of a program for the land. We are, moreover, anxious to undertake this planning effort at the time that your agencies are planning a program for the lands under their jurisdiction in order that full coordination may be achieved. As mentioned above, your report is designed to provide a legislative base for further investigations by agencies of the Department of the Interior. Among other things the report proposes that the United States Geological Survey investigate measures to control erosion at its source, and that the Bureau of Land Management undertake largescale studies in erosion control and sediment abatement. The Department of Agriculture has for many years conducted research in the field of erosion and erosion control. We question the wisdom and necessity of starting a similar program in the Department of the Interior. We would suggest, as an alternative, that your agencies bring to our attention needs for additional investigations in this field. While we have considerable research underway in the Colorado Basin, we have realized for a number of years that additional investigations are needed. Recently, moreover, the Pacific Southwest Interagency Technical Committee recommended intensification of our research in this region. Every effort to expand our going program has been pledged. As a matter of fact, our preliminary plans for the fiscal year 1953 call for a substantial increase in our research work in the Colorado Basin. Apparently it is planned to provide enough extra storage capacity to store the sediment inflow to the reservoirs for a period of 200 years. A large part of the investment in this extra capacity will provide no return for a long period of time. It seems to us that a study should be undertaken to determine if it would not be better to invest a part of this extra expenditure in a program for the land that would begin to reduce sediment damages, as well as to produce on-site benefits in a relatively short period of time. We note that the proposal to expand the irrigated acreage in the basin is based upon the assumption that with vast areas of fine range land available for summer range, livestock production is limited by the production of hay for winter feeding. In our opinion the grazing capacity of the range is a more important limiting factor than is the availability of hay for winter feeding. Hence, unless and until steps are taken to improve large areas of depleted and deteriorating summer and spring-fall range, and, in some localities, to develop irrigated pastures, expanded production of winter feed might increase the pressure upon the range and lead to its further deterioration. This again emphasizes the necessity for reinforcing the engineering program with a complementary program for the land at the earliest possible moment. The present report sets forth but an initial step in the development of the water resources of the basin. It seems to us that a long-range plan should be developed as soon as possible. In the course of formulating such a plan it will be highly important to consider all possible future needs for water. In particular, studies should be made to estimate how much water should be reserved for (a) the irrigation of range at higher elevations, and (b) industrial purposes-especially for the processing of oil shales and wood pulp. În some instances it can be shown that a given amount of water used to create scattered tracts of high-capacity range in mountain valleys will produce a net benefit exceeding the net downstream. In some areas the use of water for industrial purposes may also be found to produce greater benefits than other uses. With the Nation's security becoming increasingly dependent upon oil, it is especially important that all necessary provisions be made for future development of the vast oil shale deposits of the basin. At any rate, these and other alternative uses of water should certainly be given full and equitable consideration in arriving at a long-range plan. This plan should be aimed at that combination of projects and uses that will yield a maximum benefit to the Nation. In volume I of its recent report the President's Water Resources Policy Commission advanced, as an essential principle of sound planning, the following: Planning should be approached with a multiple-purpose concept and with the aim of maximum net benefits based on full consideration of alternative plans for meeting existing and anticipated needs. We thoroughly agree with this principle and feel that it should control the formulation of the suggested long-range plan for the Colorado Basin. 2. Further economic studies should be made The annual benefits attributed to the storage project include the expected revenues from the sale of power ($34,903,000) plus an estimate of indirect benefits ($23,725,000). This latter figure is arrived at by methods that have been questioned, upon various occasions in the past, by the economists of this Department, and that have not been accepted as sound by economists generally. It is also necessary to point out that almost one-fourth of the average annual cost of the storage project ($9,671,000 out of a total of $41,994,700) has been deducted on account of dependent (irrigation) projects. Since the irrigation benefits that justify this part of the proposed expenditure are not presented, the economic evaluation of the storage project is incomplete. The report recommends the authorization of (a) the initial stage of the Colorado River storage project and (b) 11 participating irrigation projects. However, economic evaluations of these participating projects are not presented. Presumably the economic justification. for the participating projects appear in the separate reports mentioned in the report submitted for review. This leads us to suggest that authorization of the irrigation projects be provided for in these individual reports rather than in the report on the storage project. Completion of the storage project will require the construction of 10 major dams. These 10 units are combined for purpose of economic evaluation. It is a generally accepted principle that such a system should be formulated and evaluated increment by increment with a view to maximizing net benefits. 