BOULDER CANYON PROJECT ACT HEARINGS BEFORE THE COMMITTEE ON IRRIGATION AND RECLAMATION HOUSE OF REPRESENTATIVES SEVENTY-SIXTH CONGRESS FIRST SESSION ON H. R. 6629 A BILL TO PROVIDE FOR THE ADJUSTMENT OF RATES AND FOR OTHER PURPOSES JULY 6, 7, 10, 11, 12, 13, 14 Printed for the use of the Committee on Irrigation and Reclamation 162602 UNITED STATES WASHINGTON: 1939 The committee met at 10 a. m., Hon. Compton I. White (chairman) presiding. The CHAIRMAN. This meeting is called for the consideration of H. R. 6629, "a bill for the adjustment of rates and charges at Boulder Dam, for the disposition of revenues derived therefrom, and for other purposes," which has been referred to the committee. The bill has been referred to the Department of the Interior for report, which has not yet been received, but we have a letter from the Secretary of the Interior, Hon. Harold Ickes, with reference to the bill, which I will ask the clerk to read for the information of members of the committee. The CLERK (reading): Hon. JAMES G. SCRUGHAM, House of Representatives. MAY 26, 1939. MY DEAR MR. SCRUGHAM: In a recent conversation, you expressed the desire to introduced the proposed Boulder Canyon Project Adjustment Act in the House and inquired whether the bill met with the approval of this Department. The proposed legislation was submitted to me on behalf of the power contractors at the Boulder Canyon project and all of the States of the Colorado River Basin, with the request that it receive the sponsorship and support of this Department at the current session of Congress. The bill has been transmitted to the Bureau of the Budget for advice as to whether it conforms with the policy and program of the President and, until such advice is received, it will be impossible for me to take any position or indicate the attitude of this Department with respect to the measure. If, however, you should decide to introduced the bill before the views of the Bureau of the Budget and this Department are made known, I would have no objection. The CHAIRMAN. Now we have present the author of the bill, Mr. Scrugham, and would like very much to have a statement from him. STATEMENT OF HON. JAMES G. SCRUGHAM, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF NEVADA Mr. SCRUGHAM. Mr. Chairman and members of the committee, I thank you for the courtesy of the hearing. The Boulder Dam power project was the great pioneer of its kind, and the method of financing, while entirely proper for the day in which the compacts were negotiated, has been definitely out-moded, and it was necessary, in order to put all of these projects on a similar basis, 1 to make certain changes and amendments, which were largely incorporated in this proposed bill, H. R. 6629. I am presenting it with the request that it receive your favorable consideration and report at the earliest date consistent with the performance of your duties as members of this committee. It is quite obvious we are approaching the closing hours of the session and it will require expeditious action if this legislation is to be enacted, and which all of the States affected have agreed is in the best interests of all concerned. This statement is not a detailed statement of the proposed bill, because that will be given to you by the men representing the various States who are present and who will present their views tomorrow, but is rather an outline of the reason for requiring its introduction and of the broad principles involved. It has been recognized for years that the plan of financial operation at Boulder, set up in 1928 and 1930, is out of line with the more recent developments in Federal power projects. This bill represents an agreement between representatives of the governments of the seven States of the Colorado River Basin and the power users, designed to adjust differences between those States and to bring the Boulder project more in line with the policies more recently adopted by Congress in the regulation of other projects. Under the existing Boulder Project Act the seven States of the Colorado River Basin have conflicting interests in the financial operation of the dam, and having personally been through many years of those negotiations I think the committee representing those seven States has done a marvelous job in ironing out these differences. The principal market for electrical energy is now in southern California, with a share of the power allocated also to Arizona and Nevada. So long as the act remains as it is now written an unending source of controversy and dissention among the States of the Colorado River Basin will exist. Over the past 2 years repeated conferences have been held between representatives of the governments of the seven States. These representatives were welded into the committee of 16, 2 from each State and 2 representing the power users. Starting with complete discord, this committee has finally worked to a conclusion which will bring about an accord between the States and, in my opinion, will save a good deal of money which would otherwise be lost in litigation and controversy, and at the same time actually expediting the progress on the project. In evidence of their action, a resolution was adopted at Denver, under date of March 16, 1939, a copy of which is presented herewith for your record. To my mind, one of the chief advantages of my bill is that it closes a controversy which will otherwise continue indefinitely between States which should be working together. The interests of the United States, which advanced the money for the project, will be fully protected and repayment will be assured. In brief, the bill provides that instead of the rate for energy being fixed on the basis of the value of competitive energy, as is now the case, the rate shall be fixed for the full period of amortization so as definitely to provide funds sufficient to repay the power investment within the time originally contemplated, that is, by 1987. The existing law requires that the Colorado River Dam fund shall pay to the General Treasury interest on the investment at the rate of 4 percent. That was the prevailing rate at the time the dam act was passed some 10 years ago. My bill substitutes an interest rate of 3 percent, which is fully justified by the assured repayment of the investment. It still leaves to the United States a margin of profit, as money costs the United States, at present, above 2.7 percent. In other words, it is a profit of about 0.3 percent to the Government. In the event this committee should be of the opinion that the United States should be protected against an increase in the cost of money, in any future operation, provided money rises in value, I have an alternative bill, H. R. 6666, identical with H. R. 6629, except that it contains a provision for the funding of the investment through the issuance of bonds, thereupon, applying the actual cost of money so determined, plus a handling charge, as the interest rate here. This device would absolutely protect the interests of the United States. My bill, H. R. 6629, provides that repayment of $25,000,000 allocated to flood control in the original project act shall be deferred until after the power investment shall have been repaid, and shall be repaid without interest, as in the case of reclamation advances. This is more to the interest of the United States than any other flood-control project of which I have knowledge. In all others, the United States pays and gets nothing in return. The site of the works lies between Arizona and Nevada. These States justly feel that they are entitled to revenue to compensate them for revenues which would have been available by taxation if their natural resources had been developed by private interests. In addition to that, there is what might be termed a proprietorship of the land involved in it, as the land along the Colorado River between the high-water mark and the low-water mark is property which belongs to the State, and the State has declared its ownership. I think that has been done, and the States also waive their claim to that land between the high- and low-water mark of the river. Under the present law, these States are each entitled to 1834 percent of the "excess revenues." With rates on a competitive basis, there is a probability that such "excess revenues" might be reduced to a point where these States would derive small benefits. My bill provides that in commutation of these indefinite payments, each of these States will receive $300,000 each per annum during the period to 1987, as a fair fixed return. In my opinion, there would not have been any great amount of money available in spite of the fact it was figured by the Reclamation Service that this 1834 percent would yield something like $600,000 a year, and while it was widely spread around through the States of Nevada and Arizona that they would receive $600,000 a year, I think the compromise of $300,000 a year is fair and just to all concerned. It gives a definite tangible guaranty on which to base financing. In the interests of the entire basin, but particularly to the interest of the four States of the upper basin, that is, Colorado, Wyoming, Utah, and New Mexico, there is a provision that each year there shall be paid into a Colorado River development fund in the Federal Treasury the sum of $500,000. The money comes from revenues |