Now we all recognize that out there you have got a little different situation. You are going to have 37 Congressmen some of these days soon. But this is a pretty big change in the policy.

One of the reasons, Mr. O'Neill, that we have been able to get large appropriations of Federal reclamation funds interest free for all these years is when the project is paid out the Federal Government has a great asset.

You say the Federal Government is going to have a great asset except that any time we want to ask it away from them, we can get it back.

I admit the people that use this water and pay for it, and so forth, have a big interest in it. But the Grand Coulee Dam is a very valuable asset. When it is paid out, I don't believe they are going to give the State of Washington title to it.

I have said on a hundred occasions that that money will roll into the Federal Treasury for a thousand years.

Now I may have overstated the case a little bit. It may run for a hundred years but I have been holding out the hope that they were going to get back some money to repay it for this initial use of this interest-free money. And this just hits me right straight between the eyes, that you are going to say, "No; we are going to own it when we get through.”

The only person that I know of that advocates that is Senator Malone. He has been trying to get his hands on Boulder Dam. I don't blame him for his enterprise. But I don't believe they are about to give it up.

Is this vital to this project?

Mr. O'NEILL. Well I can't say as to that, Senator. I did not sit in on the negotiations when this bill was prepared. I do know that there were so many conditions in this bill that were put there in order to satisfy some of the objections.

Senator ANDERSON. Well, I want to say, Mr. O'Neill, that I know you to be an excellent businessman and a very shrewd and competent businessman. I believe if you put money in a project and knew that you weren't going to get any dividends off of it all the years that you would hope to get a little capital gain when you finally disposed of

it.

Mr. O'NEILL. That is right.

Senator ANDERSON. That is what the Federal Government wants to do here.

Mr. O'NEILL. I think that is right, Senator.

Senator ANDERSON. That is right. We want to be careful about it. I hope this isn't too vital to it, because this would start a squabble. You know we have put into a piece of legislation a while ago a provision of 160-acre limitation should not apply under the Small Projects Act.

I think I have defended the 160-acre limitation pretty vigorously. I am very fond of it. I am glad it is there.

But, I didn't believe it belonged in the Small Projects Act. Because this was a wholly different type of work. We had quite a battle from Senator Douglas on it. He has a bill pending. He writes me a little love note every once in a while, wanting to know when I am going to give him a hearing on his provision to take out that part of the Small Projects Act.

Now when you get to the floor with this and somebody says, "Does this change the general reclamation program?" I would have to say well, if you take the recommendation that Mr. Banks made here awhile ago and I recognize he made it in behalf of the people out there-it does to this degree: It says that when you get ready to build it, if you approve it, and the Congress doesn't appropriate money fast enough, the State of California can say, "To the devil with the Congress," and build it as fast as it wants it and not as fast as the Congress wants it.

Then when it gets it built and it is paid out after using this interest-free money for all these years-all you do is when you use the interest-free money is just about match what the interest would beand when you get it out by the use of interest-free money, then we own it.

I can imagine a debate is going to run on it for a long, long time if these things are in it.

I believe the people would be well advised. And you have to make up your own minds on this-not to just differentiate too greatly from what the general Federal reclamation clause is, and expect to get through. It is going to be ticklish to explain that this dam will be built if it is built to the 2,100,000 acre-feet, and I think that would be desirable. But if 1,100,000 acre-feet paid for by the State of California, when it is mixed with the other million acre-feet, that the 160acre limitation should apply to that.

I think it should. But you and I probably have found out from our tax lawyers already that if we give our wives some community property and she ever mixes it with ours, it is gone as far as tax relief is concerned. We can't give her any separate property. It is mixed the minute she gets money of her own that has no connection whatever with community property. Once it is mixed, it is gone.

Now this water, once it is mixed, still stays with its individual characteristics. That is a tough one. I can be explained because I think it is just and fair. And I think I would support it. I don't want to commit myself, but I think I would on the statement that Mr. Banks made. It sounded sensible to me.

But when you ask to have the title to this go back to the State, I think you are asking for a battle which you don't need to take on. Senator KUCHEL. I am inclined to think that that problem could be deferred to some date 40 or 50 years from now.

