have harmful effects on the quality of water remaining for use in the lower basin. 5. The plans for construction and operation of the upper basin storage project and related reclamation projects, insofar as revealed in the original 1950 report and the Secretary's supplemental report under review, give no proper or adequate consideration to the effect of the proposals on the lower-basin developments, and evidence little if any regard to the interests of the lower basin. Moreover, the engineering studies are vague and uncertain with respect to the effect of proposed upper-basin developments on the lower basin and additional studies are essential with respect thereto. The State of California desires full information as to what the effect of the proposed plan will be on existing and future developments below Lee Ferry and particularly on the quality and quantity of water available for use in California. 6. There are many problems that should and must be carefully studied and solved before authorizing or proceeding with any overall plan of development in the upper basin. În the meantime, some additional development could proceed if found justified for authorization by the Congress. However, it is the position of the State of California that the interests of the lower basin, and of California in particular, must be fully protected with proper safeguards in connection with any legislation for authorizing of additional development in the upper basin, to the end that the construction and operation of the proposed projects shall fully conform with the Colorado River compact and related laws and documents. 7. The plan of financial operation of the project recommended by the Secretary departs materially from existing reclamation law and is not in accord with sound standards and policies. The proposed postponement for about 50 years of the repayment of a large part of the cost would result in a substantial increase in the national debt, constituting a subsidy to irrigation on the part of the Nation's taxpayers far beyond the subsidy contemplated under existing law. The magnitude of such subsidy should be clearly stated and explained in the report. 8. None of the participating reclamation projects recommended for initial authorization would be in themselves financially feasible. The water users could repay only small proportions of the reimbursable construction costs. The balance of the cost would have to be subsidized the capital investment by power revenue and the interest charges in even greater amount for an indefinite period by the Federal Treasury through taxes. 9. No clear and adequate justification is shown in support of the allocation of a large part of the storage project cost to irrigation on an interest-free basis. Only minor use could be made of the regulatory reservoirs of the storage project directly for water-consuming projects. The report indicates that the proposed allocation to irrigation on the storage project is based upon the need of holdover capacity to permit the upper basin to develop and use the water without violating the compact. However, it appears from the report that the additional consumptive use estimated for the reclamation projects proposed for initial authorization could be made without holdover storage; and that at the anticipated rate of development, Glen Canyon Reservoir alone would suffice for this purpose for 40 to 50 years hence. Therefore, the justification for immediate construction of initial units of the storage project would be based upon other considerations and purposes to be served. 10. The early construction of Glen Canyon Reservoir would be justified from the standpoint of other immediate advantages. Based upon the cost analyses in the report, the Glen Canyon Reservoir and power development could be constructed and operated on a sound financial basis and therefore merits authorization at this time. 11. Glen Canyon power could be readily disposed of in the lower basin where there is a great need for additional power. The question of policy regarding its disposal merits the special consideration of the Executive and the Congress. 12. The cost of power for most of the proposed major storage and power units, other than Glen Canyon, would be greater than the proposed selling price for power, and interunit subsidies would be required principally from Glen Canyon power revenues to support the other units. It appears questionable, therefore, whether certain of the storage units would be justified or needed, from the standpoint of either the holdover storage requirements or the value of the power produced. 13. The proposal recommended by the Secretary for the Colorado River storage project and participating projects raises basic questions as to the proper criteria to determine the financial feasibility and economic justification of new reclamation developments, and particularly the criteria, policies, and procedures for repayment, and the amount of Federal subsidy that is justified. These basic questions are a matter of national policy which must and should be decided by the Executive and the Congress. 14. The State of California in analyzing its own projects and in reviewing proposed Federal reclamation projects in California has consistently stood for sound financial and economic standards upon which proposed developments should be evaluated and qualified for approval and authorization. It is the view of the State of California that all water-development projects, including the proposed projects under review herein, should qualify under sound criteria of feasibility and repayment, as a matter of national policy in the best public interest. Submitted by: Approval recommended: A. D. EDMONSTON, RAYMOND MATTHEW, Chief Engineer, Colorado River Board of California. Approved: SACRAMENTO, CALIF., February 15, 1954. FRED W. SIMPSON, Chairman, Colorado River Board of California. LETTER OF FEBRUARY 4, 1954, FROM THE DEPARTMENT OF THE ARMY DEPARTMENT OF THE ARMY, OFFICE OF THE CHIEF OF ENGINEERS, Hon. WILBUR A. DEXHEIMER, Commissioner of Reclamation, Washington, D. C. DEAR MR. DEXHEIMER: Reference is made to the Acting Commissioner's letters of December 15, 1953, to the Secretary of the Army and to the Chief of Engineers, enclosing the revised report of the Secretary of the Interior on the Colorado River storage project and participating projects. The letter referred to Department of the Army comments on the original report which had been furnished the Department of the Interior by letter of July 3, 1951. The revised report was furnished for information and for any further comments deemed desirable. The supplemental report accompanying the revised report states that the Colorado River account and the interest component of power revenues will not be used to provide financial assistance to the participating irrigation projects. This substantially meets one of the major objections given in our previous comments in that interest on the power investment will be returned to the Treasury until the power investment has been liquidated. It is noted that only the 2 most favorable storage projects (Glen Canyon and Echo Park) are recommended for authorization instead of the 5 projects previously recommended. Although no detailed information is given on annual charges and annual benefits, it appears that the Glen