States and Imperial irrigation district. providing for a connection with Laguna Dam; but the Secretary of the Interior is authorized to modify the said contract, with the consent of the said district, or to enter into a new contract or contracts with the said district or any private corporation or corporation subsidiary to said district, in order to provide for the construction, in accordance with the terms of this act, of a canal, or canals, and appurtenant structures, adequate to serve the lands of said district, and other lands that may be served thereby, and to equitably allocate the costs thereof, SEC. 12. Political subdivision or political subdivisions" as used herein shall be understood to include any State, irrigation, or other district, municipality, or other governmental organization. Net investment" as used herein shall be understood to mean "net investment as defined by the Federal Water Power Act, plus such portions of annual or other payments as shall be used by the Secretary of the Interior for construction purposes or to amortize the cost of said dam, lands, right of way, and incidental works, which portions of said annual or other payments are hereby declared to be capital investment. SEC. 13. The Colorado River compact signed by the commissioners of the States of Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming, and by Herbert Hoover, as the representative of the United States of America, at Santa Fe, New Mexico, November 24, 1922, pursuant to Act of Congress approved August 19, 1921, entitled An act to permit a compact or agreement between the States of Arizona, California, Colorado, Nevada, New Mexico, Utah, and Wyoming, respecting the disposition and apportionment of the waters of the Colorado River, and for other purposes," is hereby approved by the Congress of the United States, and the provisions of the first paragraph of article 11 of the said Colorado River compact, making said compact binding and obligatory when it shall have been approved by the legis lature of each of the signatory States, are hereby waived, and this approval shall become effective when by act or resolution of their respective legislatures at least six of the signatory States shall have approved or may hereafter approve said compact, and shall consent to such waiver. SEC. 14. This act shall be deemed a supplement to the reclamation law, which said reclamation law shall govern the construction, financing, and management of the works herein authorized, except as otherwise herein provided. (A letter of the Secretary of the Interior to the chairman of the Committee on Irrigation and Reclamation relative to S. 1868 is here printed in full as follows:) DEPARTMENT OF THE INTERIOR, Hon. CHAS. L. MCNARY, Chairman Committee on Irrigation and Reclamation, United States Senate. MY DEAR SENATOR MCNARY: I have received your letter of December 23, transmitting, with request for report, a copy of S. 1868, entitled "A bill to provide for the protection and development of the lower Colorado River basin." Instead of discussing the provisions of this bill, section by section, I desire to submit some suggestions regarding the policy and procedure to be followed in this development and the legislation required to secure the desired results. It is assumed that the dam and reservoir to be created are essentially those described in a report of the Bureau of Reclamation dated February 28, 1924, which proposes a dam 550 feet high, and a reservoir to impound 26,000,000 acre-feet of water, and that the all-American canal for connecting the Colorado River with the Imperial and Coachella Valleys is substantially the one described in Senate Document No. 142 and in the report of the all-American canal board published in 1920. It is my understanding that the primary purpose of this scheme is to regulate and control the flow of the river below the dam, so as to lessen the menace from floods to low-lying land below, to increase the water supply for irrigation in seasons of drouth, and provide an adequate water supply at all seasons of the year for household and industrial uses in growing cities and towns, and to generate electric energy both as a means of making this project a financially solvent undertaking and contributing to the general prosperity of the southwestern part of the country. The general plan and purpose of this measure has my support, and I favor it being made a national undertaking, to be carried out and administered by the Federal Government. Interstate and international rights and interests involve the diversified benefits from the construction of these works, the waiting necessities of cities for increased water supplies, the large development of latent agricultural resources, the protection of those already developed, and the immense industrial benefits which may come from the production of cheap power, which together appear to render the construction and subsequent control of these works a measure of such economic and social importance that no agency but the Federal Government should be intrusted with the protection of rights or distribution of its opportunities. All uses can be coordinated and the fullest benefits realized only by their centralized