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is concerned in its operation of that part of the project which would feed the Federal system.
Mr. AANDAHL. Not necessarily its operation, but assurances that water would be available for the needs of the irrigation project.
Senator KUCHEL. Then the Department would have no objection to a joint construction, the operation of which might be in the hands: of the State under clear agreements that the Bureau of Reclamation's responsibilities to the Central Valley service area would be satisfied?
Mr. AANDAHL. That is correct, and that would be a desirable arrangement. We like to see the local groups take over the operation. Senator KUCHEL. I have no more questions, Mr. Chairman.
Senator ANDERSON. I may have some other questions, but right here I would like to put into the record the letter from the Secretary of Interior of March 12 enclosing information, the first part of which is a copy of Mr. Aandahl's statement, which is already in the record and therefore is not needed again. But the second enclosure is information developed by the Bureau of Reclamation in response to a letter sent to them on February 20, and information with reference to Senate Resolution 148 developed by the Bureau of Reclamation. Without objection, this complete letter of March 12 will be inserted in the record at this point.
(The letter and enclosures are as follows:)
DEPARTMENT OF THE INTERIOR,
OFFICE OF THE SECRETARY, Washington, D. C., March 12, 1958.
Hon. CLINTON P. ANDERSON,
United States Senate,
Washington, D. C.
DEAR SENATOR ANDERSON: There is enclosed herewith information requested in your letter of February 20, 1958, relative to the forthcoming hearings before your subcommittee on S. 1887, to authorize the San Luis unit of the Central Valley project, California. While I appreciate your invitation to be present at the hearings, I expect to be away from Washington at the time they are scheduled. Assistant Secretary Aandahl and Mr. N. B. Bennett, Jr., Chief Division of Project Development, Bureau of Reclamation, will present testimony for the Department of the Interior.
The enclosed material is as follows:
Enclosure 1, a copy of Mr. Aandahl's proposed prepared statement (incorporated in his oral testimony).
Enclosure 2, contains information developed by the Bureau of Reclamation in response to items 1 and 2 on page 2 of your February 20 letter. Enclosure 3, contains the information requested pursuant to Senate Resolution 148, and developed by the Bureau of Reclamation, in as complete form as it could be prepared in the limited time available.
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.
FRED A. SEATON, Secretary of the Interior.
INCREASE IN ESTIMATE OF COST
The present estimate of the capital cost of the San Luis unit, Central Valley project, is $290,430,000 exclusive of distribution and drainage systems. This is based on October 1957 prices and upon use of off-peak pumping. This represents an increase of $61,300,000 over the cost estimate given in Secretary Seaton's interim San Luis report to the Congress of December 17, 1956, which was based on January 1954 prices. About $29 million of this increase is occasioned by
rises in construction price levels and the remainder (about $32 million) by the provisions for off-peak pumping discussed below.
JUSTIFICATION FOR OFF-PEAK PUMPING PLAN
Purpose. The studies discussed in this memorandum were made to determine the economic feasibility of providing excess capacity in San Luis pumping facilities to allow a greater amount of off-peak pumping. Off-peak pumping is of value in two ways:
(1) In months when power output is limited by available machine capability, any shifting of project-use demand from on-peak to off-peak will allow greater commercial sale of dependable or nondependable capacity.
(2) The recent offer by the Pacific Gas & Electric Co. with Trinity power sales provides for exchange of off-peak project pumping energy within a calendar year. Therefore, if the offer is accepted, any shifting of project pumping energy to off-peak hours would allow greater use of this exchange provision in critical months with an increase in salable capacity.
Plan of development.-In the San Luis report of May 1955, capacity of the San Luis pumps was selected as the minimum to pump Delta-Mendota Canal flow on a 24-hour-a-day basis. Water would be pumped directly from the DeltaMendota Canal to San Luis Reservoir or Canal. The off-peak plan assumed for comparison increases capacity of the main pumps about 50 percent over those in the report plan and provides a forebay supplied by low lift pumps from the Delta-Mendota Canal. Reservoir size and distribution pump sizes are the same for both plans. The comparison of plans is made both with Federal construction of transmission and with wheeling. A comparison of Federal costs with the Pacific Gas & Electric Co. of March 1, 1957, indicates that wheeling would be the less expensive.
