Page images
PDF
EPUB

include (a) a joint study with the Department of Agriculture of the direct agricultural benefits of each project; and (b) a reevaluation of the nondirect benefits of each project, based upon a reexamination of the methods presently used to compute the indirect and public benefits of reclamation projects.

The development of irrigation in the upper Colorado River Basin to use the increased supply of water made available as a result of the storage project is recognized as an integral part of the basin plan. Reclamation projects in the upper basin which are economically justified and which represent wise use of available resources in a manner consistent with State water laws and interstate compacts have the full support of the administration. Authorization of the participating projects proposed in your report should be contingent on reexamination so that there may be no doubt about the economic justification of the projects finally undertaken. Reexamination is particularly necessary in the case of those projects which show a favorable economic justification only if a useful economic life of 100 years is assumed and if the full estimate of indirect and public benefits-the so-called secondary benefits-used in your report is accepted. It is recognized that a basic purpose of the reclamation laws is to spur development of the West. Consequently, it follows that the justification of a reclamation project is not adequately measured by a simple comparison of project costs with the dollar value of the agricultural produce and other goods and services directly produced by the project. However, the procedures used to compute the secondary benefits of the participating projects proposed for authorization would appear to require a fundamental reexamination.

The standards and procedures for the economic appraisal of water resource projects are now under review in the Executive Office. It is expected that any final recommendations made by the Secretary of the Interior would take into account the conclusions reached as a result of this review.

8. Provision should be made in the authorizing legislation for financing the project through a separate revolving fund established in the Treasury which would (a) receive all appropriations for construction and operation and maintenance as advances from the general fund, (b) receive all revenues collected in connection with the operation of the project, (c) be available for the operation and maintenance of the project, subject to such limitations as may be imposed by the Congress in annual appropriation acts, (d) be available for construction in accordance with the appropriations made therefor, (e) provide funds for the payments referred to in paragraph 5 above, and (ƒ) pay to the general fund of the Treasury annually, after completion of any feature or unit, a sum sufficient to return within 50 years, exclusive of authorized development periods, the full reimbursable costs of that unit or feature including interest on the commercial power and municipal water supply investment. It is expected that the interestbearing and non-interest-bearing investments will be repaid concurrently to the extent practicable.

9. The cost allocations proposed in your report for the storage project and the participating projects should, prior to initiation of construction, be refined and adjusted to conform to the standards

In

and procedures established for use by all agencies at that time. this connection, it is suggested that Assistant Secretary Aandahl's letter to this Bureau of March 2, 1954, dealing with future refinement of the cost allocation of the storage project be made a part of your report to the Congress.

10. Authorization for a development fund for use in conducting investigations in the basin would not be in accord with the President's program. Existing statutory authority is adequate for these purposes and the regular general investigations appropriation, rather than the revenues of any project, should be used to finance such investigations.

11. The revolving fund discussed in paragraph 8 above will eliminate the need for a separate continuing fund of $1 million recommended in your report. The revolving fund will provide the basis for financing operations, maintenance, and emergency work of the project.

12. The necessity for authorization for agencies of the Department other than the Bureau of Reclamation to participate in the project, as your report recommends, is not clear. It would appear that participation by such agencies could be accomplished under the existing authority of each agency, and that work to be performed by these agencies could be financed directly as a part of their regular programs. Participation by these agencies in the basin development should, of course, be coordinated by the Department.

We shall be glad to work with your representatives in the preparation of legislation for authorization of the upper Colorado Basin development which would accord with the conditions set forth above and which could be presented to the Congress as a substitute for S. 1555, H. R. 4443, H. R. 4449, and H. R. 4463.

It is requested that a copy of this letter accompany your modified report when it is submitted to the Congress.

Sincerely yours,

Jos. M. DODGE, Director.

[graphic]

Projects in the upper Colorado River Basin recommended for authorization by the administration

1 In addition, the authorized Eden project, estimated to cost $7.287,000, will be included in the plan. 'Partially authorized.

LETTER OF MARCH 2, 1954, FROM ASSISTANT SECRETARY
AANDAHL TO THE BUREAU OF THE BUDGET

Mr. JOSEPH M. DODGE,

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington 25, D. C., March 2, 1954.