3. The desirability of establishing the upper Colorado River account is questionable The report proposes the establishment of an upper Colorado River account. An account of the type proposed would establish a precedent in basin planning under which the decision to undertake an irrigation project would hinge upon the power potentials of the basin; a factor which should have no bearing upon that decision. As we have stated in commenting upon earlier proposals, we feel that it should be possible to proceed with economically sound irrigation projects whether or not Federal power projects can be, or are, constructed in the particular basin within which the irrigation projects would be located. Conversely, we believe that the presence, or absence, of irrigation projects should have no bearing upon the rates at which public power is sold. It is essential that full and equitable consideration be given to all means of deriving benefit from the resources of our river basins. The establishment of accounts of the type proposed would make it impossible to adhere fully to this principle. And this would prevent attainment of the desired goal of maximum net benefits. As we have pointed out before, such an account has no real bearing upon the justification for, or the desirability of, the projects covered by it; nor upon the amount that must be withdrawn from the Treasury to construct these projects. If a basin account is considered desirable simply as a matter of information, we would suggest that it be designed to provide a record of all costs and all benefits. An account which merely compares one kind of benefit-power revenues-with the required public contribution toward irrigation projects is, to say the least, incomplete. At any rate, the account proposed in the present report appears to be incorrectly set up. In the economic evaluation of the storage project, the interest upon the unpaid balance of the investment is correctly counted as a cost. In the repayment schedule on page 94, however, it is noted that only the construction cost of $1,139,100,000 is subtracted from the net project revenues in determining the amount to be credited to the upper Colorado River account. Yet in column 14 of this table (headed "Income deductions -Repayment of investment") the cost of this interest is shown to total $693,281,094. This exceeds the accumulated net credits of $674,906,800 appearing in column 26. In other words, during the first 70 years no net credits would accumulate. This, it seems to us, casts further doubt upon the meaning and utility of an account such as the one proposed. COMMENTS, DEPARTMENT OF COMMERCE DEPARTMENT OF COMMERCE, BUREAU OF FOREIGN AND DOMESTIC COMMERCE, Memorandum. To: Mr. Wesley R. Nelson, Assistant Commissioner, Bureau of Reclamation, United States Department of Interior. From: H. B. McCoy, Department of Commerce member, Federal Interagency River Basin Committee. Subject: Colorado River storage project and participating projects. After reviewing the subject report two agencies of the Department of Commerce commented as follows: Bureau of Public Roads: * * * our review of the Bureau of Reclamation report indicates that the Bureau of Reclamation estimates are generally sufficient to take care of necessary replacement of roads to be inundated by the dams (including those for which authorizations are not now sought). However, no data are presented regarding supplemental projects or participating irrigation projects which may not only require relocation of existing roads but may require many additional roads to serve the newly developed agricultural areas. In regard to the Glen Canyon Reservoir, there is some doubt whether provision has been made for the increment in cost of the Blanding-Hanksville Federal-aid secondary route which will be constructed at some time in the future. Coast and Geodetic Survey: There is one adverse technical feature of the report itself that we would like to point out. The various maps shown throughout the report do not have any projection lines * * *. Without projections, it is difficult to transfer information shown on one map to another map with a high degree of accuracy; and without connections of surveys to a basic network of geodetic control, it is not practicable to show the correct projection lines on a map, nor will the various surveys for a basin development fit together properly. H. B. McCoy. COMMENTS, FEDERAL POWER COMMISSION FEDERAL POWER COMMISSION, Washington 25, D. C., May 21, 1951. Subject: Colorado River storage project and participating projects. Mr. MICHAEL W. STRAUS, Commissioner, Bureau of Reclamation, Department of the Interior, Washington 25, D. C. DEAR MR. STRAUS: The comments herein with respect to the proposed report of the Department of the Interior on the