(The information referred to on p. 1206 follows:) MILLWOOD DAM The estimate includes $1,093,000 for a ring levee which would protect the Okay Cement plant and that part of its quarry which would be subject to frequent flooding. Hon. OREN HARRIS, Representative in Congress, El Dorado, Ark. OCTOBER 2, 1953. DEAR MR. HARRIS: At the request of Mr. L. R. Matthias, executive secretary of the Red River Valley Association, I am furnishing you certain information relative to the Millwood and Walnut Bayou projects which has been prepared primarily through the efforts of Col. Stanley G. Reiff, district engineer of the Tulsa District, who has direct supervision over these projects. As you know, the authorized Millwood Dam and Reservoir would be located on Little River about 10 miles northwest of Fulton, Ark. On the enclosed map there is shown an outline of the Millwood Reservoir as authorized, with top of conservation pool at elevation 252 and top of flood control pool at 291.0. The conservation storage to elevation 252.0 would amount to 52,000 acre-feet, and the flood control storage with pool at elevation 291.0 would amount to 2,208,000 acre-feet. Because of the indication of a desire of local interests for consideration of water supply storage in Millwood Reservoir, there is also shown on the enclosed map the outline of the top of conservation pool with an additional 100,000 acre-feet of water supply storage. With this additional 100,000 acre-feet of storage, the top of conservation pool would be at elevation 257.0, and the top of flood control pool would be at elevation 292. Because of the proximity of the top of flood control pool at elevation 292 to top of flood control pool at elevation 291, the outline of the pool at elevation 292 has not been indicated on the map. Our studies indicate that nearly all relocations could be accomplished by raise of grade above the effects of the reservoir, and without major changes in alinement. Operation of the reservoir would affect United States Highway 71 from a point approximately 1 mile north of Wilton, Ark., and extending northerly for a distance of approximately 6 miles. The highway would be raised above the effects of the reservoir along the existing horizontal alinement and resurfaced "in kind." The Gaysonia, Nashville & Ashdown Railroad would be affected for about 12 miles of its length between Ashdown and Mineral Springs, Ark. A spur line of this railroad extending from a point near Schaal, Ark., to the Ideal Co. cement plant near Okay, Ark., would be affected by the reservoir for a distance of about 31⁄2 miles. Relocation of both the main line and the spur of the Graysonia, Nashville & Ashdown Railroad would be accomplished by raising the grade above, the effects of the reservoir on an offset alinement approximately paralleling the present line. The present studies indicated that relocation to the Kansas City Southern Railroad would not be required because of the operation of Millwood Reservoir The proposed plan for Millwood Reservoir includes provision for protection of the Ideal Co. cement plant near Okay, Ark., by construction of a dike along the north side of the quarry and plant. This dike would provide protection from inundation to the existing cement plant and quarry; however, not all of the land owned by the Ideal Cement Co. could be protected by the dike. The unprotected portion of the property is not developed for quarry purposes at this time, and an allowance for purchase of the unprotected property has been made in the estimate of cost for the project. The preliminary studies indicate that the Little River Country Club located near the crossing of Little River by Arkansas State Highway 41 between Jewel! and Horatio, Ark., would not be materially affected by operation of Millwood Reservoir, since the reservoir at that location would be confined to the channe of the stream. The estimated cost of Millwood Dam and Reservoir is $55 million. The Walnut Bayou project was recommended for construction in the report of June 20, 1950 prepared by the Board of Engineers for Rivers and Harbors on Red River and Tributaries, Texas, Oklahoma, Arkansas, and Louisiana. The report is under review in the Office, Chief of Engineers, Washington, D. C., at this time, and the economic data are being brought up to date with a view to submission of the report to Congress in the near future. The Walnut Bayou project as recommended in the report by the Board of Engineers for Rivers and Harbors would consist of clearing and enlarging the channel of Walnut Bayou from the Arkansas-Oklahoma State line downstream to mile 7 and diverting the stream into Red River at that point. This improvement 19.2 miles in length would increase the channel capacity to not less than about 3,000 cubic feet per second and would benefit about 15,800 acres of land. The total estimated first costs for the Walnut Bayou project, as given in the report by the Board of Engineers, was $480,000, of which $440,000 was Federal cost and $40,000 was non-Federal cost. These estimated costs were based on 1949 prices. I trust that this is sufficient for your present purposes. Please let me know when I may be of further service. Sincerely yours, HERBERT D. VOGEL, Colonel, Corp of Engineers, Division Engineer. INFORMATION CONCERNING EFFECT OF MILLWOOD RESERVOIR ON IDEAL CEMENT CO. PLANT, OKAY, ARK., AND ON THE GRAYSONIA, NASHVILLE & ASHDOWN RAILROAD The Ideal Cement Co., Denver, Colo., operates a cement plant located at Okay, Ark. The plant and quarry are on the north slope of a ridge extending from high ground on the east side of the Saline River Valley to the west. The area of the plant and quarry site is 1,020 acres. Of this area, 570 acres are above elevation 295, 260 acres lie between elevations 265 and 295, and 190 acres are below elevation 265. Elevation 265 is 12 feet above the proposed conservation pool of the Millwood Reservoir and the frequency of flooding at this elevation is about once in 20 years, with a duration of 34 days. Elevation 295 is 2 feet above the top of flood control pool at elevation 293 and filling of the reservoir to