In our studies of the feasibility of off-peak pumping at San Luis, it was assumed that off-peak energy would be obtained from Pacific Gas & Electric in critical months and returned to the company in the same calendar year. Pumping at all pumps except San Luis main pumps was assumed uniform over a month with 50 percent of the energy used during the contractors peak-load period. At San Luis the same condition was assumed in the report plan, but in the off-peak plan pumping was assumed in off-peak hours as much as possible. In some years water level in San Luis Reservoir in August or September drops too low to divert by gravity to the San Luis Canal. In those months, it was assumed water would be released back to the forebay and repumped to San Luis Canal on a uniform basis. This condition, which limits dependable capacity of the system, could be decreased by differential or separate pumps to eliminate the pumping head from forebay to reservoir water levels. The additional cost involved has not been estimated.
Benefits.-Benefits were estimated as the difference in value of power accomplishments based on alternative cost of steam-electric generation with and without facilities for off-peak pumping. There would be no appreciable change in average energy generation or sale, and it is estimated that the possible change in nondependable capacity is negligible. There would be an increase in dependable capacity under ultimate conditions of 60,000 kilowatts. Comparative studies have not been made for earlier years of development nor for other water-supply conditions. However, it is believed that the 60,000 kilowatts is a satisfactory estimate of average increase over the 50-year period of analysis. Based on the cost of equivalent production in a privately financed steamplant with the present posted $2.95 per barrel cost of fuel oil, the annual benefit would be: 60,000 kilowatts by $26.08 per kilowatt__.
Including taxes forgone of 60,000 kilowatts by $9.15 per kilowatt_-
$1, 565, 000 549, 000
Benefit-cost ratio.—A summary of incremental annual equivalent benefits and costs due to off-peak pumping at San Luis is given below:
Costs and taxes forgone with wheeling of San Luis power:
Interest and amortization_.
31, 400 774,000 -61,000 549, 000
Costs and taxes forgone with Federal transmission:
Interest and amortization___.
1, 489, 400 1.05
223, 500 71, 300 888,000 549, 000
1, 731, 800
Conclusion.-As indicated by the above computations, the benefits of modifying the report plan to allow greater off-peak pumping are very nearly equal to the costs with federally constructed transmission lines to San Luis. If wheeling of project power to the San Luis pumps is assumed, the ratio of benefits to costs is 1.05 to 1. With improvements in the plan of development, particularly in regard to pumping requirements at times of low reservoir storage, it is believed the ratio of benefits to costs could be somewhat improved. It is believed that the additional cost for off-peak pumping at San Luis can be justified on the basis of increased benefits.
Alternative plans are discussed in chapter X of the planning report. More recent studies demonstrate that by taking advantage of off-peak energy exchange, the benefits of placing the San Luis pumps offpeak exceed the cost of providing those facilities to make possible this offpeak pumping. This is covered in detail in enclosure 2.
(1) Description of project.—A description of the project is given in detail in the planning report, particularly in chapter V. Since preparation of the report, the plan has been modified to take advantage of the offpeak energy exchange offered by the Pacific Gas & Electric Co. The project as now planned includes a low head pumping plant and a forebay of about 20,000-acre-foot capacity between the Delta-Mendota Canal and the San Luis Reservoir. Otherwise, the plan remains essentially the same as described in the planning report. The economic life of the major project facility, San Luis Dam and Reservoir, is at least 150 years.
(2) Estimated cost of construction, operation, and maintenance and replacement. As noted above, the total construction cost of the San Luis unit is estimated to be $290,430,000, exclusive of distribution and drainage system costs. The annual operation, maintenance, and replacement for this unit is estimated to be $1,915,000, exclusive of the cost of pumping. When the San Luis unit is added to the Central Valley project the power requirements of the unit, from existing and authorized Central Valley project plants, will result in a reassignment of costs of power facilities from commercial power to project pumping power. The portion of the cost of the generating facilities required for the San Luis unit is estimated at $54 million. The cost of pumping for the San Luis unit therefore must reflect the allocation of the capital cost of the generating facilities ($54 million) and the operation, maintenance, and replacement cost of furnishing power to the San Luis pumps. This annual cost is estimated to be $2,827,000 which when added to the $1,915,000, results in a total cost to operate and maintain the San Luis unit of $4,742,000.