Colorado River storage project and participating projects are transmitted in response to a letter dated January 30, 1951, from Mr. Nelson, Assistant Commissioner. Transmitted with Mr. Nelson's letter were copies of your report dated December 22, 1950, approved by the Secretary of the Interior on January 26, 1951, and the regional director's report of December 15, 1950. The transmittal of these comments by the Commission is in accordance with the established procedures of the Federal Interagency River Basin Committee. The subject report proposes a plan for the development of the water resources of the upper Colorado River Basin, consisting of the Colorado River storage project and participating irrigation projects which are considered to be made possible by the storage development. The storage project, with which the report is primarily concerned, would include 10 dam and reservoir units, namely Echo Park, Flaming Gorge, Glen Canyon, Navaho, Whitewater, Cross Mountain, Crystal, Curecanti, Gray Canyon, and Split Mountain, with power-generating facilities at each unit and with associated transmission facilities. The first five named of these units, with appurtenant power and transmission facilities, are recommended for early authorization. An initial group of 12 participating irrigation projects is also recommended for authorization. The primary purpose of the Colorado River storage project is to provide the storage and regulation necessary for the utilization of waters allocated to the upper basin States under the Colorado River compact, and to meet the requirements for flows downstream at Lees Ferry and of the treaty with Mexico. The aggregate active storage capacity in the 10 proposed reservoirs would amount initially to 37,530,000 acre-feet which, with encroachment by sedimentation, would be expected to be reduced to about 25,900,000 acre-feet in 200 years. The reduced active storage capacity is considered in the report to be adequate to meet the abovementioned requirements up to that time. The aggregate ultimate power installation at the 10 developments is 1,622,000 kilowatts. Under initial conditions, with full installation, the annual generation of firm energy would amount to about 9 billion kilowatt-hours. Under ultimate conditions of flow depletion and losses by evaporation, the generation of firm energy would be reduced to about 6 billion kilowatt-hours annually. The estimated cost of the Colorado River storage project on the basis of December 1949 prices is $1,139,100,000. Of this amount, $806,150,000 is proposed to be allocated to power and the balance of $332,950,000 to irrigation. No part of the cost of the participating irrigation projects is included in these estimates. However, the proposed initial group of participating irrigation projects is estimated to cost an additional $293,188,800. For purposes of benefit-cost analysis, the report estimates the equivalent annual cost of the storage project at $41,994,700, using a 2.5percent interest rate and a 100-year amortization period. Estimated benefits to irrigation resulting from operation of the storage project are not given in the report. However, an annual cost of $9,671,000, derived from a study of the alternative justifiable cost of providing compact storage and considered chargeable to dependent irrigation projects, was deducted from the total estimated annual cost. This leaves an annual power cost of $32,323,700. The annual primary and secondary power benefits are estimated at $59,084,000, giving a benefit-cost ratio of 1.8 to 1. The report also gives the results of a detailed financial analysis for the storage project covering 70 years, including a 20-year development period and a 50-year operating period following the installation of the last generating unit. Operating revenues would be derived from the sale of firm energy, averaging 6,346 million kilowatt-hours annually after allowance of 7 percent for transmission losses, at 5.5 mills per kilowatt-hour, and secondary energy in the amount of 152 million kilowatt-hours annually at 3 mills per kilowatt-hour. The table on page 94 of the substantiating materials shows that over the period of analysis such power revenues should be sufficient to cover all operating costs of the storage project and return its entire investment cost of $1,139,100,000 with interest at 3 percent on the investment of $806,150,000 allocated to power. As stated above, the total annual power benefits of the storage project are estimated in the report at $59,084,000. This includes $35,359,000 of expected revenue from the sale of energy, $3,554,000 in savings on production cost realized by utilities purchasing.project power for resale, $17,844,000 as a proportionate share of the retailing benefits arising from resale of the power to consumers at higher rates, and $2,327,000 as a proportionate share in the increased value of goods and services produced by utilization of project power. The latter three classes of benefits are defined in the report as indirect benefits. The direct benefit, or expected revenue, is computed on the basis of the sale of firm energy at 5.5 mills per kilowatt-hour and the sale of secondary energy at 3 mills per kilowatt-hour. The savings to utilities. (assumed to be passed on to the consumers) or the first named of the indirect benefits, amounts to 0.56 mills per kilowatt-hour of firm energy. Together these amount to 6.06 mills per kilowatt-hour, which the report estimates as the cost of alternative steam-electric |