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Mr. AANDAHL. No. As far as the bill is concerned, it is satisfactory but this is a modification from the earlier report that was sent in which we are calling to your attention.
Senator ANDERSON. And you can do that without change in language?
Mr. AANDAHL. Without any change in the authorizing legislation. Senator KUCHEL. If I am not incorrect, the point which you make in this sentence relative to "one important change" contemplates a change with respect to the problem of power as developed at Trinity; is it not?
Mr. AANDAHL. No; it is not even dependent on that. We can use off peak power under either type of development of the Trinity project. Senator KUCHEL. And what does the one important change here allude to?
Mr. AANDAHL. It alludes to the construction of a forebay and an afterbay and some other changes in the facilities to make it possible to use offpeak power for project pumping.
Senator KUCHEL. Regardless of how it were to be finally determined by Congress that it would be produced?
Mr. AANDAHL. Yes; that is correct.
Senator KUCHEL. Is the feasibility of the project, Mr. Secretary, affected by the position, I think unfortunate position, that the Southern Pacific Railroad Co. has taken with respect to its excess land holdings?
Mr. AANDAHL. It may be. That land is essential to the full development of the project, and the feasibility is woven into the utilization of the water on the full acreage that has been described.
Senator KUCHEL. The railroad has indicated, as you state here, that it is not prepared to commit these lands, that is to say, the lands it holds there, for sale under the usual Bureau of Reclamation recordable contract.
Then you go on to say:
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.
What does that mean? That the company takes the position that after this project is built it will then determine to what extent it would participate in contracts to obtain supplemental water?
Mr. AANDAHL. We have not gone into any extended negotiation with the company, and I am not sure just what they do mean there. I would assume that they are probably thinking in terms of a cash payment or a payment with interest if they would be given an exemption from the acreage limitations provisions. But we have not negotiated and we do not know exactly what the company might be thinking of.
Senator KUCHEL. Has the Congress in all its history ever recognized that type of exemption from reclamation law so that a corporation with large land holdings could enter into some interest payment arrangement?
Mr. AANDAHL. We had it to some extent in the Washoe project where the irrigation investment on excess lands is repaid with
Senator ANDERSON. Are you referring to a bill that passed here a year or 2 years ago?
Mr. AANDAHL. Yes.
Senator ANDERSON. I do not think it is comparable at all, do you? Mr. AANDAHL. The size of holdings are entirely different.
Senator ANDERSON. Will the Senator from California now yield? Senator KUCHEL. Yes, sir.
Senator ANDERSON. Is it not true that this total project has costs that run nearly $1,000 an acre?
Mr. AANDAHL. That is correct.
Senator ANDERSON. Do I understand that the Southern Pacific Railroad says that if we can prove that the benefits are $1,000 an acre they will be happy to pay it and if they cannot they want to stay out? Mr. AANDAHL. That is apparently their position.
Senator ANDERSON. Of course we cannot show it. You have to take the power revenues to get it down to a figure that the average farmer can afford to pay, and I am in favor of doing that for the farmer of California even when Senator Douglas talks about bananas on Pike's Peak.
I think it is a desirable thing to say the farmer, "Use these power revenues to reduce the construction cost to a figure that you can afford to pay."
Do I understand that Southern Pacific says-I would think it would be a perfectly fair position on their part-"If you do that and get the costs down to $1,000 an acre, we will pay that," or had we better ask the Southern Pacific that question?
Mr. AANDAHL. The question had better be asked of the Southern Pacific. However, the water users on the San Luis project will repay about 76 percent of the total cost.
Senator ANDERSON. Not of the total cost. We do not mean they will pay $860 an acre. They are not stupid or they would not own the land.
Mr. AANDAHL. That is the information I have here.
Senator ANDERSON. They will pay 86 percent of the cost of the distribution system. Is that not what they will pay?
Mr. AANDAHL. No. The information I have is that they will pay 76 percent of the cost of the supply works; that is, the cost of the operation and maintenance and 76 percent of the cost of the supply works.
Senator ANDERSON. Let's get to the $290 million. Mr. O'Neill, would you be happy to pay an assessment of $860 an acre on land? Mr. O'NEILL. I do not believe we could do it, Senator.