elevation 293 is estimated to have a frequency of once in 50 years. Available information indicates that in 1952 the plant produced 1,369,000 barrels of cement from 427,000 tons of material mined in that year. A preliminary estimate of the value of the plant and quarry, based on data readily available and with only a limited inspection of the property, indicates a value of the property of $15 million, based on capitalized profit in 1949. Should the Millwood Reservoir be placed in operation without the works proposed to protect the quarry and plant, the property would be rendered inoperative and the value of the damage would be the value of the cement plant and quarry. In addition, this cement plant provides a major part of the traffic for the Graysonia, Nashville & Ashdown Railroad, and the closing of the plant would cause major damage to the railroad which would probably require its abandonment. The protective measures necessary for the railroad are discussed later in this statement. Plans for the Millwood Reservoir include the construction of a levee approximately 8,400 feet in length, with top elevation of 296, beginning west of the existing quarry and tying to high ground at the eastern limits of the cement company property. This levee would protect all the residential, administrative and productive parts of the plant as well as all of that part of the quarry presently being worked. The natural ground elevation at the base of the levee would be from elevation 265 to 270. The estimated cost of the levee includes provision for pumping of seepage and surface water in the amount of approximately 35,000 gallons per minute. The estimated cost of the Millwood project approved in 1953 includes $1,093,000 for construction of the levee under the component "levees." Of this amount, direct costs are $982,600. In addition to the Okay property, the Ideal Cement Co., owns about 3,880 acres of land in Little River and Sevier Counties, including the site of a former cement plant and chalk quarry, located at Whitecliffs about 71⁄2 miles west of Okay. The former cement plant has been dismantled and all buildings removed. The quarry floor is at about elevation 300. The shipping point for the former operation was the Whitecliffs station on the Graysonia, Nashville & Ashdown Railroad about one-half mile south of the quarry site. The effect of the Millwood Reservoir on this site would be largely confined to the disruption of shipping facilities for any future operations of the site as the crossing of the Saline and Little River Valleys by the railroad would be inundated by the reservoir. Of the Whitecliffs property 1,865 acres are below elevation 265; 425 acres are between elevations 265 and 295; and 1,590 acres are above elevation 295. Acquisition of appropriate real-estate interest in the undeveloped Whitecliffs property is included in the approved estimate of cost for Millwood in the amount of $170,000. With respect to the Graysonia, Nashville & Ashdown Railroad, this facility extends some 27 miles between Nashville and Ashdown. The part affected by the reservoir is located between Schaal and Ashdown across the Saline and Little River Valleys. At Schaal, a spur 4.7 miles long runs southeasterly to the Ideal Cement Co. plant at Okay. Unless the main line of the railroad and the cement plant spur are altered to provide for continued operation with the reservoir in place, and unless the cement plant is continued in operation, it would be necessary to purchase or to otherwise idemhify the railroad for the losses which would be sustained. It is understood that 90 percent of the production of the cement plant is marketed via the railroad and that this traffic is by far the longest part of the railroad's freight business. Total traffic for the railroad in 1950 was 291,000 tons. of which 256,000 originated on the line. Under the component "levees,” the 1953 estimate for the reservoir provides for relocation of the Graysonia, Nashville & Ashdown Railroad in the amount of $7,766,900. Indirect costs included in this estimate are $784,200, so that direct costs are $6,982,700. Of this total amount, the main-line alteration is estimated to cost $5,560,000 and the spur alteration $2,206,900. (The information referred to on p. 1416 follows:) The engineering committee of the Mississippi Valley Flood Control Association, after a thorough review of the recent Atchafalaya River study prepared by the Army engineers, concurred in the conclusion that if left alone the Atchafalaya would capture the Mississippi River, thereby causing serious consequences in the immediate area to the detriment of the lower valley. This committee therefore recommended immediate construction of the necessary control structures. COST ALLOCATIONS DEPARTMENT OF THE ARMY, Hon. STYLES BRIDGES, Chairman, Committee on Appropriations, United States Senate, Washington, D. C. DEAR SENATOR BRIDGES: I am forwarding herewith for your information copies of a statement pertaining to the allocation of costs of Federal multiple-purpose projects. This statement is the basis for a recent agreement among the Departments of the Army and Interior, and the Federal Power Commission on principles and procedures to be followed by all three agencies in the matter of cost allocation. Sincerely yours, E. C. ITSCHNER, Brigadier General, USA, Assistant Chief of Engineers for Civil Works COST ALLOCATION AGREEMENT AMONG DEPARTMENT OF THE INTERIOR, DEPARTMENT OF THE ARMY AND FEDERAL POWER COMMISSION Costs of a multiple-purpose project shall be allocated among the purposes served in such manner that each purpose will share equitably in the savings resulting from combining the purposes in a multiple-purpose development. Acceptable methods. (See attachment for brief descriptions.) (1) Separable costs-remaining benefits method. This method is considered preferable for general application. (2) Alternative justifiable expenditure method. This method differs from (1) only in employing specific costs of the various functions rather than their separable costs. It is acceptable where the necessary basic data to determine sep rable costs