in 1946 remanded the case to the district court for rehearing. However, soon thereafter it became evident that a valid district organization and contract could not be completed before authorization for construction of the Woodside unit expired. Authorization for the unit expired June 30, 1947 (6 months after the proclamation by the President ending hostilities in World War II).

Dissatisfaction with the proposed repayment plan for the Woodside unit centered on the flat per-acre charge contemplated for supplemental water. This plan failed to take into consideration the varying severity of water shortages among different landowners.

Missoula Valley project, Montana.-The Missoula Valley project is situated just west of the city of Missoula in western Montana, near the confluence of the Bitterroot and Clark Fork Rivers.

Investigations of the project were made prior to 1942 when a report (project Rept. No. 60, April 1942) was issued by the Bureau of Reclamation.

The Missoula Valley project was authorized by the President, May 10, 1944, under the Water Conservation and Utilization Act (53 Stat. 1418), as amended. As originally planned, the project consisted of two units: The north side low-lift unit of 1,200 acres, and the Big Flat unit of 900 acres. The north side unit embraced an area already under irrigation that needed supplemental water. The plan provided for pumping this additional water from the Clark Fork River into a new canal connecting with the existing distribution system. The plan for the Big Flat unit consisted of a simple gravity diversion from the Bitterroot River, and construction of a 5-mile canal and a lateral system to irrigate 900 acres of dry land by gravity.

Prospective water users in the Big Flat area promptly formed the Big Flat irrigation district and contracted with the United States in April 1945 to repay $45,000 as their share of the reimbursable construction cost of the irrigation works. A contract for construction of the irrigation system was awarded later on a bid of $129,951 but expenses for supervisory personnel, materials, and incidentals raised the cost to about $200,000. Construction on this unit was accomplished during 1946 and 1947, and the irrigation workers went into operation for the 1948 irrigation season.

Prospective water users in the north side low-lift area across the Clark Fork River, however, failed to organize an irrigation district, largely because of opposition by one major landholder. Without an organization which could contract with the Government for repayment of the reimbursable costs, no construction could be undertaken, and authorization for this unit as a war foods project was revoked in 1945. Recently, following changes in ownership and some subdivision of the larger holdings, there has been evidence of renewed interest in supplemental water in the north side area.

Need for supplmental water in this unit is more pressing than ever. The area is only partially irrigated by diversion of natural flow from Grant Creek. This source is far from adequate in late summer. In recent years some of the land under irrigation systems has reverted to dry farming or has been idle. Supplemental water is needed to increase and stabilize agricultural production and to strengthen the general economy of the Misoula area.

On the basis of present construction costs (April 1, 1949), an expenditure of $183,750 would be necessary, it is estimated, to build the required works to supply supplemental water to the north side low-lift unit. All of this sum would be a reimbursable allocation to irrigation.

Repayment ability of water users in this area was estimated prior to the 1944 authorization at an average of $4 per acre. Operation and maintenance costs were estimated at $1.25 per acre annually, and cost of power for pumping was estimated at $1.54 per acre annually. Thus the annual operation and maintenance would amount to $2.79 per acre or $3,348 per year.

The anticipated increase in gross crop values is used as a measure of the benefits expected from the provision of supplemental water for this unit. This increase is expected to average $15 per acre annually, or a total of $18,000 each year for the 1,200-acre unit. Annual monetary benefits to the Nation from development of the north side low-lift unit exceed annual costs to the Nation, according to the foregoing estimates, in the ratio of 1.72 to 1.

With an amount of $1.21 per acre per year available for payment on construction, water users in the 1,200 acres would repay approximately $72,000 in a 50-year repayment period. Thus, a balance of $111,750 of the reimbursable construction cost would remain to be returned through the recommended basinwide repayment plan.

Mann Creek Project, Idaho.-The Mann Creek project is located northwest of Weiser, Idaho, near the confluence of the Weiser and Snake Rivers. The average yearly precipitation is 11 inches, and the annual average frost-free period is 150 days.

Lands in the project area are adaptable to a wide range of crops but, because of late season shortages of irrigation water, are now utilized largely for growing hay and grain. Provision of supplemental water would not only allow production of cash crops such as sugar beets, potatoes, fruit, and truck crops, but would remove the possibility of serious droughts which, under present unregulated conditions, are an ever-present threat.

