and comments. Copies of all comments received are enclosed with the report. The report and all comments were transmitted to the President, via the Bureau of the Budget. Enclosed for your consideration along with our report is a copy of the letter of comments of March 14, 1956, from Assistant Budget Director Percy Rappaport. Sincerely yours, DOUGLAS MCKAY, Secretary of the Interior. COMMENTS FROM BUREAU OF THE BUDGET EXECUTIVE OFFICE OF THE PRESIDENT, BUREAU OF THE BUDGET, Washington, D. C., March 14, 1956. The honorable the SECRETARY OF THE INTERIOR. MY DEAR MR. SECRETARY: This is in reply to your letter of January 6, 1956, submitting your report on the Crooked River project, Oregon, and requesting advice as to its relationship to the program of the President. The project, which is designed primarily for irrigation, would involve construction of Prineville Dam to create a reservoir with a capacity of 155,000 acre-feet, a small diversion dam, a diversion canal 6.3 miles long, a distribution canal 14.8 miles long, 2 pumping plants, and necessary appurtenant works. The report states that operation of the proposed Prineville Reservoir in conjunction with the existing Ochoco Reservoir on Ochoco Creek will furnish a water supply initially to 20,210 acres of land in the Crooked River Basin in addition to providing 51,200 acre-feet of water for deferred irrigation. The estimated project cost, including $259,000 for an existing unit in the Cove powerplant, is $6,598,000 and is tentatively allocated as follows: The economic and repayment analyses included in the report take into account the following additional reimbursable sum: (1) $777,000 assigned to nonproject facilities for deferred irrigation; and (2) $617,000 representing present indebtedness of the Ochoco Irrigation District. Based on amortization of the project cost of $6,598,000 and the cost of nonproject deferred irrigation facilities over a 50-year period, the benefit-cost ratios are stated to be 1.25 using direct benefits and better than 2.0 using total benefits. V The repayment proposals presented in the report are summarized below. The report recommends that the project be authorized on the basis that net surplus power revenues from The Dalles project of the Corps of Engineers be utilized to return the reimbursable costs beyond the water users' ability to repay. On the basis of the above tabulation, these costs would amount to $3,604,000. In commenting on the report, the Corps of Engineers states that The Dalles project is entirely dissociated from the proposed irrigation improvements in the Crooked River Basin and, on this basis, questions the propriety of using net surplus power revenues from The Dalles project to return the reimbursable cost of irrigation beyond the water users' ability to repay. It suggests that the report be modified to eliminate linking the repayment provisions with a specific project of the Corps of Engineers. It is The Bureau of the Budget believes that the question of linking the irrigation repayment provisions of a disassociated project with a specific power project is a part of a broader policy question involving the establishment of a basin account for the Columbia Basin. understood that your Department is now making studies of the possibilities of deriving needed assistance for irrigation projects in the Pacific Northwest from the Federal power system in that area as a whole rather than from individual projects. Until such time as questions relating to the establishment of a basin account are resolved, we believe it would be preferable to recommend that reimbursable costs which are beyond the ability of the water users to repay within 50 years, exclusive of the permissible development period, be borne by the Federal Government as a contribution to irrigation. In that case, the letter transmitting the report to the Congress should include proposed language stating the maximum amount of such contribution for incorporation in the authorizing legislation. It is noted that approximately 34 percent of the usable storage contemplated for Prineville Reservoir is excess to the needs of project lands and would probably be utilized to irrigate other lands in the Deschutes River Basin. The incremental cost of this excess storage and the anticipated timing of its initial use are not set forth in the report. The Bureau of the Budget believes that normally such excess storage should be provided only if its cost does not exceed 15 percent of the construction cost of the project, and a repayment contract is signed with local interests prior to the initiation of construction, agreeing to start repayment within 10 years. However, in this case, since data in the report and additional information furnished by your rep resentatives indicate that the proposed excess storage will be utilized well within the 10-year period, we believe that its inclusion in the report is justified, even though the above conditions are not specifically met. It appears that the recreational and fish and wildlife features of the proposed plan are of local rather than national significance. On this basis it would appear that the costs of these improvements should not be borne in their entirety by the Federal Government. The costs of preventing damages to existing fish and wildlife resources and the costs of minimum facilities necessary for the general protection and operation of the proposed development and for the accommodation and protection of the visiting public should be treated as a part of the overall costs and allocated to the basic purposes of the improvement. In view of the sizable secondary benefits involved in the project, the Bureau of the Budget believes that consideration should be given to a requirement for the establishment of a conservancy district to insure maximum justifiable contribution or repayment by those to whom secondary benefits of the project will accrue. In the event the project is authorized by the Congress, we would expect that any request for funds to initiate construction would be accompanied by evidence that repayment contracts have been executed with the water users which are generally consistent with the estimates of repayment capacity set forth in the report. Subject to your consideration of the foregoing comments, you are advised that there would be no objection to submission of the report to the Congress. No commitment, however, can be made at this time as to when any estimate of appropriation would be submitted for construction of the project if authorized by the Congress, since this would be governed by the President's budgetary objectives as determined by the then prevailing fiscal situation. Sincerely yours, PERCY RAPPAPORT, LETTER FROM THE SECRETARY OF THE INTERIOR TO THE PRESIDENT The PRESIDENT, DEPARTMENT OF THE INTERIOR, The White House, Washington, D. C. (Through the Bureau of the Budget.) MY DEAR MR. PRESIDENT: My report on the Crooked River project, Oregon, is transmitted herewith, pursuant to the provisions of section 9 (a) of the Reclamation Project Act of 1939 (53 Stat. 1187). This is primarily an irrigation project and will furnish a water supply initially to 20,210 acres of land in addition to providing 51,200 acre-feet of water for deferred irrigation. Other project benefits accrue to flood control, drainage, recreation, and fish and wildlife functions. The general plan provides for regulation of Crooked River flows in the proposed Prineville Reservoir, which when operated in conjunction with the existing Ochoco Reservoir on Ochoco Creek, will provide the necessary storage to achieve the project pur poses. The economy of the area will be greatly improved as a result of the increased irrigation water supply. The estimated project cost, including $259,000 for existing Cove powerplant facilities, is $6,598,000. Of this amount, $5,903,000 is tentatively allocated to irrigation, of which it is estimated that $2,299,000 could be repaid by the water users in a 50-year period. It is recommended that the remaining reimbursable amount be repaid from surplus power revenues from The Dalles project of the Corps of Engineers. Costs allocated to flood control and fish and wildlife preservation are respectively $653,000 and $29,000. These are, in accordance with law, considered nonreimbursable. An amount of $13,000 is included for minimum recreational facilities, and it is recommended that it also be nonreimbursable. The project is economically justified, with benefits exceeding costs by a ratio of greater than 2 to 1. Considering direct benefits only, the ratio is 1.25 to 1.0. It is strongly supported by local interested persons and it would make an important contribution to irrigation in the area. The report has been transmitted to officials of the States of the Columbia River Basin and to the Secretary of the Army for their consideration and recommendations as required by the provisions of section 1 (c) of the Flood Control Act of 1944 (58 Stat. 887). It was also sent to the State of Oregon for the comments of the head of the agency exercising administration over the wildlife resources of that State as required by the provisions of the act of August 14, 1946 (60 |