Page images
PDF
EPUB

The views expressed in that letter by Assistant Secretary Aandahl have not been changed. We are of the same opinion as expressed therein. We do feel this is a good project and one which should be undertaken.

Mr. SELDEN. Yesterday we received testimony which indicated that the Falcon Dam was not amortizing through the sale of power the cost of its power facilities. Could you explain to the subcommittee what significance this has, in relation to the 1954 law, which you state in your letter of the 29th of January to the Assistant Secretary of State, provides this energy must be marketed to cover the cost of producing and amortizing allocated capital cost?

Mr. BENNETT. Yes, sir, the act of June 18, 1954, requires that the rates for the sale of power at Falcon be set so as to accomplish amortization of the power costs.

As of today we have been unable to establish what those allocations are. We cannot arrive at a final allocation until the costs of the total projects on the river are known. This would include the present dam under consideration, so we have established an interim rate schedule at Falcon which has been approved by the Federal Power Commission. That rate schedule calls for sale of power in general terms at $15 per kilowatt-year and 1.75 mills per kilowatt-hour and for 1 mill per kilowatt-hour for all hours beyond 400.

The revenues which we have secured today under that rate schedule gross total $1,216,982. That includes the annual operation, maintenance, replacement, and incidental expenses due to marketing. Excluding these items we have deposited in the miscellaneous receipts of the Treasury $563,733 above the operating costs.

Mr. SELDEN. Which does not amortize the cost of the power facilities?

Mr. BENNETT. Whether it does or does not, I don't think we can tell today. It simply indicates in the terms of the annual operating costs we are operating in the black. There was 1 year

Mr. SELDEN. Why is it you can't determine the cost of the power facilities at the Falcon Dam?

Mr. BENNETT. The position has been taken by the State Department that until the costs of the structures required by the treaty are all known you cannot tell what the costs of allocated power will finally be. Mr. SELDEN. What position has the Department of Interior taken on it?

Mr. BENNETT. We have to take the position that the cost items are those referred to as by the State Department; when we have those costs, allocations can be made.

Mr. SELDEN. Have you made no determination on the basis of that one dam itself as to whether or not the power facilities are being amortized by the sale of power from the dam?

Mr. BENNETT. No, sir, that has not been made.

Mr. SELDEN. Did I understand you to say that a determination cannot and will not be made until all the other structures required by the treaty are installed?

Mr. BENNETT. That is the policy being followed.

Mr. SELDEN. Could such a determination be made?
Mr. BENNETT. Theoretically it could be.

Mr. SELDEN. Would the Department of the Interior have the operating responsibility for the powerplant at the Amistad Dam if the Federal Government constructs the power facility there?

Mr. BENNETT. There is no present legal authority for that. I would have to assume if there is a federally constructed powerplant, it would be operated in connection with the powerplant at Falcon to produce system power and the Interior Department in that case should be responsible for marketing the power from the two structures. Mr. SELDEN. Mr. Fisher, do you have any questions?

Mr. FISHER. No.

Mr. SELDEN. Mr. Kilgore?

Mr. KILGORE. Mr. Bennett, would you be in a position to indicate by-I suppose this would be by projecting the figures on power returned that have actually been experienced at Falcon and projecting that over the expected 50-year life, what cost would be amortized by the return that you have now experienced?

Mr. BENNETT. That could be done in a very rough fashion. We have now 5 years of operating experience with a net return of $563,733. That is approximately $112,000 a year; 112,000 times 50 years would give you a rough figure.

I would gather from the information contained in Senate Document No. 65 that the gross revenue would be increased some $3,000 a year if Amistad Dam is constructed. So you would have possibly as much as $115,000. Trying to go from the 5 years of experience on into the future is dangerous. Unfortunately that 5 years happened to include 1957, a very, very low water year, in which we sold only 23 million kilowatt-hours.

I would hope there wouldn't be many more like that.

Mr. KILGORE. I can assure you that the people down there hope that too.

Mr. SELDEN. On the basis of the estimate of the Department of State of the increase that you have just mentioned, would the cost of the power facilities be amortized?

Mr. BENNETT. I don't recall at the moment what the specific cost of the power facilities was, but I think it would be fair to anticipate that by extrapolating from the full year period to a 50-year period your net revenues would be on the order of $6 million.

