The Federal Power Commission reiterates its previously expressed opinion that the Echo Park and Glen Canyon units are of such importance as to warrant their consideration for inclusion in any early programs for the future development of the Colorado River Basin. Attachment No. 1 to the October 1953 Supplemental Report on Colorado River Storage Project and Participating Projects, transmitted with our December 10 letter, is a financial operation study for examination of investment repayment from power revenues, dated October 9, 1953. Further studies by the Bureau of Reclamation of the proposed financial operations of the project disclosed certain errors involving duplication of power transmission losses. A copy of the financial operation study, revised as of December 24, 1953, correcting these errors and reflecting other improvements in its presentation, is submitted herewith as a substitute for the study previously submitted as attachment No. 1. The principal change in the study involves the length of the power repayment period which has been reduced from 56 years to 44 years. Substitution of the revised financial operation study also requires a modification of paragraph 27 of the October 1953 supplemental report with respect to project repayment from power revenues. Copies of revised pages 9 and 10, covering paragraph 27, are also attached for substitution in the supplemental report transmitted to you with the December 10 letter. Sincerely yours, DOUGLAS MCKAY, Secretary of the Interior. LETTER OF'JANUARY 16, 1954, FROM THE STATE OF ARIZONA H. F. MCPHAIL, OFFICE OF THE GOVERNOR, Phoenix, Ariz., January 16, 1954. Acting Commissioner, Bureau of Reclamation, Department of Interior, Washington, D. C. DEAR MR. MCPHAIL: This letter is in response to your request of December 15 that Arizona make such additional comments as it may wish on the supplemental form of the report of the Secretary of the Interior on the Colorado River storage project and participating projects, as approved December 10, 1953, by Secretary of the Interior, Douglas McKay. We respectfully call your attention to the fact that our letter of comment of June 19, 1951, addressed to Mr. Wesley R. Nelson, Assistant Commissioner of the Bureau of Reclamation, includes the following paragraph: In view of the fact that Arizona is one of the upper Colorado River Basin States and that the Glen Canyon Dam site and powerplant are located within and constitute a natural resource of the State of Arizona together with consideration of the estimated cost of power generation at Glen Canyon and the possible power market needs of Arizona, it is recommended tnat the Secretary of the Interior be requested to include the State of Arizona in the project power market area as fringe area D (Arizona) and that energy be made available to that fringe area on the same basis as proposed for the other three fringe areas. In this connection, it would likewise seem equitable that fringe area C (New Mexico) be increased to include the western edge of that State and that the southwestern portion of Utah also be included in the project power market area. The above quoted paragraph refers to the fact that while item 10 of the supplemental report implies that Arizona will not be excluded from obtaining power from the Glen Canyon project and item 9 says that an effort will be made on the part of the "States of the upper division" to retain a permanent power user's priority over users elsewhere, attention is respectfully called to these facts: The northeastern corner of Arizona is in the upper basin but Arizona is not specifically one of the States of the upper division, and there therefore is no clear declaration that Arizona is included in the States having power priority although the Glen Canyon Dam and powerplant would be located entirely in Arizona. Furthermore, Arizona has not been included in previous power-market studies and there exists a stated policy of the upper division States to establish differential treatment for the several areas. We are disappointed that the supplemental report does not recommend authorization of all of the facilities included in the original report. The failure to approve these additional facilities is a matter of grave concern to the upper basin, and we hope that when final action is taken all of these facilities will be approved. Other than the foregoing, we have only this comment: We have heretofore expressed ourselves in favor of the storage project and look forward to its early construction as another logical step in the utilization of Colorado River water, and further believe that equalization of yearly river flows at Lee Ferry will be of maximum benefit to both the upper and lower basins. Sincerely, HOWARD PYLE, Governor. LETTER OF FEBRUARY 15, 1954, FROM THE STATE OF CALIFORNIA Hon. DOUGLAS MCKAY, STATE OF CALIFORNIA, DEPARTMENT OF PUBLIC WORKS, Secretary of the Interior, Department of the Interior, Washington, D. C. DEAR SIR: Your proposed supplemental report on the Colorado River storage project and participating projects, transmitted to the President on December 10, 1953, was received in this office on December 28, 1953, with letter of transmittal from the Acting Commissioner of