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tion contemplates one important change in the plan of development and operation of the San Luis unit to take advantage of the offer by the Pacific Gas & Electric Co. to exchange energy on a more favorable basis than possible under present contracts.
Studies show that it would be economical to invest additional funds for a forebay to the San Luis pumps and for enlargement of the capacity of those pumps to permit use of offpeak energy for pumping. This additional cost, coupled with the estimated cost of the original report plan indexed to present-day construction costs, results in a current estimated cost of the San Luis unit of $290,430,000, exclusive of distribution and drainage systems.
New payout studies, based on these costs and presently estimated costs of the Trinity River division, show that project costs can be fully returned during a 50-year repayment period, either under all-Federal development or joint development of the Trinity River division, with surplus revenues in amounts of $67,195,000 under all-Federal development of the Trinity River division and $207,124,000 under joint development of that division.
The distribution and drainage system costs are now estimated to be $192,650,000. These costs would be repaid by the local districts under separate contracts if constructed by the United States. Addition of the San Luis unit to the Central Valley project will, of course, have an impact on electric-power service available to preference agencies from the Central Valley project.
If the Trinity power facilities are constructed by the Federal Government, the preference-agency load served would decrease from 650,000 kilowatts to 470,000 kilowatts. If the Trinity plants are constructed by Pacific Gas & Electric Co., the preference-agency load served would drop from 400,000 kilowatts to approximately 290,000 kilowatts, the amount required to serve only the Sacramento Municipal Utility District and other minor contracts.
These decreases in service to preference agencies were, of course, taken into consideration in the payout demonstrations previously mentioned. Under either circumstance of Trinity power development, we support approval of the San Luis unit and leave selection between the alternatives for power production to the hearings on Trinity River division legislation and subsequent action by the Congress.
Much of the service area fo the San Luis unit is now in large ownerships. Westlands Water District, which includes two-thirds of the entire San Luis water area, is mindful of the provisions of reclamation law with regard to acreage limitations in single ownerships. Members of that district, in appearing before your committee in May of 1956, indicated their willingness to comply with those provisions of reclamation law.
However, the Southern Pacific Railroad Co., which owns approximately 120,000 acres of land in the service area, 65,000 of which are in the Westlands district, informed the Bureau of Reclamation by letter of October 1, 1956, that it was "not prepared to commit these lands for sale under the usual Bureau of Reclamation recordable contract."
The company further stated that it neither sought nor expected any Federal subsidy in the form of 40-year interest-free money, but was willing to pay its fair share of the irrigation benefits, provided
the capital and operating costs are such that the land and crops can afford to do so. The legislation which we recommend be enacted requires compliance with the land-limitation provisions of reclamation law.
Senator ANDERSON. What would the Southern Pacific pay on? The amount assigned to irrigation, or the amount of actual cost of irrigation? We understand what the cost is, but we assign a great deal of that to power revenues. Would they pay on the remaining portion, or on the full cost?
Mr. AANDAHL. I don't think any understanding has been worked out as to what might be done there.
Senator ANDERSON. Will it be necessary to question Southern Pacific on what they mean, or do they pretty well know it is the amount assigned to irrigation that they expect to pay?
Mr. AANDAHL. The legislation that we are recommending, as it is drafted, would require compliance with the acreage-limitation law. If there is going to be any modification of that, that would be a matter for additional consideration. We have not worked out any arrangement with the Southern Pacific for handling that matter.
Senator ANDERSON. You would recommend, then, if the bill was passed, that it pass with the regular minimum requirements in it? Mr. AANDAHL. That has been the position the Department has taken. However, we are calling attention to the fact that there is this particular problem, and it should have further consideration.
Senator ANDERSON. Would the Ivanhoe case, now pending in the Supreme Court, have any bearing on this?
Mr. AANDAHL. It would have a bearing on the validation of a repayment contract. It is a matter that would have to be cleared up one way or the other before we could proceed with construction.
Senator ANDERSON. The project would have to be held up until that matter was resolved? I assume that is what you just said.