Mr. SELDEN. Do you have any estimate of the cost of the power facilities, Colonel? Certainly you must have that figure somewhere? Colonel HEWITT. We gave you that figure yesterday for Amistad. Falcon or Amistad?

Mr. SELDEN. Falcon.

Colonel HEWITT. Yes, sir, we do. Capital costs tentatively allocated to power is $6,945,000, that is, specific costs to power.

Mr. BENNETT. What we are saying is that forecasting from 5 years of record it would appear that the revenues would be about equal to that tentative allocation.

Mr. SELDEN. So including interest, it would not amortize the cost of installations.

That is the answer I am trying to get.
Mr. BENNETT. Based on this 5 years of
Mr. SELDEN. That answers my question.

Mr. KILGORE. Mr. Bennett, because of the Bureau's interest in the area below Falcon, the Bureau is aware of some of the conditions that exist there and is aware of the litigation involving water rights. Would it be a correct and fair statement to say at this time there would be no way during the pendency of this litigation to identify the irrigation beneficiaries in the area?

Mr. BENNETT. I think that is probably a fair statement. Until such time as the court has made its finding as to what are the water rights, it would be difficult to say who would receive the specific benefit from the stored water.

Mr. SELDEN. Thank you very much, Mr. Bennett.

We are running into the lunch hour. We have an important witness this afternoon from the Bureau of the Budget, Mr. Hughes. I am going to ask him, if he will, to come back at 2:30 and we will continue the hearing at that time. Colonel Hewitt, I hope you will be here also to answer any questions that might come up.

The committee will stand in recess until 2:30.

(Whereupon, at 12:45 p.m., the subcommittee was recessed, to reconvene at 2:30 p.m., the same day.)

AFTERNOON SESSION

The subcommittee reconvened at 2:30 p.m., Hon. Armistead I. Selden, Jr., chairman of the subcommittee, presiding.

Also present were the Honorable O. C. Fisher, a Representative in Congress from the State of Texas, and Hon. Joe M. Kilgore, a Representative in Congress from the State of Texas.

Mr. SELDEN. The meeting will come to order.

Our witness this afternoon is Mr. Phillip S. Hughes, Assistant Director for Legislative Reference, Bureau of the Budget. Mr. Hughes, do you have a prepared statement?

STATEMENT OF PHILLIP S. HUGHES, ASSISTANT DIRECTOR FOR LEGISLATIVE REFERENCE, BUREAU OF THE BUDGET

Mr. HUGHES. No, sir; I do not.

Mr. SELDEN. I understand the Bureau of the Budget has several suggested amendments to the pending legislation. I am going to ask you to explain the proposed amendments and the reasons that you have suggested those amendments.

Mr. HUGHES. Mr. Chairman, our letter of September 2, 1959,1 transmitted to the committee our comments with respect to H.R. 8080, and suggested five amendments in total. These, in general terms, were amendments designed to bring this legislation into conformity with what we considered to be generally good practice in legislation of this kind.

Without further ado, perhaps I can brief somewhat from the material that we sent you, the nature of these recommendations and then if you wish you may raise such questions as may arise.

The first suggestion that we made dealt with section 2.

There is a proviso in section 2 to the effect that if a power privilege is leased, a report shall be made to the Foreign Relations Committee

1 See app. IV, p. 271.

of the U.S. Senate and the Foreign Affairs Committee of the House of Representatives and such agreement shall not become effective unless approved by these committees.

As we view it, this language presents some serious problems essentially constitutional in nature and we have therefore recommended that the proviso be stricken from the bill.

I don't know if you wish to take these items in sequence. Perhaps it might be better for me to run through them.

Mr. SELDEN. Yes; run through them and we will ask questions after you have completed your presentation.

Mr. HUGHES. The second recommendation deals with the matter of repayment of water supply and irrigation costs. We have recommended that, in conformity with what we believe to be generally good practice, the local interests should agree to appropriate repayment of the costs that are allocated for these purposes. We have suggested some language for the committee's consideration to this end.

Mr. SELDEN. You mentioned in your letter the Anzalduas diversion dam-where is that dam located?

Mr. HUGHES. [Referring to wall map.] The little black line west of McAllen.