Senator ANDERSON. Which way? If you put it in the bill you are going to find me on the floor early and late keeping this bill from passing. Because I think this is a drastic change.

Senator KUCHEL. I think the whole problem, Mr. Chairman, can be deferred.

Senator ANDERSON. I think the day is going to come when the States are going to take a little different view of this question of what happens to these projects once they are paid out.

I think Senator Malone may have a point there; that when they are paid out, the people who pay them out are the people who are under them.

Senator Watkins pointed out that one of the big projects in his State was going to be paid out by the rates that these people would pay for the power. I can see how there is some justification for saying that under those circumstances they ought to have title to what they

have paid for. With the use of interest-free money, I think it is a pretty close question as to who ought to have title to it when it is. over. The payments back from this project, as we looked at it briefly this morning, may run about $14 million a year. The interest costs are going to run about $10 million a year.

So that we don't gain too much even by this $14 million being paid in.

If that $14 million, however, is paid in, and finally pays the project out, as it will, I am not really sure you have a right to claim you own it. At least I wouldn't lay that down as an absolute standard. Because as I say, as the Senator from California suggested, there will come a day that these projects all pay out, when the people are going to want to get them back into the hands of the folks around them.

But I think I would not be fair if I didn't warn you that some of us would be a little touchy on this subject right now.

You may proceed.

Mr. O'NEILL. I am sure you will agree that S. 1887 contemplates a true partnership between the State and Federal Governments. It is a fine example of what can be accomplished when men of good will sit down around a table and try to work out a solution to a complex problem. There can be no better testimony as to its merits than the fate that our two Senators from California joined in introducing it in the Senate; that our Governor and our State director of water resources approved it; and that the administration has recommended to you that it be enacted.

This is not to say that the bill is perfect or that amendments might not improve it. The California director of water resources, Mr. Banks, proposed certain amendments at the House hearings which we are willing to accept. We will accept any further amendments which are agreeable to the Secretary of the Interior and to the Congress as long as they do not delay Federal authorization and Federal construction of the facilities needed to provide our lands with a supplemental water supply.

Senator ANDERSON. May I ask you there. You may not want to comment on it now, but some time we are going to have to have an answer on the question of this section 4, which would add these other areas to the bill.

I don't know whether you have any thoughts on that or not, but these people feel that they want to get some amount of water because of the deficit they may have in their area.

or

Do you have a feeling that you want your bill about as it stands;

Mr. O'NEILL. We would be very glad, Senator, to take care of our neighbors across the mountains if it can be worked out on an engineering basis.

Senator ANDERSON. Do you think there is enough water to take care of it?

Mr. O'NEILL. I think we can take care of it. I understand their needs aren't going to be so great.

Senator ANDERSON. I don't recall how much it was. Mr. Congressman, do you know how much it would be?

Representative GUBSER. The maximum by the year 2000 would be 88,000 feet total amount of water which could be taken in the off-peak

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season because it is all percolated under the ground. And not during the irrigating season.

Senator ANDERSON. You don't know how much it would be in the beginning.

Mr. DAN SULLIVAN. What is the question?

Senator ANDERSON. If this were to be added to the project now, do you know how many acre-feet of water it would take?

Mr. DAN SULLIVAN. Approximately 150,000 acres, total. I am speaking of San Benito and Santa Cruz, also. This that you quoted is the State department of water resources estimates which includes only the underground-or only the users. And we add on to that a supplement

Senator ANDERSON. For San Benito County, 55,000?

Mr. DAN SULLIVAN. Yes.

Senator ANDERSON. So it will be about 143,000 acre-feet.

Mr. DAN SULLIVAN. Yes, on that order. Now incidentally you are talking about supply. The State department of water resources has its estimate. This is not anything extra than what is planned. Senator ANDERSON. So it is a matter of bookkeeping?

Mr. DAN SULLIVAN. That is all. It is taking it from a different place. There is no new water involved in that.

Senator ANDERSON. It does not jeopardize then, in other words, the project that Mr. O'Neill has been talking about?

Mr. DAN SULLIVAN. No.