The construction cost contained in the San Luis unit report ($229,143,000) was estimated at feasibility grade. In bringing the construction cost of the unit up to date, those facilities which remain unchanged in size and location were indexed to October 1957 prices. Those facilities that were changed in size to accommodate offpeak pumping operation, were estimated to reconnaissance standards. (These latter estimated are considered adequate when related to the situation with regard to integration of these facilities with the Feather River project.)
The annual operation, maintenance, and replacement estimates take into consideration such factors as anticipated organization and size of operating forces. The capital cost of the distribution and drainage system is estimated to be $192,650,000. The annual operation and maintenance replacement costs associated with the distribution systems are estimated to be 4,532,000. The estimate of distribution and drainage system for this large area was obtained by selecting a sample area, analyzing the cost in detail of a distribution system to serve that area, and then projecting that cost over the entire service area.
(3) Benefit-cost ratios.-Benefit-cost ratios calculated by using total tangible benefits and costs, including distribution and drainage costs with irrigation benefits calculated on 250/265 price levels, are as follows:
2. 41: 1 1.94: 1
(4) Indirect and intangible net benefits.-Information regarding indirect and intangible benefits will be found in chapters VII and VIII of the report.
(5) Capacity for current needs and future uses.-Provisions for future use amounting to about $15 million to permit future raising of San Luis Dam and enlarging certain reaches of San Luis Canal are included in the present estimate. Further arrangements would be dependent upon the terms of the authorizing legislation and the arrangements arrived at with the State of California pursuant to such legislation.
(6) Allocations of costs.-Inasmuch as the San Luis unit is, for practical purposes, a single-purpose irrigation development practically all project costs, under any method of allocation, would be assigned to irrigation.
(7) Interest in participation.-This subject is discussed in the planning report. Interested individuals and organizations have also presented testimony to the Congress in the two previous hearings.
(8) Repayment.-A rate of $7.50 an acre-foot has been assumed for irrigation water service to the San Luis unit. This will yield a gross revenue of $382,400,000 over a 50-year period. Deducting from this the operation, maintenance, and replacement costs, exclusive of reimbursement of the capital costs of the generating facilities allocated to this unit, results in a total payment of $216 million over a 50-year period, toward repayment of the total capital costs assigned to irrigation of $284,400,000. The difference, $68,400,000, plus costs of generating facilities allocated to this project, a total of $122,200,000 is the amount paid from surplus power revenues.
A rate of $15 per acre-foot for municipal and industrial water service has also been assumed. This rate, in addition to other municipal and industrial revenues of the Central Valley project, is sufficient to repay the municipal and industrial allocation of the total cost of the Central Valley project, including the San Luis unit.
(9) Effects on State and local governments.-Time did not permit a detailed evaluation of these effects. It is evident, however, that by strengthening the economy of an area embracing a half million acres, there will be a significant enhancement of local and State taxes. The areas to be retired from production by project features are on the other hand, minor in size and importance and the taxes foregone from such areas will be relatively insignificant.
(10) Schedules supporting proposed increases in authorization.-Not ap plicable.
Senator ANDERSON. Also, we have just received from Governor Knight a letter dated March 13, which presents his statement on S. 1887, to authorize Federal-State cooperation on the San Luis unit. He wants to put it in the hearings and says that Mr. Banks and Mr. Porter Towner, chief counsel of the water resources department, will testify on the bill.
I believe it might be helpful to read Governor Knight's statement. Senator KUCHEL. Before you do, I had forgotten I had a question for the Secretary. May I inquire?
Senator ANDERSON. Surely.
Senator KUCHEL. Mr. Secretary, I want to have the record perfectly clear on this point.