control. I shall therefore consider this development as including three features: (1) A dam approximately 550 feet high creating a reservoir holding 26,000,000 acre-feet of water. (2) Works for the generation of electric power. (3) An all-American canal starting at Laguna Dam and delivering water to the Imperial and Coachella Valley canals. The reservoir should be regulated primarily to safeguard the valleys in Arizona and California, including Imperial Valley with its present extensive development from the destructive effect of large floods. Water levels in the reservoir would be raised during flood periods and lowered at other times, thus equalizing the discharge of the river below and securing a regulated flow for irrigation and power. The water so impounded should be sold to cities requiring it for domestic purposes and other municipal uses and to irrigation districts, like that of the Imperial Valley, desiring a complete or supplemental water supply under the provisions of the Warren Act, payment to be made for a definite volume of water each year. The electric energy generated should be sold to the highest and best bidders, with due regard to public interest, at the switchboard of the power plant. Contracts should not exceed 50 years in duration. Transmission of power and its distribution to be provided by the purchasers. Water supplied for domestic, industrial, or irrigation uses should be delivered at the dam, at points along the river agreed upon, and at the terminal of the All-American Canal. Prices for this water should be such as to at least repay all of the cost of operation and maintenance of the canals and an equitable part of the operating expenses of the dam. This, with the revenues from power, will, we believe, repay the entire investment in this development, with 4 per cent interest. The money for this development should, I believe, be provided by a bond issue of the United States. It should be for a sum sufficient to provide for the construction of the dam, the power plant, and the All-American Canal. An additional sum should be included in the authorization to pay interest on bonds sold during the period of construction, and until such time as the revenues will meet interest charges. Providing the money for this development througn a special bond issue will obviate disturbance of the regular fiscal operations of the Government. It will obviate provision by the Budget for the money needed during construction. The bonds could be sold as money would be needed. Construction would extend over a period of between 5 and 10 years if work was carried on at a rate to secure the greatest efficiency. In the sale of water to irrigation districts and municipalities, the provisions of the reclamation act and of the Warren Act would apply. Such an adjusting of burdens and benefits should stimulate irrigation development because of the generous terms on which water will be supplied, and at the same time result in a considerable revenue from the water furnished for irrigation, domestic, and industrial uses. But the money-earning feature of this development is power. The revenues from the sale of power will, it is believed, alone repay the entire cost of these works with interest at 4 per cent. With this general outline of the development program favored, I submit comments on features of the bill which are approved and others which it is believed should be modified. The necessity for the All-American Canal, and the size and cost of this canal, depends largely on whether the existing concession under which water is now diverted from the Colorado River at Hanlons Heading and carried through Mexico to irrigators in the Imperial Valley, can be modified. If it can not be, then the All-American Canal becomes an indispensable part of this development. Under this contract, or concession, the Mexican Government gave a corporation permission to build and operate a canal across Mexican territory, to irrigate land in California, on condition that Mexican irrigators be given, if they desire it, one-half of all the water diverted into this canal from the Colorado River. Hence the canal has to be double the capacity required to meet the needs of California. The river has to supply double the water needed in California and the rights of Mexicans to water under this concession grow, as the irrigated area is extended in California. The canal now supplies water for the irrigation of over 400,000 acres in California, and irrigators in Mexico at present require water for the irrigation of 200,000 acres. But Mexican irrigators are entitled, under this concession, to double the volume they are now using, or for enough to irrigate as many acres as are now irrigated in California. That is more water than the unregulated flow of the river will now supply. As the Mexican irrigators are on the upper end of the canal, the pinch of scarcity when it has come in the past, or when it may come in the future, falls first on irrigators in the United States, which country supplies the water, all the construction cost and all the money advanced for operation. It is unfair to California irrigators now, and will be even more so after the reservoir is built. It is physically