Senator ANDERSON. As long as the project then could be satisfactory to you. I thought I might as well ask that question because it is going to come up later on.

You spoke of amendments.

Thank you very much.

What about this 160-acre limitation? You heard the testimony about the Southern Pacific Railroad. Is that embarrassing to you? I believe you own more than 160 acres in the area.

Mr. O'NEILL. Yes, I do. And I expect to comply with the land limitations.

Senator ANDERSON. You don't mind the 160 acres?

Mr. O'NEILL. I mind it.

Senator ANDERSON. Well, I will put it this way. Regardless of your personal feeling on the matter, if the bill passes with 160-acre limitation, you are going to accept the provisions of the bill.

Mr. O'NEILL. We expect to do that; yes.

Senator ANDERSON. Do you have any feeling on the position of the Southern Pacific? I merely ask this for my own guidance.

Mr. O'NEILL. Well, I think as long as you have invited them to testify here, I would rather have them make their own statement. Mr. LINEWEAVER. I don't know what we will get. We wired asking the company to present their testimony in person.

Senator ANDERSON. What I am getting to is this; the Department of Interior made it quite clear that they would go right ahead and pass the bill over the protest of the Southern Pacific Railroad. I may be mistaken but it sounded like that, at least to me.

You have said that as an individual you would be willing that the bill be passed. You aren't going to welcome it. You aren't going to go out and look for it. But you aren't going to be too distressed over the 160-acre limitation if it finally ends up in the bill.

If the committee decided to report out the bill, with the 160-acre limitation in it-I think perhaps that is the only way it could pass the bill on the floor of the Senate-would you feel that was the desirable thing to do, or do you think we should try to get the Southern Pacific Railroad in here and try to draft an amendment that might suit them even though it doesn't suit the Secretary of the Interior? Or would you not wish to comment on it?

Mr. O'NEILL. I would like to see some negotiations with Southern Pacific to, if possible, relieve the acreage limitation. But I have a feeling that they will not stand in the way of getting water for that area regardless of the limitation.

Senator ANDERSON. Just in my own mind I can't believe that the Southern Pacific would go ahead and ask to have the interest added into their burden. I think it puts their hand at a great disadvantage. Mr. O'NEILL. Well, they have discussed that point. But nobody has been able to give them accurate figures on that.

Senator ANDERSON. I don't think they are too hard to get at. I figured it out in my head and got $56 per acre.

The Bureau of Reclamation figured it out on paper and got $56.50. So it must be somewhere in that general neighborhood.

Mr. O'NEILL. Well, those figures were flying around pretty fast this morning.

Senator ANDERSON. That is the best way to do when you are figuring out of your head. You might get caught if you had it on paper. That is what I was worried about.

Mr. O'NEILL. The cost is added to the cost of our water, and the water is to be delivered to us at $7.50 an acre-foot.

Now, that repays the project cost plus the pumping, and in addition to that then we will have to assess-or levy an acreage assessment to repay our distribution system, which we think will cost between $7 and $10 an acre, a year.

Senator ANDERSON. You have got me confused now. $7.50 an acre-foot. You are going to have an average of 212 acre-feet.

Mr. O'NEILL. No, I don't believe we will use that much. Only on summer crops. We can't, because we have a half a million acres to supply with a million acre storage.

Senator ANDERSON. Well, at least you think we should try to find the position of Southern Pacific Railroad.

Mr. O'NEILL. I would like very much, if that could be done.
Senator ANDERSON. Thank you. Go ahead.

Mr. O'NEILL. Although able to recite substantial support-both Federal and State I cannot report complete understanding with certain interests in the southern portion of our State. We have met with them time after time, especially over the past few months, and almost up to the 11th hour before the start of this hearing, in an effort to arrive at an understanding. You will recall that we first sought a straight Federal authorization of San Luis. After various intermediate approaches, we support the Knowland-Kuchel bill which will permit the development of our project and materially assist the State of California in carrying out the objectives of its water plan.

We have now become convinced that nothing short of a complete settlement of all rights to all of California's unappropriated waters, either by a constitutional amendment or otherwise, plus a determina