The Headwaters Protection Act updates a federal program that helps protect and restore watersheds in national forests. The program, called the Water Source Protection Program, works with local communities, water districts, and other partners to improve water quality and quantity while also managing forest health and reducing wildfire risks.

The bill expands who can participate in the program by adding acequia associations (traditional irrigation groups), stormwater and wastewater management agencies, and private water delivery companies to the list of eligible partners. It also allows the program to work on private and state lands that are in the same watershed as national forests, as long as the landowners agree to participate. The bill emphasizes that projects should use nature-based solutions like restoring wetlands and riparian areas, and it prioritizes projects that help communities prepare for droughts, wildfires, flooding, and extreme weather.

Financially, the bill increases funding from $10 million per year to $30 million per year through 2034, and requires that at least 10 percent of funding go toward helping non-federal partners build their capacity to plan and implement projects. The bill also requires that partners contribute at least 20 percent of project costs, though the Secretary of Agriculture can waive this requirement if needed. Importantly, the law makes clear that nothing in it changes state water laws, federal water rights, or allows the government to take control of private land.