Mr. AANDAHL. Yes; I think, in this project, where all of the facilities are specifically for the purpose of irrigation, it would not be advisable to proceed with the main structure unless we were assured of a repayment contract.
Senator KUCHEL. I hope, however, that the implications of your statements, Mr. Secretary, are not to be construed as opposing any reclamation development in California pending any final outcome of the so-called Ivanhoe decision.
Mr. AANDAHL. That would depend on the characteristics of the individual projects that were involved. If we were dealing with a large storage reservoir that had multiple uses, I think we could proceed with that and take care of the diversion facilities at some subsequent time. But here we have a project that, as I view it, is primarily and exclusively, in the size that is being proposed for Federal financing, solely for the purpose of irrigation, and I think that we would have to have the repayment contract cleared up before we could proceed with construction.
Senator ANDERSON. You say that this needs to be done selectively. You do not just lay down a flat rule that you reject them all? You will just reject those where the case is of overriding importance? Mr. AANDAHL. That is correct.
Senator KUCHEL. Mr. Chairman, again on that point, the United States Supreme Court has scheduled hearings on the Ivanhoe decision
in April, which, I assume, means that sometime during the fall sitting of the Court a final judgment would be rendered there. Would it be the position of the Department that, if the State supreme court decision in that case were to be upheld, it would have a bearing on future reclamation projects in California of the type of this one?
Mr. AANDAHL. Yes; I think it would have appreciable bearing on it, and I also think that both the State and the Federal Government would be immediately concerned about remedial measures. I would not expect that there would be an indefinite delay or postponement of reclamation work in the State of California. I think an answer is going to be worked out, and I might also say that I do not think that that is a question that needs to delay the authorization of the San Luis project.
I think we can proceed with the authorization understanding what needs to be done before construction can start.
Senator ANDERSON. Yes, I would not interpret your remarks as having to do with the authorizing legislation. You referred only to the construction work of the project.
Mr. AANDAHL. That is correct.
Senator ANDERSON. I think there is a good deal of merit in what you say. After all, if I was in the automobile finance business and lending money on cars, and the State supreme court held that you could not take a man's automobile away from him because he could not make a payment, I would go out of the automobile finance business. pretty quick voluntarily or otherwise, and I think it is important for us to consider.
If you cannot force these repayment contracts in the State of California, it does make a difference to the Federal Government.
Proceed, Mr. Secretary.
Mr. AANDAHL. In the Department's report on S. 1887, we called attention to the requirement in section 1 providing that construction of the San Luis unit shall not be commenced until the Secretary has secured, or has satisfactory assurances of his ability to secure, all rights to the use of water which are necessary to carry out the purpose of the unit and the terms and conditions of the tct.
In view of the uncertainties created by recent decisions of the California Supreme Court, I wish to reiterate our opinion as to the desirability and wisdom of this provision.
S. 1887, section 3, sets forth several provisions and principles to guide preparation of an agreement between the United States and the State of California for coordinated operation and joint use of the facilities of the San Luis unit.
In many respects these provisions and principles contain the heart of the proposal for joint development. Among other things, they contain safeguards to assure operation of the San Luis unit as planned to thus protect the Federal investment during the repayment period.
We regard such provisions as of basic importance to Federal participation in any joint development of the San Luis unit.
S. 1887 was drafted to reflect carefully worked-out agreements between Federal, State, and local interests on an acceptable form of a coordinated San Luis unit development.
Further discussions by these interests during the past 2 months indicate that refinements of or alternatives to S. 1887 will be presented to your committee during this hearing.
Although we believe S. 1887 presents a satisfactory framework for Federal participation in joint development of the San Luis unit, we will, of course, be glad to consider fully any new refinements or suggested means to accomplish joint development.
Senator ANDERSON. Right there, Mr. Secretary, if these alternatives are brought in, this involves some $300 million and we would have the right, I am sure, to submit those to you and get your comments, and on any of the alternatives that are proposed.
Mr. AANDAHL. Yes, we would be very glad to review them and comment on them.
