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(APPENDIX 37]

MEMORANDUM OF THE COMMISSIONER OF RECLAMATION

JANUARY 10, 1930

541

January 10, 1930.

MEMORANDUM TO THE SECRETARY—THE

COLORADO CONFERENCE

In conformity with the understanding of the conference yesterday I submit the following statement of the views of this bureau on three of the controverted questions which will come before the conference of the representatives of the lower States of the Colorado Basin, to be held at Phoenix on January 20.

While it is hoped that this conference may remove some of the objections of Arizona to the Colorado compact and subsequent legislation, and thus make the administration of the act easier, there is danger that action might be taken which would have a broader application than to the Colorado River and create precedents which would seriously interfere with the orderly irrigation development of the arid region.

One of the important questions to be considered will be an increase in the price of power to be generated at Boulder Dam, as tentatively fixed by the Secretary. Those urging this increase do so because it will affect the surplus revenues which under the provisions of the Boulder Dam act, go in part to the States of Arizona and Nevada (section 2 (6)). Such rate is therefore a matter of interest and the proper subject of discussion and consideration as influencing the attitude of such States toward the Boulder Canyon development. It seems doubtful, however, whether any attempt should be made to deal with it in any subsidiary compact that may be formulated.

It is not believed, however, that there is anything in the economic situation which will justify the Government's representative in approving recommendation for increasing the price tentatively fixed by the Secretary. That price will provide all the revenues needed to meet the requirements of the act in making payments within the 50year period and give in addition a substantial yearly payment to the States of Arizona and Nevada. It will do this if the height of the dam, as originally fixed, remains unchanged, but it will do far more if the plans of the Reclamation Bureau for increasing the height of the dam approximately 25 feet are approved. The bureau engineers are convinced that this increase in height should be made. It will greatly increase the storage area and the effectiveness of regulation. It will add to the amount of power which can be developed and to the uniformity with which water for power can be delivered. I am confident that the dam will be built at the greater height proposed, and, if that is done, the payment to Arizona and Nevada will be somewhere between $500,000 and $700,000 a year.

As bearing on this matter, and on the inability to increase the price of power without endangering the ability to sell that power to responsible contractors, there is attached a letter from R. F. Walter, chief engineer of this bureau, dated December 7, 1929. I believe Colonel Donovan, as the representative of the Government, should have this information.

There is another objection to increasing the price charged for this power, with a view to increasing the payments to be made to Arizona and Nevada. Except as a compensation to Arizona and Nevada for the loss of taxes resulting from the building of the dam and power house by the Government, I regard payment to these States of part of the power revenue as wrong in principle and creating a precedent which will seriously interfere with the orderly development of the water resources of the arid region in the future.

The rights of a State in the water of a river flowing through the State or past its borders should be limited to the quantity which the State can beneficially use. Beyond this, no toll should be levied on that water where the use goes elsewhere. I do not believe that Arizona and Nevada or any other State of the Colorado Basin are entitled to charge for the use of this water outside their boundaries, any more than I believe that the State of Illinois is entitled to levy a toll on the power generated at Rock Island, because the Mississippi is the western boundary of the State.

This charge, therefore, to be correct in principle should not exceed the income which the States would receive if they were in a position to tax the Boulder Dam structure. Even this is a tax which has not been imposed on Government dams or other irrigation works built heretofore in other States. If such taxes are to be imposed in the future, it is likely to add a burden on the users of water which will be an injury rather than a benefit.

In addition to the above, Arizona and Nevada are both deeply interested in having the charge for power kept low. Cheap power as an instrument to bring into use latent resources, help establish mills and factories, and help bring under irrigation land for which water has to be pumped, will do more for the upbuilding of these States and their general prosperity than any share which they may obtain from higher power charges.

The second imporant matter to be dealt with concerns the division of the water allocated by the Colorado River compact to the lower basin States. The compact allocates to the upper basin States 7,500,000 acre-feet and to the lower basin States an equal amount, with the right of the lower basin States to increase this amount by an additional million acre-feet. Congress, in section 4 (a) of the Boulder Canyon project act authorizes the execution of a subsidiary compact among the lower basin States, allocating the 7,500,000 acrefeet apportioned by paragraph (a) of Article III of the compact, to the State of Nevada, 300,000 acre-feet, and to the State of Arizona, 2,800,000 acre-feet, thereby leaving 4,400,000 acre-feet of this water for the use of California. This is consonant with the other provisions of this section, absolutely limiting California to the use of this amount of water. In each case reference is specifically made to paragraph (a) of Article III of the compact, which covers only the 7,500,000 acre-feet, thereby evidencing the intention apparently of leaving the additional million acre-feet allowed by the compact to the lower basin States to be divided in some other manner. The proposed subsidiary compact authorized by Congress further provides for the use by Arizona of all the waters of the Gila and its tributaries within the boundaries of that State. This is manifestly the proper use to be made of this water.

It is not believed that there is at present sufficient information available to justify this conference attempting disposal of this million acre-feet or for the Government to agree to such disposal. The plan of dividing the water between States makes possible long-time planning, but its value is measured largely by how closely such division conforms to the economic needs of the country. The Boulder Canyon act specifically provides for an investigation of the Parker-Gila project. It seems advisable to await completion of the economic and engineering studies provided for in that act. After such study has been made, then it can be determined how much of the water should go to Nevada, how much to Arizona, and how much to California. Before that, action is likely to be mistaken and it is wholly unnecessary.

The third important question which will likely come before the conference relates to the storage charge to be paid for water diverted by the Metropolitan Water District. That has been fixed in the tentative allocation at 25 cents an acre-foot. Those who object to this as being too low do not understand all the circumstances. They do not realize that this will involve a yearly payment by the Metropolitan Water District of $250,000. They do not realize that practically no service is rendered. All the surveys of the aqueduct thus far made provide for a diversion from the river below Boulder Dam. If there were no reservoir, the natural flow of the river would provide all the water which the counties need for ten months in the year. All that storage would do in any event would be to supplement the low-water flow of the river during a period of two months. All the water which will be diverted will have passed though the power wheels in the dam, and for this the Government will have collected a power charge of about 75 cents an acre-foot.

The largest revenue from power requires that the water be delivered uniformly and that meets the requirements of the city, so that no change in power operations will be required. If the city does not divert the water it will go down to irrigation works below which will take it without paying any storage charge, or will go, unused, into Mexico, of course without any payment for storage. Through filings, the district is entitled to take the natural flow of the river and the builders of the dam can not object to its diversion, even if no storage charge whatever is paid. The willingness to pay a reasonable storage charge grows out of the urgent desire of the coast cities to have an early construction of the dam. They need the water and they need the power which the dam will provide, but their needs should not be taken advantage of to extort an unreasonable price, because the cost of the aqueduct and the heavy yearly pumping charges will make the price of this water, when finally delivered to the households and industries of the coast, a serious economic burden upon them. More money is not needed to get the revenue which the act requires, and the imposition of a higher storage charge such as has been proposed, would add to the economic and financial problems of the coast to an unwarranted degree.

If the Metropolitan Water District changes its plan and diverts water above the dam, or takes it directly from the reservoir in order to get the benefit of increased elevation, a charge to compensate for the reduction in power revenue through such change in diversion will

be made.

ELWOOD MEAD,

Commissioner.

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