Director, Bureau of the Budget,

Washington 25, D. C.

MY DEAR MR. DODGE: Members of your staff have been reviewing the Colorado River storage project report and have suggested, in discussion with staff members of the Bureau of Reclamation, that the cost of the alternative single-purpose reservoirs for irrigation be discounted for purposes of cost allocation in order to reflect the fact that the irrigation storage probably will not be actually required for a number of years. This Department recognizes that the suggestion is a refinement of the broad assumptions which the Bureau found necessary to make. Any estimates of the time when the various units of storage will be required for irrigation will necessarily have to be quite arbitrary but inasmuch as an allowance for time is technically correct, the Bureau of Reclamation has made preliminary estimates of the probable effect of the suggested recalculation based on a deferred period of 25 years. Those estimates indicate that the allocation to power would be increased about $34 million and a corresponding decrease in the allocation to irrigation. The repayment period for the project would be extended from 44 years to 46 years without any increase in power rates, or the 44-year payout period could be retained by increasing power rates from 6 mills to about 6.25 mills.

It is our opinion that since the proposed project would be feasible even with the lesser allocation to irrigation and since the practical effect of following the technically correct suggestion of your staff would result in relatively little change in the project payout analysis, the report should not be revised for that minor correction. If the storage project is authorized, the suggestion made by your staff can be readily incorporated in definite plan reports prepared in advance of construction.

If your staff feels that additional information on this matter is necessary, the Bureau of Reclamation will be glad to supply such material.

Sincerely yours,

FRED G. AANDAHL, Assistant Secretary of the Interior.

SECRETARY'S LETTER OF MARCH 19, 1954, TO THE PRESIDENT

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington 25, D. C., March 19, 1954.

(Through: The Bureau of the Budget.)

The PRESIDENT,

The White House.

MY DEAR MR. PRESIDENT: By letter of January 19, 1954, we submitted to you as a supplement to our report of December 10, 1953, on the Colorado River storage project and participating projects, the

statements of the official position of the States of the upper division of the Colorado River Basin.

We indicated also that comments of the other States of the basin which are not so directly affected and of the Federal agencies which had not been received would be forwarded at a later date. The comments of the States of Arizona and California, the Departments of the Army and Commerce, and the Federal Power Commission have now been received and I am submitting them herewith as a further supplement to this Department's report of December 10, 1953. The State of Arizona expresses itself as in favor of the storage project and looks forward to its early construction as another logical step in the utilization of Colorado River water. The State further expresses its belief that equalization of the yearly river flows at Lee Ferry will be of maximum benefit to both the upper and lower basins. It also points out that there 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" the northeastern part of which is in the upper basin. As stated in our supplemental report, the power-marketing studies in the project report should be regarded as examples only and not as evidence of any intention of excluding Arizona from the use of power from the project. The Congress is presently considering bills to authorize certain initial units of the project which include provisions relating to the disposal of power.

It is the State of California's view that there are many problems needing careful study and solution before authorizing or proceeding with the overall plan of development in the upper basin. It is the further view of California, however, that some additional development could proceed in the meantime if found justified for authorization by the Congress and that the early construction of the Glen Canyon unit would be justified and therefore merits authorization at this time. As has been mentioned above, the Congress is presently considering bills to authorize initial units of the storage project including certain initial participating projects desired by the States of the upper division.

The Congress will no doubt also consider the several problems with which the State of California is concerned, principal among which are: (a) effect of the construction and operation of the project on established rights of California and its agencies in and to Colorado River water and lower-basin developments, (b) questions of policy pertaining to the financial feasibility and economic justification of new reclamation developments, and (c) disposal of the greatly needed power output from the project, particularly from its Glen Canyon unit.

The letter from the Chief of Engineers, on behalf of the Secretary of the Army, advises that the supplemental report substantially meets one of the major objections given in his previous comments "in that interest on the power investment will be returned to the Treasury until the power investment has been liquidated." The Chief of Engineers also states that the Glen Canyon and Echo Park units of the storage project appear to be justified.

The Department of Commerce advises that it has no further comments on the supplemental report.

« PreviousContinue »