To amend the Water Resources Development Act of 1996 to make modifications to the Chesapeake Bay environmental restoration and protection program.

Amends the Water Resources Development Act of 1996 to eliminate the pilot program status of the Chesapeake Bay environmental restoration and protection program. Permits the nonfederal share of project costs of a local cooperation agreement to include in-kind services. Treats funds provided for a project by a federal agency other than the Corps of Engineers as nonfederal funds for purposes of cost sharing requirements.

Authorizes the Secretary of the Army to carry out projects under the program in the Chesapeake Bay watershed, with the goal of carrying out projects in Delaware, New York, Maryland, Pennsylvania, Virginia, West Virginia, and the District of Columbia (currently the Secretary is required to establish at least one project in each of Maryland, Virginia, and Pennsylvania).

Directs the Secretary to establish a program, to be administered by the National Fish and Wildlife Foundation, to provide small watershed grants for technical and financial assistance to local governments and nonprofit organizations in the Chesapeake Bay region. Permits the use of grant funds only for implementation of cooperative tributary basin and other Chesapeake Bay-wide strategies that address storm water management or the establishment, restoration, protection, or enhancement of natural habitat associated with the Chesapeake Bay ecosystem.

Increases the authorization of appropriations for the Cheasapeake Bay program.

Directs the Secretary to develop at federal expense and submit to Congress a comprehensive plan to prioritize projects within the Chesapeake Bay watershed.