possible to irrigate much more than 400,000 acres from this canal in Mexico. If this concession remains in force without any amendment and the canal continues to be used as now, the irrigated area in Mexico will continue to extend. The volume needed to be diverted from the river would be more than the direct flow at the low water season, and the area irrigated in California would be subject to ruinous uncertainties and loss. If storage is provided, a part of the water for the irrigation of lands in Mexico would, under this concession, have to be supplied from the reservoir, as this canal would be the only means of conveying water to the Imperial Valley and it can be operated only if the terms of the Mexican concession are complied with. If, however, the Government of Mexico would consent to a modification of this concession and definitely limit the volume of water to which Mexican irrigators would be entitled, then the future use of the present canal would be economical and desirable, a smaller high line could be built and utilized mainly for the irrigation of the higher lands of the Imperial and Coachella Valleys. Thus far, no negotiations for the modification of this concession have been made. It is not known what the attitude of the Mexican Government would be and plans for this development should therefore include provision for an all-American canal as an essential part of the scheme. The building of a unified power plant by the Federal Government in the place of allocating power privileges, as proposed in the bill, is regarded as more efficient and cheaper. It will obviate controversies between applicants, and long delays in their adjustment. In the end, results will, I believe, be superior to those possible under an allocation of privileges. The area for the location of separate power sites is restricted. Allotments would not be equal in value. Some allottees would, therefore, have an advantage over others. It would result in the creation of operation and administration controversies to be avoided and which a unified development will avert. The transmission lines for the distribution and retailing of this power should be financed by its purchasers. To secure the greatest economy, main transmission lines leading to different localities should be constructed for joint use. This plan of power development is not an experiment. It has been adopted by the Government with satisfactory results in the construction of other reclamation works, where the generation of power is an incident to irrigation development. Salt River, Minidoka, Lahontan, and Guernsey are illustrations. 1 The Sociedad de Riego y Terrenos de la Baja California, S. A., is authorized to carry through the canal which it has built in Mexican territory, and through other canals that it may build, if convenient, water to an amount of 284 cubic meters (10,000 cubic feet) per second from the waters taken from the Colorado River in territory of the United States by the California Development Co., and which waters this company has ceded to the Sociedad de Riego y Terrenos de la Baja California, S. A. It is also authorized to carry to the lands of the United States the water, with the exception of that mentioned in the following article. From the water mentioned in the foregoing article, enough shall be used to irrigate the lands susceptible of irrigation in Lower California with the water carried through the canal or canals, without in any case the amount of water used, exceeding one-half of the volume of water passing through said canals. Section 6 provides that no part of the construction cost of the dam and the appurtenant works shall be charged against any lands irrigated by the waters of the reservoir. If the all-American canal is to be considered as an appurtenant work, the bill should be amended. It is believed that the sales of water from this canal will return not only the cost of operation and maintenance, but pay construction costs without interest, as is done on other reclamation projects. All revenues from power, irrigation, and domestic water supplies should be placed in a common fund and used for the payment of interest. operating expenses, and build up a sinking fund for redeeming the entire bond issue. In order to give assurance before any large expenditure is incurred that the anticipated revenues from this development will be obtained. the bill should contain a provision that before any bonds are issued and sold and before awarding any contracts for construction, the Secretary of the Interior shall secure the execution of contracts with irrigation districts, municipalities. and corporations, on terms to be fixed, for the deery of all water to be supplied for irrigation, domestic, and municipal uses, and shall obtain definite commitment for the purchase of power from responsible bidders in an amount to insure a sufficient return from this development to repay the money to be expended with interest within a period of 50 years. Section 8, which provides for the distribution and use of all water for irrigation, power, and otherwise, in accordance with the Colorado River compact, seems well conceived and is a necessary part of this legislation. This appears to afford ample