Mr. SELDEN. Under the terms of the legislation authorizing that dam, does it require repayment of water supply and irrigation costs? Mr. KUGEL. It is in the appropriation language, I think the 1953 act. Isn't that right, Colonel Hewitt?

Colonel HEWITT. The appropriation language states if it is used for irrigation purposes it shall not be used until some appropriate arrangements are made to the beneficiaries thereof for repayment. It has not been used for that purpose.

Mr. SELDEN. Do you intend to use water from that dam-for irrigation purposes?

Colonel HEWITT. NO.

Mr. SELDEN. Then the language is rather meaningless.

Mr. FASCELL. Perhaps that is the reason they are not going to use it. Mr. KILGORE. If I might interject, I think it would be well for the committee to know that Anzalduas is a diversion dam. It is a small structure. It was required for two purposes: One, to permit the water to be raised sufficiently to where Mexico could divert her water into the Anzalduas Canal. The headgates are just above the structure from the U.S. standpoint where the water could be raised in order that it could be diverted into a floodway system to divert water from the main channel of the Rio Grande in flood periods.

Colonel HEWITT. If the chairman would care to have it submitted and have it appear in the record, I can read you the proviso of the law.

Provided further, That the Anzalduas diversion dam shall not be used for irrigation or water supply in the United States unless suitable arrangements have been made with the prospective water users for repayment to the Government for such portion of the cost of said dam as shown to have been allocated for such purposes by the Secretary of State.

That is Public Law 195, act of August 5, 1953.

Mr. SELDEN. No provision of this type is included in legislation dealing with the Falcon Dam.

Mr. HUGHES. No, sir; there is not this type of provision in the Falcon legislation. As a matter of history, we did propose it.

Mr. BURLESON. Are we to discuss each of these points as Mr. Hughes presents them or wait until he concludes his complete statement? Mr. SELDEN. I'm certain Mr. Hughes is willing to answer any questions as they occur to the members of the subcommittee.

Mr. BURLESON. I want to know what it is the Bureau of the Budget proposes in the latter part of the provision Mr. Hughes just mentioned. Does this mean that the water users would contract to pay the sums which are divided as ratio cost benefits to the total cost of the project? Or does it mean that they would pay as they use water and whatever income is derived from that purpose would be recoverable into the Treasury of the United States?

Mr. HUGHES. The arrangement which we are proposing would be similar to that in general irrigation practice. I am not familiar with it in detail. Perhaps Mr. Kugel could comment more specifically on the type of repayment arrangement which is customary.

STATEMENT OF KENNETH KUGEL, RESOURCES AND CIVIL WORKS DIVISION, BUREAU OF THE BUDGET

Mr. KUGEL. I suspect this would contemplate that the Secretary of State would establish charges which over a period of years would, on the basis of estimated use, amortize the cost allocated to irrigation.

Mr. BURLESON. The water users would not be contracting to pay the entire cost apportioned to irrigation, would they? Suppose oneeighth of the total cost of this project were devoted to irrigation purposes; would water users contract to reimburse the Federal Government to that extent regardless of the amount they may actually use? It doesn't mean that; does it?

Mr. KUGEL. I would hesitate to make an interpretation of the language itself and be definite. It seems to me it is rather open ended. It could be either way. It could involve a contract, I should think, or it could involve the Secretary simply establishing a rate for repayment which would on the basis of his estimated use involve repayment over a 50-year period.

I should think, I don't know how the Department would interpret it, I would think that it would give them a certain amount of leeway as to whether they would choose to put it on a utility basis or a contract basis. The Bureau of Reclamation, for example, has in their repayment arrangements for irrigation investment both types of arrangements; I understand both contracts and utility payments.

Mr. BURLESON. I am not aware of any arrangement where they would have it on a contractual basis.

Mr. KUGEL. I don't think that would be required by this. That is not our intention.

Mr. FASCELL. Do I understand what you are asking is that if oneeighth of the total cost of the project is allocable to irrigation and you only have four users, would the charge to the four users be equal to the total cost of one-eighth?

Mr. BURLESON. That could be.

Mr. FASCELL. Is that what you were asking?

Mr. BURLESON. I didn't ask it, but it states the point.

« PreviousContinue »