The project area has been investigated and the results reported upon by the Bureau of Reclamation in Project Investigation Report No. 51, dated October 1940. The project was further investigated by the Bureau and the Department of Agriculture in 1940 as a possible water conservation and utilization project. The Secretary of the Interior requested a finding of feasibility under the act of August 11, 1939 as amended October 14, 1940, in a letter to the President on March 10, 1941. A finding of feasibility was signed by the President on July 7, 1941.

Water users failed to approve a repayment contract in an election held on May 30, 1942. Reasons for failure to approve the contract are varied but the major reasons were that the election came during a wet weather cycle, and that misunderstandings developed regarding the meaning of the repayment provisions. Water users had previously indicated a willingness to pay $2.50 an acre and they can be expected to approve the project as herein proposed.

The project as authorized provided for construction of a dam and reservoir northeast of Weiser, Idaho. The dam was to be 118 feet high above foundation, have a 1,000-foot crest, and impound 8,600 acre-feet of irrigation water.

The project plan contemplates construction of a dam and reservoir only. The present distribution system is adequate to serve the 4,300 acres that lie within the project. Of this acreage 270 acres are now dry and need a full supply of water, and 4,030 acres are in need of supplemental water.

On the basis of present construction costs an estimated expenditure of $1,949,200 would be required to build the required dam and appurtenant works. The amoount of $71,000 is allocable to flood control on a nonreimbursable basis. The allocation to irrigation is $1,878,200.

Operation and maintenance costs are estimated at present prices, to amount to $0.25 per acre for the existing distribution system. It is estimated that the cost of operation and maintenance of the proposed dam and reservoir would be $0.50 per acre.

Repayment ability of water users was estimated in the 1940 report to be $2.50 per acre. With a total operation and maintenance cost of $0.75 per acre there remains $1.75 per acre for repayment of construction costs. For the 4,300 irrigable acres this amounts to $7,525 annually or $376,250 during the recommended 50-year repayment period.

The increase in gross crop value is used as a measure of total benefits to the local and national economy. This increase is expected to average $19.27 for land needing supplemental water and $34.61 for new land and to total $87,000 annually for the 4,300 acres in the project. The annual benefit derived from flood control amounts to $2,760 annually to bring total project benefits to $89,760. Annual monetary benefits to the Nation from the proposed Mann Creek project exceed the attendant Federal costs, according to the above estimates, in the ratio of 1.14 to 1.

With a total reimbursable cost of $1,878,200 and a repayment of $376,250 from water users, there remains $1,501,950 to be returned through the recommended basin-wide repayment plan.

EXHIBIT C

BASIN-WIDE REPAYMENT PLAN

The projects described in exhibit B typify needs and problems which face reclamation development in the Pacific Northwest. Production and income from many areas now irrigated are low and undependable because available water supplies are inadequate. Large expanses of unpeopled, little used desert and a semiarid land remain to be added to the irrigated acreage and thereby to create new opportunities for homes, new communities, and new regional and national income. The benefits to be secured by the provision of supplemental water and

the irrigation of new lands clearly indicate that expenditures for these purposes constitute sound national investments even if no return of the capital outlay were made to the Federal Government. Without questioning, however, the long-established policy that irrigation construction costs shall be returned, it is evident that direct benefits to the water users of the projects discussed are insufficient in most instances to expect that group of beneficiaries alone to return the full costs within a reasonable repayment period. The same conditions hold true for other new lands awaiting irrigation development in the Columbia River Basin and for lands now irrigated which are in need of supplemental water. The easier, less costly irrigation developments understandably have been constructed in the past. Those remaining are more difficult and more costly. They will, however, add as much or more to the regional economy as those already developed.

Water users will be expected to contribute to the return of irrigation construction costs in accord with their ability, but that alone, it is clear, will not suffice. In the case of the 12 irrigation projects described above, payments by water users will fall short of returning the irrigation construction costs on 10 of the projects. The proportion of other, future developments requiring financial assistance beyond the returns of water users will probably be even higher. Of the total estimated costs of those 10 projects allocted to irrigation ($222,301,825), about $125,488,250 will be returned from project sources. The return of $96,813,575 cannot be expected from those sources.