are not available and the time and expense required to obtain the ata are not warranted. (3) Use of facilities method. This method is acceptable where the use of failities is clearly determinable on a comparable basis and where use of this ethod would be consistent with the basis of project formulation and authorizaion. finimum allocation Each purpose shall be allocated, in every case, at least its separable cost (the ost traceable to its inclusion in a multiple-purpose project). Limitations of basic data may occasionally require the use of specific cost (the cost of features dentified solely with a single purpose) and other available data as constituting he best available basis for approximating separable costs. Legislative history The legislative history of authorized projects shall be considered in the allocation of cost. The authorizing act, committee reports, project justification documents, and similar sources disclose the nature of the proposal submitted to the Congress and of congressional action thereupon. Consideration of economic costs In applying any one of the above allocation methods, taxes in an amount equal to those which would be foregone as a result of Federal development of the power rather than the most likely alternative development shall be included as an economic cost when distributing costs among the project purposes for analysis of economic justification, but shall be subtracted from the costs thus distributed to power in order to obtain the allocation of project costs to power. Value of power The value of power produced means the estimated market value which would be obtainable if it were to be sold on an open competitive basis, without restriction as to use or resale. The value of power shall be determined as the lower of two figures: (1) The estimated actual cost of equivalent power from the most likely alternative source that would be expected to develop in the absence of the project, to meet the same power needs, with appropriate adjustment for transmission costs and losses and other technical factors. (2) Estimated value of power to users. (Applicable where costs of alternative power would be prohibitive either for part or all of the power produced.) The value of power, determined as indicated above, shall be used for computations of economic benefits in project justification and for the allocation of project costs. It will not be used to establish the level of power revenues, which are based on the amortization of project costs (Federal power investment) over a reasonable period of years. Project feasibility Criteria of project feasibility shall be such that, insofar as can be determined in advance: (1) Projects will be considered economically feasible when the value of power (as defined above) will at least equal the project costs allocated to power, plus the amount of taxes which would be foregone as a result of Federal development of the power rather than the most likely alternative development. (2) Projects will be financially feasible, i. e., they will have potential net revenues from power sales sufficient to reimburse the Federal Government for the Federal investment in power. BRIEF DESCRIPTION OF METHODS OF COST ALLOCATION The separable costs-remaining benefits method has the following steps: (1) The benefits of each purpose are estimated. (2) The alternate costs of single-purpose projects to obtain the same benefits are estimated. (3) The separable cost of each purpose is estimated. (4) The separable cost of each purpose in the multiple-purpose project is deducted from the lesser of each purpose's benefits or alternate cost. The lesser figure is used since alternate cost is used in this method only if it represents a justifiable expenditure; that is, if it does not exceed the benefits. (5) From total cost of project deduct all separable costs to determine residual costs. (6) Residual costs, designated as joint costs in this method, are distributed in direct proportion to the remainders found in step 4. (7) To determine the cost allocated to each purpose, add the separable and distributed costs for each purpose and, in the case of power, subtract from that sum the amount of taxes foregone which was used in computing power costs under steps 2 and 3 above. The alternative justifiable expenditure method has the following steps: (1) The benefits of each purpose are estimated. (2) The alternate costs of single-purpose projects to obtain the same benefits are estimated. (3) The specific cost of each purpose is determined. (4) The specific cost of each purpose in the multiple-purpose project is de ducted from the lesser of that purpose's benefits or alternate cost. The lesser figure is used since alternate cost is used in this method only if it represents a justifiable expenditure; that is, if it does not exceed the benefits. (5) From total cost of project deduct all specific costs to determine joint costs. (6) Joint costs of the multiple-purpose project are distributed among purposes in direct proportion to the remainders found in step 4. (7) Allocation of project cost is determined in the same manner as under the separable costs-remaining benefits method. The use of facilities method has the following steps: (1) The use which is made by each purpose of joint project facilities is esti mated on some basis which is comparable for the purposes concerned, using such measures of use as those of flow, reservoir capacity, energy consumption, and others as may be applicable. (2) The separable cost of each purpose is estimated. (In cases of minor inportance specific rather than separable costs may be used.) (3) From total cost of project deduct all separable costs to determine join: (residual) costs. (4) Joint costs of the multiple-purpose project are distributed among purposes in proportion to the comparable measures of use of the joint facilities estimated in (1). (5) To determine the cost allocated to each purpose, add the separable and distributed costs for each purpose and, in the case of power, subtract from that sum the amount of taxes foregone which was used in computing power cost under (2) above. |