Senator ANDERSON. You would not be the kind of businessman I think you are if you offered to do it. You cannot do that.
What is the 76 percent figure you are talking about? It must be the cost of the distribution system, not the dam. Let us reduce it to the $290 million.
Mr. AANDAHL. The information I have before me is that the estimated cost of the supply works is $290,430,000.
Senator ANDERSON. That is right. You mean they are going to pay 76 percent of that?
Mr. AANDAHL. And that the repayment of the supply works by the irrigators, water users, will be 76 percent, or $215,340,000.
Senator ANDERSON. What is that?
Mr. AANDAHL. $215,340,000. In addition they will repay the entire cost, 100 percent, of the distribution and drainage, which is $192,650,000.
The total per-acre cost that they will be expected to pay is $36. I understand that is the way the project is being planned and offered. Senator ANDERSON. Wait a minute. Thirty-six dollars?
Mr. AANDAHL. Yes, sir.
Senator ANDERSON. How many acres are in this?
Senator KUCHEL. About 400,000 all told.
Senator ANDERSON. Divide 400,000 into $400 million. Roughly that comes out to $1,000, does it not?
Mr. AANDAHL. That is correct.
Senator ANDERSON. Where do you get $36?
Mr. AANDAHL. Divide that by 50. Your $1,000 is a total over the whole period.
Senator ANDERSON. They cannot pay $36 a year for water an acre. Mr. AANDAHL. We think they can; yes, sir. That is the repayment study we have on the project.
Senator ANDERSON. I just want to say if that is the basis we need not hold the hearings but just authorize it, because nobody could do it. Nobody in the world can pay $36 an acre a year. I have trouble paying $4.50.
You must be taking power revenues into consideration.
Mr. AANDAHL. No, sir. This is the payment of the water users, and that is the project plan as it has been worked out.
Senator ANDERSON. Do you know any place where the user of water pays $36 a year?
Mr. AANDAHL. Yes; on the Cachuma project.
Senator ANDERSON. Where is that?
Mr. AANDHAL. Down near Santa Barbara, Calif. They are paying $25 per acre-foot a year.
Senator KUCHEL. I respectfully suggest that it would not be a comparable situation. Let me ask this question, if I may: What is the acre rate of water in the present Central Valley service area?
Mr. BENNETT. $3.50 per acre-foot for the supply works, in addition to which those same irrigators pay 100 percent of their distribution and drainage cost.
Senator KUCHEL. Why should that not apply, may I inquire, in the area contemplated to be covered by the San Luis Reservoir?
Mr. BENNETT. Because of the substantially increased cost of pumping. This is approximately the $3.50 rate for the canal site plus the pumping cost to get the water to the San Luis unit.
Senator KUCHEL. When you speak about increased pumping costs, what do you base that on?
Mr. BENNETT. It is increased over and above that which the water users under the Delta-Mendota Canal are paying for pumping_costs. In other words, there is a higher lift. You pump from the Tracy plant to the Delta-Mendota, and that is repumped into the San Luis Reservoir.
Senator KUCHEL. Is it not the theory under which the Department recommends approval of the San Luis project that it will constitute an extension of the Central Valley's area, and should we not reasonably assume that there will be no differentiation between the treatment
which a farmer receives in the Central Valley area merely because he is north or south or east or west of the present CVP area?
Mr. BENNETT. This is, Senator, substantially based on that same principle. In other words, the irrigators pay all of their operation and maintenance costs. That is basic.
Senator KUCHEL. Yes.
Mr. BENNETT. In addition to that, they are paying something on construction of the supply works and all of the cost of the distribution and drainage. This is the same basic principle.
The main reason for that difference between $3.50 and $7.50 is the added pumping cost, which is a part of operation and maintenance. So the same basic principles are being followed.
Senator KUCHEL. If the pumping costs were the result of the Federal operation not only of Trinity but of the entire Central Valley system, would your figures still be the same with respect to the charges against the farmers?
Mr. BENNETT. Yes, sir. The pumping is based upon getting power from the Central Valley project.