Reclamation to Gov. Goodwin J. Knight, and forwarded to the division of water resources of this department for study and review. On February 2, 1954, a request was sent to you for additional detailed sustantiating information in order to permit a thorough analysis and appraisal of the proposed developments. Since it appears that the proposed developments are now under active consideration by the executive departments and the Congress, looking toward an early decision, it is understood that comments of all interested States are desired without delay. Accordingly, a report has been prepared by the division of water resources in collaboration with the Colorado River Board of California, setting forth the general views of the State of California; subject, however, to such modifications as are deemed necessary when and if detailed substantiating information has been received and the proposals have been given further consideration. This report has been received and is transmitted herewith. I concur in the comments submitted and request that they be considered as expressing the views of the State of California on your proposed report. It is further respectfully requested that the report, dated February 15, 1954, on this subject, be transmitted to the President of the United States and to the Congress along with the other material that may be so transmitted. Very truly yours, FRANK B. Durkee, STATEMENT OF THE STATE OF CALIFORNIA ON PROPOSED SUPPLEMENTAL REPORT OF THE SECRETARY OF THE INTERIOR ON COLORADO RIVER STORAGE PROJECT AND PARTICIPATING PROJECTS, DATED DECEMBER 10, 1953 INTRODUCTION Reference is made to letter of December 15, 1953, by Acting Commissioner of Reclamation H. F. McPhail to Governor Goodwin J. Knight of California, transmitting copies of a supplemental report of the Secretary of the Interior, dated December 10, 1953, on the Colorado River storage project and participating projects, and inviting comments. The project was originally reported upon by the Bureau of Reclamation in Project Planning Report No. 4-8a.81-1 dated December 1950. That report is incorporated, with modifications, in the Secretary's supplemental report. The 1950 report presented a plan of development of the upper Colorado River Basin comprising 10 major dams and reservoirs with hydroelectric plants on the Colorado River and principal tributaries above Lee Ferry, and an indefinite number of water using projects designated "participating projects." That report recommended approval of the overall plan and initial authorization and construction of 5 units of the storage project and 10 new participating projects, and inclusion as participating projects of 2 irrigation developments already authorized and under construction. The supplemental report of December 1953 recommends approval of the overall plan, initial authorization and construction of the Glen Canyon and Echo Park units of the storage project, authorization for immediate construction of the same 10 new participating projects, inclusion of the same 2 previously authorized projects as participating projects and authorization of the Shiprock division of the Navaho project, including Navaho Dam and Reservoir, with actual construction of the Navaho project to be deferred until a report thereon has been approved by the Congress. Cost estimates for the storage units and the participating projects in the Secretary's supplemental report are revised upward as compared to the estimates in the 1950 report. There also appears to be some revision in the assumptions as to power output and revenues and allocation of costs of the storage project, although no explanation is given. A proposed repayment program is recommended, which would involve postponement of repayment of the irrigation costs beyond the ability of the water users to repay until after the power investment in the storage units is repaid with interest. It is estimated in the financial operation study attached to the report that it would take 56 years off the power investment with interest. to pay This proposal differs from the repayment program proposed in the 1950 report, under which it was planned to divert and use the interest charged on power investment to repay the portion of the irrigation costs beyond the ability of the water users to repay. PREVIOUS VIEWS AND RECOMMENDATIONS Under date of June 14, 1951, the State of California submitted to former Secretary of the Interior Oscar L. Chapman its views and recommendations on the original project planning report, dated December 1950. From those views and recommendations the following is quoted: Therefore, the State of California favors congressional authorization of the specific projects set forth in the proposed report of the Secretary of the Interior or as may be modified, and their construction with Federal funds consistent with national welfare if (a) such projects qualify under criteria, policies and procedures of the Congress; and (b) the diversion and utilization of the waters of the Colorado River system by and through these projects will not impair the rights of the State of California or any of its agencies to the waters of that system as defined and set forth in the Colorado River compact and related laws