Another, different type of development which is being made and will continue to be made in the Columbia River Basin is typified by the Hells Canyon project described above, involving power production, with flood control, navigation, and other benefits, but having no directly associated irrigation features. The full costs allocated to power in these projects will be returned to the Federal Government, with interest, through rates paid by power users of the region. The combination of such irrigation and such power projects in a single basin-wide development for purposes of financing constitutes the basis of the recommended basin-wide repayment plan. It provides a solution to the return of irrigation construction costs, which the water users cannot reasonably be expected to repay, which is in accord with a principle incorporated in existing reclamation law.

That principle of existing reclamation law is that revenues from power in excess of those required to return the costs allocated to power may be used for the return of reimbursable costs of other project features. This plan of repayment is applicable under present law only to projects incorporating power and other features with reimbursable costs. It is currently applied to account for the return of irrigation construction costs in excess of water user payment ability on many projects which have both power and irrigation features.

In applying the principle, two elements of the power revenue may be used in accounting for the return of irrigation construction costs. Reclamation law provides that the power rates charged shall be sufficient to return the capital costs allocated to power with interest on the unpaid balance. The interest paid on the power investment may be credited to the return of irrigation construction costs, if required for that purpose. The second element of the power revenues which may be thus credited consists of the net power revenues remaining after payment of capital costs and interest, or surplus power revenues. The surplus represents a profit on over-all capital and operating expense. In keeping with the objective of Federal power policy to make power available at the lowest possible rates consistent with sound business practices, such surplus normally is small.

Application of the interest on the power investment to the return of irrigation construction costs may be considered to be in effect a Federal reinvestment. The capital cost of the power development and the interest on it are actually returned to the Federal Government. In crediting the interest thus paid to the return of irrigation construction costs, however, the effect is to reinvest in the irirgation phases of the project the interest paid by people in the region on the loan of Federal funds for power development. Direct return of that reinvestment to the Federal Treasury cannot be traced in detail, but that return unquestionably is made in one form or another. To cite only one, studies made of existing irrigation projects in the Pacific Northwest indicate that total Federal income taxes paid by project residents during the project repayment period will greatly exceed the costs of the project.

The basin-wide repayment plan recommended extends the principle as now applied to projects to the region as a whole. In keeping with the basin-wide approach to resource development, the purpose of the repayment plan is to

treat all Federal reclamation and power projects of the Pacific Northwest as parts of one development for the purposes of returning reimbursable construction costs to the United States Treasury. It will permit irrigation projects which have no power developmetns associated with them to secure the same kind of financial help now available to those embracing both irrigation and power features by treating those single-purpose irrigation projects and the power proj ects without irrigation features as a single, region-wide development.

Establishment of a single account.-The mechanics of doing these things are provided for through the establishment and maintenance of a single Columbia Basin account, to which charges and credits described below will be made. These charges and credits are book entries in the account; no money would be received or paid out through the account, and no special fund would be established. The account is necessary, however, to the accomplishment of the repayment plan, for it provides: (1) The accounting means for showing the source of return of nonpower costs assigned to be returned from power revenues, a showing that is needed in connection with the determination of financial feasibility of undertakings that need assistance from power revenues; (2) the accounting control needed to show for the region as a whole what nonpower costs are required to be returned from power revenues and what the effect on power rates and pay-out would be by reason of additional nonpower costs being assigned for return from power revenues; and (3) the basis for determining power rates at levels that will accomplish the required pay-out of costs assigned to be returned from power revenues.

Agency procedures unchanged.-The Department of the Interior, including both the Bureau of Reclamation and the Bonneville Power Administration, and the Department of the Army are the two Federal agencies which construct the projects for which charges and credits are to be handled through the account. The procedures of these agencies with respect to project investigation, construction, and repayment will remain unchanged. Each will continue to make investigations and prepare reports on projects in its respective field of responsibilities; submit its reports for review to the other and to the affected States; transmit its reports to the Congress for authorization; receive its own appropriation for construction; build its projects; and return reimbursable construction costs directly to the Treasury (fig. 1). The only additions to this customary procedure will be the entry of charges and credits in the account for projects of both agencies and a revised, more comprehensive procedure for the Secretary of the Interior in reporting to the Congress, described later. It will be evident, therefore, that the administration of the account, which will be the responsibility of the Secretary of the Interior, will not give to him any authority over the use of revenues credited to the account.