Senator KUCHEL. Under that it is your estimate again that the farmer would have to pay how much for his water?
Mr. BENNETT. The figures come out to $36 per acre.
Mr. AANDAHL. That is how much water each year?
Senator ANDERSON. Acre-feet?
Mr. BENNETT. Acre-feet.
It isn't exactly that. That is what you would pump. It is just a little better than 2.
Senator ANDERSON. Their payment then will be about $14 million a year, and the cost to the Government about $12 million a year for interest?
Mr. BENNETT. I haven't checked that.
Senator ANDERSON. So, all they are going to do is pay the interest on it for 50 years and then have it cleared up. $36 an acre out of 400,000 acres is $14,400,000. With 3 percent, which is about what we borrow money for, you have another $190 million added in there. But on $300 million it is about $9 million a year.
Mr. AANDAHL. I think that estimate is generally true of all reclamation projects.
Senator ANDERSON. Yes; it is. I do not question it at all. It just looks like an awfully high payment. It may be all right. Mr. BENNETT. We believe that they can pay that.
Senator ANDERSON. There are no power revenues available then to pay off this obligation?
Mr. BENNETT. Oh, yes, power revenues are paying the difference between the $290 million, approximately, and the $215 million, which water users pay. Power revenues do pay here approximately $75 million of the total cost.
Senator ANDERSON. However, that is not the usual proportion, is it? Mr. BENNETT. Oh, no. Generally it is the reverse in that power pays more than the water users.
Mr. AANDAHL. This is the way the project was analyzed in the field, and that is the way we had it submitted to us, and that is the way we are presenting it to your committee.
Senator ANDERSON. I am surprised it is that high a payment. It makes the project more attractive, but it does look like a very high figure.
I would think, though, if the Southern Pacific is going to pay interest on it, that they would, of course, nearly double their payment. Mr. AANDAHL. That is correct.
Mr. LINEWEAVER. What are the comparable pumping costs-that is one way to get at it-in the valley?
Mr. BENNETT. Comparable to what?
Mr. LINEWEAVER. What are the pumping costs in supplying the area now?
Mr. BENNETT. You mean the cost of pumping an acre-foot?
Mr. BENNETT. We might have to work that out.
Senator ANDERSON. Would you send some figures and comment on some figures I am going to use now, which may be badly out of line, but, if they are going to pay on $215 million and the Southern Pacific would be required to pay interest as well. You say they are going to pay $36 based on $215 million-the interest comes into that and would raise it approximately $20; so they would have to pay $56 per acre per year.
You say they are going to use 212 acre-feet. That would give you a cost of $16.50 an acre-foot for water. What is the average out there $3 or $4, is it not?
(The figures and comment were later developed by Mr. Bennett. See p. 21.)
Mr. BENNETT. Certainly, not above that.
Senator ANDERSON. That is the payment per acre-foot of water delivered.
Mr. BENNETT. I think now, under their present pumping conditions, they are paying substantially more than that. The set rate in that area from the Central Valley project is $3.50 per acre-foot.
Senator ANDERSON. I do not understand. Do you think that $16 is smaller than $3? I must not have stated it well.
Mr. BENNETT. Maybe I didn't understand your question.
Senator ANDERSON. I did not think we were that far apart. Let me start again. If they are going to pay $36 per year for water without interest, and the Southern Pacific is going to pay interest on $215 million, it is going to be paying on approximately $20 an acre more. So, that is $56 a year. You are going to get 21/2 acre-feet of water, you said a moment ago, and that somes out to $14 exactly per acre-foot. You said they are delivering it for $3.50 an acre.
Mr. BENNETT. Are you charging interest on $215 million? I understood you to say you were. What you have to do, if you haven't done it there, is you have to get the amount of your investment down to that, applying to the 65,000 acres which the Southern Pacific Co. has.
Senator ANDERSON. I believe I understand that. It does not matter how many acres there are. I took 400,000 acres against the total interest cost. If you take the total interest cost and only take 65,000 acres, if your arithmetic is any good, you come out with exactly the same figure, do you not?
Mr. AANDAHL. Yes, sir. The $56 seems to be the correct figure, with interest.