Senator ANDERSON. It is a rather substantial sum of money. Back on page 3, in your prepared statement, you indicate that new payroll studies show the project costs could be determined during the 50-year payment period either under all-Federal development or joint development of the Trinity River division with surplus revenues in the amount of $67 million under all-Federal development of the Trinity River division and $207 million under joint development of that
Are there not some other figures that would come in there as to the extra cost to the taxpayers under those circumstances? It is not all black and white.
Mr. AANDAHL. There is a complete analysis of that associated with the hearing on the Trinity project itself.
Senator ANDERSON. Yes. I just did not want this statement to stand here to look as if it was going to cost $140 million more to have Federal development. It costs money to do it either way, does it not? You just take it out of a different pocket. You do not have to comment.
Mr. AANDAHL. Yes, sir. The total costs of the project are, I was going to say, the same under either arrangement. I do not think I would be correct in making that statement, because there will probably be some difference between Federal cost of power facilities.
Senator ANDERSON. Could we say it this way: That the construction cost is going to be the same whether it is done by private or with other funds? The private companies will install their own equipment and we will assume it will be equivalent to what the Federal Government would put in.
Can they buy a generator cheaper than the Federal Government can buy one?
Mr. AANDAHL. I started out to say that the costs would be the same irrespective of who built it. Then I backed away from it because I am not sure that the costs would be the same to private enterprise as they would be to the Federal Government. There may be some difference.
Senator ANDERSON. You do not regard them as substantial?
Mr. AANDAHL. I would not think there would be a great deal of difference.
Senator ANDERSON. In reference to this hearing, the Secretary wrote a letter saying he was going to be away, and he said:
We have not completed our report on H. R. 9969 which embodies the so-called Kern County concept but we will be prepared to testify as to the Department's views on that concept at the hearing.
I wonder if we could have some testimony on that.
Mr. AANDAHL. I would say, in general terms, that the Department would be very pleased to proceed under the general type of arrangement that is proposed by the Kern County group, and that is one in which the reservoir would be constructed by the State of California and the Bureau of Reclamation would be responsible for the distribution system, if the irrigation district wanted it constructed by the Bureau of Reclamation. We are very, very glad to be a part of a joint project where a major portion of the responsibility is picked up by the local groups.
There are, however, a number of factors associated with that arrangement that need to be carefully analyzed.
Senator ANDERSON. It would depend on whether or not the State of California came in here and testified it wanted to build this itself and that it did not need the Federal money?
Mr. AANDAHL. That is correct. That type of arrangement where the State wants to pick up additional amounts of construction responsibility is one that is very appealing to us.
Senator ANDERSON. You do not object to that?
Mr. AANDAHL. Not at all, providing that the coordinating arrangements are properly worked out.
Senator KUCHEL. Mr. Secretary, I assume, by reason of the comments which you have made in your prepared statement with respect to the controversy on the development power at Trinity, that it is the position of the Department that it favors the San Luis legislation now before this committee regardless of how that power controversy will be determined by the Congress this year?
Mr. AANDAHL. That is correct.
Senator KUCHEL. I note that you suggest, on page 3 of your prepared statement, that
In addition to possible changes in the plan to accommodate full integration with the Feather River project.
The Bureau contemplates other changes.
Would it be the position of the Department that the bill as now drafted contemplates full integration with the Feather River project? Mr. AANDAHL. Yes, it does.
Senator ANDERSON. Do I understand, then, that there is something more coming?
In addition to possible changes in the plan *** the Bureau of Reclamation contemplates one important change in *** operation.
Are you not satisfied with this bill as it is in front of us?
Mr. AANDAHL. Just a moment. The important change that is contemplated is the use of offpeak power for project pumping, which is described here.
Senator ANDERSON. Is the bill the way you want it or not?
Mr. AANDAHL. The bill is broad enough so that this modification of the plan that was previously submitted could be put into effect under the legislation as it is.
Senator ANDERSON. You can handle a modification administratively? You do not need any change in the language?