Canyon and Echo Park storage projects are justified. It is understood that the Department of the Interior has made an economic reevaluation of the participating projects which is the basis of the statement in the supplemental report that each of the participating projects has favorable economic justification. As this Department has not had the opportunity of reviewing these revised computations, I am not in a position to comment in this regard. The opportunity to review the report is appreciated. Sincerely yours, S. D. STURGIS, Jr., Major General, Chief of Engineers. LETTER OF JANUARY 21, 1954, FROM THE DEPARTMENT OF Mr. H. F. MCPHAIL, COMMERCE DEPARTMENT OF COMMERCE, OFFICE OF TECHNICAL SERVICES, Acting Commissioner, Bureau of Reclamation, Department of the Interior, Washington, D. C. DEAR MR. MCPHAIL: Thank you for your letter of December 15, 1953, attaching two copies of supplemental report on Colorado River storage project and participating projects, upper Colorado River Basin, October 1953. We are glad to have the report for reference purposes and have no further comments. Sincerely yours, H. B. McCoy, Deputy Administrator. LETTER OF FEBRUARY 26, 1954, FROM THE FEDERAL POWER COMMISSION FEDERAL POWER COMMISSION, Washington, D. C., February 26, 1954. Subject: Colorado River storage project and participating projects. Hon. DOUGLAS MCKAY, Secretary of the Interior, Washington, D. C. DEAR MR. SECRETARY: The comments herein relative to your revised report on the Colorado River storage project and participating projects are transmitted in response to Acting Commissioner McPhail's letter of December 15, 1953. The revised report consists of the supplemental report of the Commissioner of Reclamation on the Colorado River storage project and participating projects, dated October 1953, and related material. The Commissioner's report, approved and adopted by you on December 10, 1953, supersedes previous reports by your Department on this project. The revised report presents a plan for the ultimate development of the water resources of the upper Colorado River Basin consisting of nine dam and reservoir projects, with power-generating facilities at each project and with associated transmission facilities, and a group of participating irrigation projects. Recommendation is made for the approval of this plan and for authorization at this time of only a partial or initial plan of development. The initial plan of development would consist of the Echo Park and Glen Canyon Dam and Reservoir projects, with power-generating facilities at each unit and with transmission facilities to interconnect them and other Federal plants and to market the power produced. The initial plan also includes 13 participating projects. The combined total storage capacity of the Echo Park and Glen Canyon Reservoirs would be 32,460,000 acre-feet, of which 25,460,000 acre-feet would be active storage capacity. The installed generating capacity at Echo Park would be 200,000 kilowatts and at Glen Canyon 800,000 kilowatts, making a total of 1 million kilowatts. The average annual salable energy output during 50 years of full operation is estimated in the report to be 1,017 million kilowatt-hours for Echo Park and 3,813 million kilowatt-hours for Glen Canyon. The capital costs of the initial plan of development are estimated in the report to be $1,134,643,000 based on January 1953 prices. Of this amount $597,700,000 would be chargeable to the Echo Park and Glen Canyon projects and $536,943,000 to the 13 participating projects. In regard to the total cost of the Echo Park and Glen Canyon projects, $499,400,000 would be allocated to power and $98,300,000 to irrigation and other water consuming uses. The ratio of annual power benefits to annual power costs is estimated in the report to be 1.64 to 1.0. By letter dated May 21, 1951, the Commission furnished you with its views on your Department's previous reports on the Colorado storage project and participating projects. The letter expressed the opinion that the Echo Park and Glen Canyon projects are of such importance as to warrant their consideration for inclusion in any early programs for the future development of the Colorado River Basin. It pointed out that Echo Park, possibly with an installation somewhat higher than the 200,000 kilowatts recommended by your Department, was favorably located to assist in serving powerloads of the northerly part of the upper Colorado River Basin, and that the Glen Canyon project was favorably located for assisting in serving powerloads to the south. The Commission staff has reviewed your revised report and advises that it is still of the opinion that northern Utah constitutes the logical market area for the power from the Echo Park project, and that the lower Colorado River Basin constitutes the logical market area for the power from the Glen Canyon project. Studies by the Commission staff indicate that the power from the Echo Park project could be utilized in northern Utah in about 5 years, and that the power from the Glen Canyon project could be utilized in the lower basin in about 10 years from the time that the first unit would become available. If it is assumed that the upper Colorado River Basin constitutes the market for the power from both projects, the staff studies indicate that it would require about 20 years to utilize the power from the projects. In connection with the above, it is noted that the revised report recommends authorization of transmission facilities to interconnect the Glen Canyon and Echo Park projects. The staff advises that based upon its studies and having consideration for the situation outlined in the preceding paragraph, and having regard for other related factors, it sees no necessity for interconnection of these two projects as a part of the initial plan of development. According to information received by our staff from your Salt Lake City office, transmission costs included in your Department's estimate for the Echo Park and Glen Canyon projects amount to $160,400,000, of which $133,600,000 were allocated to Glen Canyon. The staff estimates the capital cost of the transmission facilities needed to market the power from the Echo Park project in northern Utah to be $9,823,000, and to market the power from the Glen Canyon project in the lower basin to be $67,205,000. The total estimated capital cost of these transmission lines is $77,028,000, or $83,372,000 less than your Department's transmission estimate. Á substantial part of this difference in estimate of cost is attributable to the elimination at this time of a transmission line connecting the two projects. The staff's estimates of value of power are based on both Federal and private financing of alternative steam-electric plants, and on Federal financing of facilities required to transmit the output of the hydroelectric plants to load centers. The cost of steam-electric power was based on plants operating at an annual plant factor of 60 percent. It is understood that the at-market value of power of 7.3 mills per kilowatt-hour shown in your report was based on the cost of power from alternative steam-electric plants federally financed. The staff's corresponding estimate of the at-market value of Glen Canyon power is 4.7 mills per kilowatt-hour, and of Echo Park is 5.6 mills per kilowatt-hour. |