and documents. It was further stated that the phrase "criteria, policies and procedures of the Congress" was intended to refer to "uniform criteria, policies and procedures to be established by the Congress." COMMENTS ON SUPPLEMENTAL REPORT California agencies have rights established by prior appropriation and by contract with the Secretary of the Interior under the authority of the Boulder Canyon Project Act, providing for the use in California of 5,362,000 acre-feet annually of water from the Colorado River system. It is the duty of the State to protect and preserve those rights of its citizens. California is, therefore, rightfully concerned in proposals for the further development of the water resources of the Colorado River Basin wherever such developments may be. For this reason it is necessary for the State to analyze thoroughly any proposals for further development and take whatever steps appear required to insure that such developments would not impair the rights of California and its agencies in and to the waters of the Colorado River system. The Colorado River storage project and participating projects as proposed in the report under review would obviously have substantial effect upon the available water supply and the operation of facilities in the lower basin and California. Furthermore, the plan of financial operation of the project as proposed by the Department of the Interior departs materially from existing reclamation law and is not in accordance with sound standards and policies. The comments herein are directed, first, to the effects of the proposed project on California's rights to Colorado River water and, secondly, to basic questions of criteria, policies, and procedures involved in the proposals. These have been prepared by the Division 45515-54- -2 of Water Resources in collaboration with the Colorado River Board of California. Because of the lack of supporting detail in the supplemental report under review, the comments are necessarily based largely on the substantiating material presented in the original 1950 report and the accompanying special reports on individual participating projects. Effects on California's rights to Colorado River water The engineering studies presented in the original 1950 report and the related special reports on participating projects and the supplemental report of the Secretary of the Interior are vague and uncertain with respect to the effects of proposed upper basin developments on the water supply available to the lower basin, the rights of California thereto and the operation of facilities in the lower basin. The plans for construction and operation of the proposed developments, insofar as revealed in these reports, give no proper or adequate consideration to the interests of the lower basin States. Furthermore, the studies involve or imply what California considers to be erroneous interpretations of the Colorado River compact. The erroneous interpretations of the compact include: (1) That article III (a) apportions to the upper basin a water use of 7,500,000 acre-feet a year in terms of depletion of the virgin flow at Lee Ferry instead of a beneficial consumptive use of 7,500,000 acre-feet a year at places of use; (2) that the upper basin would be entitled to the consumptive use of an average annual amount of 7,500,000 acre-feet instead of a maximum of 7,500,000 acre-feet in any 1 year. Because of these erroneous interpretations, the report is invalid as regards the showing of how soon and how much holdover storage will be needed and as regards the ultimate quantity and pattern of residual flow into the lower basin at Lee Ferry. There are at least 10 serious questions of interpretation of the compact which would be involved in and affect the proposed storage project and related reclamation developments. (See statement of Northcutt Ely on behalf of Colorado River Board of California at hearings on H. R. 4449 before Subcommittee on Irrigation and Reclamation of Committee on Interior and Insular Affairs of House of Representatives, January 26, 1954.) All of these questions are at issue in the pending case of Arizona v. California, et al.; United States Supreme Court, October term, 1953, No. 10 original. California's basic position is that this State is conforming to the Colorado River compact and must insist that the Bureau of Reclamation and the States of the upper basin do so in the planning and administration of the Colorado River storage project and participating projects. As to annual variation in consumptive-use requirements, there appears to be no justification for the assumption in the report that under full development, with a regulated water supply and with practically all the irrigated land receiving a full supply each year, the water requirement and use would be highest in wet years and lowest in dry years. This assumption cannot be reconciled with the results of the latest scientific investigations of the subject, and therefore is a probable source of further error in the findings in the reports on the storage project and participating projects. It is evident that the building, filling, and operation of the proposed main-stream reservoirs, with an ultimate total capacity of about 48 |