protection and assurance to those States included in the upper division of the watershed, against the creation of a priority of right through the building of these works, which would impair in any way their right to the volume of water guaranteed to that division in the compact. I suggest for consideration, amendment to the effect that the benefits to be derived from this development shall be available only to those States or the etizens of those States which have ratified the compact. I suggest the amendment of section 9 as follows: In line 1, page 11, strike cut the words "the proportionate share" and insert in lieu thereof the words "an equitable share in accordance with the benefits received." After the word "lands," in line 15, insert "subject, however, to the provisions of subsection C of section 4, act of December 5, 1924 (43 Stat. 702)." The first amendment suggested is designed to avoid the necessity of fixing a flat-rate charge without regard to the classification or quality of the land. Experience has shown that a flat-rate charge is undesirable in some cases. The second amendment I believe of prime importance. If soldiers and sailors are to be given a preference, experience has shown that provision should be made for selection. This is desirable for the protection of all prospective entrymen, soldiers and sailors, as well as civilians. Since section 1 provides for the building of a dam either at Black Canyon or Boulder Canyon, I suggest that line 11, section 10, be amended so as to designate the subfund there mentioned as the "Colorado River Dam fund." which would be applicable in either case. The present designation might possibly prove a misnomer. I suggest the following proviso be inserted at the end of section 10 of the bill: Provided, however, That no work shall be begun and no moneys expended on or in connection with the works or structures provided for in this act until the respective legislatures of at least six of the signatory States mentioned in section 13 hereof, shall have approved the Colorado River compact mentioned in said section 13, and shall have consented to a waiver of the provision of the first paragraph of article 11 of said compact making the same binding and obligatory when it shall have been approved by the legislatures of each of the seven signatory States, and until the President, by public proclamation, shall have declared that the said compact has been approved by and become binding and obligatory upon at least six of the signatory States." An approximate estimate of cost, operating expenses, and income leaves no question as to the ultimate solvency of this undertaking if carried out along the lines proposed. The main source of revenue will be power, and the rate assumed is lower than the wholesale prices now being paid in the West. Those of which we have information range from 32 to 8 mills per kilowatt-hour, measured at the switchboard. As the largest consumers of this power would be distant. a low figure of 3 mills per kilowatt-hour at the switchboard has been assumed in the estimates which follow: Colorado River development, Boulder Canyon Reservoir, all-American canal Interest during construction, on above 5 years, at 4 per cent. 21, 000, 000 Storage and delivery of water for irrigation and domestic pur poses-- 1,500,000 Total Estimated fixed annual charges for Operation and maintenance, storage, and power. Total. 12, 300, 000 700, 000 500, 000 5, 000, 000 6, 200, 000 Estimated annual surplus, $6,100,000, or thought to be sufficient to repay the entire cost in 25 years. The height of this dam as fixed will not prevent the construction of the proposed dams at Diamond Creek or Bridge Canyon. The approval of this project should open the way for other development and encourage the construction of projects above this dam for development of irrigation, power, or other purposes. Although the difficulties of construction and magnitude of the proposed structure compared with any other for similar purposes are unprecedented, assuming that it is a feasible engineering possibility, the Reclamation Bureau of the Department of the Interior as now organized, with its present commissioner, is competent to construct the works contemplated in S. 1868. With the amendments suggested, I recommend the favorable consideration of this bill by Congress. Respectfully submitted. HUBERT WORK, Secretary. The CHAIRMAN. At this time I desire to put in a letter from Mr. Elwood Mead, Commissioner of the Bureau of Reclamation, Department of the Interior, showing the interest of the Government in lands in case of the construction of the all-American canal. (The letter referred to is here made a part of the record, as follows:) Hon. CHAS. L. McNARY, United States Senate. DEPARTMENT OF THE INTERIOR, MY DEAR SENATOR MCNARY: In reply to your inquiry of December 14, 1925, we have no detailed information relative to the status of lands under the allAmerican canal other than is given in the table on page 80 of the report on problems of Imperial Valley and vicinity. (S. Doc. 142, 67th Cong., 2d sess.) This table shows a net area of 785,400 acres or irrigable land under the allAmerican canal in the United States, divided as follows: |