Charges to the account.-The charges to the account will consist of construction costs for projects noted subsequently which are assigned for repayment from power revenues. These costs would be made up of two parts, the first of which is the project cost properly allocated to power. This consists of the total construction cost required for project features which exclusively serve power production, plus a fair share of the cost for joint facilities which serve power and other purposes. The costs thus determined as properly allocable to power are recognized as the power investment. It is reimbursable and is repaid from power revenues, with interest.

The second part is the reimbursable construction costs which are properly allocated to purposes other than power, but which cannot be returned within the proposed repayment period by immediate beneficiaries of those other purposes, and are then assigned for repayment from power revenues. Irrigation is the predominant and much the most important example. That part of the total allocation properly made to irrigation which the water users cannot be expected to return thus will be assigned for return from power revenues.

Illustrations of charges to the account are presented in figure 21 for three representative types of projects. Project A is a single-purpose irrigation project, or a project such as the Crooked River, Cambridge Bench, and others described above which involve no reimbursable costs other than irrigation. The entire construction cost, it is assumed in the illustration, is allocable to irrigation. Water users, it is further assumed, can be expected to return only a part of that cost in the 50-year repayment period; the remainder will be assigned for return from power revenues. The latter thus will be charged to the account. The part

1 Not printed.

repayable by water users will not be charged to the account. That part will be accounted for separately under existing arrangements.

Project B is a multiple-purpose development, illustrated by the Mountain Home project described above, the reimbursable construction cost of which is allocated between irrigation and power. Water users, it is assumed, cannot return the entire costs allocated to irrigation. The costs charged to the account thus consist of the power investment and that part of the irrigation investment which water users cannot repay.

Project C is a multiple-purpose development, the entire construction cost of which is assumed to be allocated between navigation and power. This is similar to the Hells Canyon project described above except that the latter also has costs allocable to flood control and recreation. The construction costs for navigation are nonreimbursable and hence not chargeable to the account. The charge to the account in this instance thus is limited to the power investment. The amounts of the charges entered in the account will be, in the case of existing projects, those costs actually incurred, and in the case of new projects, the estimated costs as each is brought into the account upon authorization by the Congress. The account will periodically be revised to reflect the costs actually incurred as projects brought into it are constructed.

Credits to the account.-The credits to the account will consist of all power revenues from projects participating in the repayment plan, after deducting operation and maintenance costs assigned to power. That is to say, the credits will be made up of net power revenues. As in the case of the charges, the amounts of the net revenues credited will be those actually realized and those which it is estimated will be realized.

The net power revenues credited to the account in each case will consist of at least two elements, and in some instances may include a third. The two present

in each instance are: the amounts required to amortize the power investment, and the interest charge on the power investment. Interest on the power invest. ment is to be established by the Secretary of the Interior, having regard, among other things, for the cost of money to the United States and for interest rates employed by Federal agencies in the amortization of investments of like character, but in no event at less than 2 percent per annum. In some instances, there also may be a third element of the net power revenues consisting of the surplus realized after amortization of the power investment.

Credits to the account from the representative projects previously discussed are indicated in figure 3.1 From the single-purpose irrigation project, lacking power features, there is no credit to the account. In the case of the navigation and power project, net power revenues have been assumed which will just amortize the power investment with interest, whereas in the case of the multiplepurpose irrigation and power project a small surplus also has been shown for illustrative purposes.

The balance of charges and credits in the account.-The balance of charges and credits to the account for the three hypothetical projects is shown graphically in figure 4. Indicated are the several elements of the charges and credits, by projects, discussed above. The credits, it is evident, exceed the charges by a substantial margin under the assumptions made for these projects. Such excess of credits over charges is in reality in prospect under actual operation of the account.

The balance sheet will permit the comparison of the total charges and credits for projects participating in the pooling plan at a given time. Appraisal of the effect and of the feasibility of adding new projects to those participating thus can readily be made.

Application of interest to repayment of nonpower costs.-Under operation of the repayment plan, the required return to the United States will be deemed to have been accomplished when the total credits to the account equal the total charges to it. The net power revenues credited to the account are required to be sufficient at least to amortize in full the power investment charged to the account with interest on that investment. The net power revenue credits need not cover in addition, however, the irrigation or other nonpower costs charged to the account unless the total of these costs were to exceed the amount of interest. Interest on the power investment and surplus after amortization, if any, will be applicable to the return of nonpower costs. Interest on the power investment, it will be clear, will not be applicable, however, to the return of power costs.

1 Not printed.