regulation, or is to be repaid by nonfederal interest when used for water supply, the Department, after consulting with concerned units and jurisdictions, shall estimate:

(1) The amount of water-supply storage required to meet both initial and future needs in the potential service area within the State; and

(2) The need for and benefits of storage for regulation of streamflow for quality control.

(b) The Department shall contract with appropriate federal authorities to obtain reimbursement of costs for initial water supply and furnish reasonable assurance that costs allocated to future water supply for use in the State will be repaid. When future water supply is required, the Department shall contract with federal authorities for reimbursement.