Mr. CARROLL. Mr. Chairman, I think I have this much clearer. Mr. ROCKWELL. I may say, Mr. Carroll, that I think the Department is giving their rebuttal already. If Judge Stone wants to go on and let them talk afterward-I think these are very interesting figures and we should have them. Mr. CARROLL. We had, as far as I am concerned, an entirely new theory interjected this morning, and I wanted to find out about this new theory of going into the reclamation fund. On my part, it has been very helpful. Mr. STONE. I can finish very briefly, unless there are further questions. I want to clarify or refer to the statement made by Mr. Carroll that this is an entirely new theory. It is not an entirely new theory. What we are proposing is what actually happens under the Hayden-O'Mahoney Act. The Hayden-O'Mahoney Act is the reclamation law and has been ever since 1938. What I referred to was not a new theory but was to clarify a wrong impression that seemed to prevail as to where this money went. It seemed to be the impression that the interest money and any other return from commercial power went into the General Treasury. Under the Hayden-O'Mahoney Act, all of the returns go into the reclamation fund. We are not presenting a new theory, we are simply explaining how it will act or what will happen under existing law. I want to refer to another question which arose when Mr. Warne spoke, that he could not by any stretch of the imagination—or it was hard for him to understand what I meant when I said that the interest money did not go into the reclamation fund for reappropriation. By his own statement and his own explanation, he said that he was showing what it would do by deposit in the reclamation fund. The interest, when it is paid, under the Rockwell bill, will be deposited in the reclamation fund. If it is used to aid in retiring the investment; it is not deposited in the reclamation fund. It is by that process that the interest is plowed back to retire capital and not paid as an additional amount as compensation for the use of money. That is the point which I was making. Of course, we all understand that both the general fund and the reclamation fund are within the United States Treasury. I believe that it has resulted in a misunderstanding here again because of the use of terms. When money goes into the United States Treasury, it must be credited to the proper fund according to existing law. So that this interest money under the Rockwell bill does go into the reclamation fund under existing law. Mr. FERNANDEZ. Has the gentleman from Colorado finished? Mr. CARROLL. The point I wanted to make is that wherever it goes it would affect the power rate in the same degree. Mr. STONE. Surely it would affect the power rate in the same degree; because, to the extent that you relieve power rates by using the interest component for aid of irrigation, it relieves the power rate. In the Lemke bill you do that and also get the lower interest and the longer period. Mr. FERNANDEZ. As I understand the law, as it has stood, and the practices of the Department as they have stood for many years now, the effect is this: We in Congress say to the people of the West, through the Bureau of Reclamation, "Here is a project which we have studied and we want developed for the national welfare and which will be feasible. You cannot pay for all of it. But if you will enter into long-term contracts with us to pay a portion of the irrigation costs, we will, in connection with the project, develop a power project which will afford you reasonable power rates and will also, through the revenues therefrom, including the interest charge on the project cost, repay a portion of the irrigation cost." In order for the Bureau of Reclamation to say that to the people of the West, they will have to calculate first the power costs, the power construction costs. That is one block. Second, the operation and maintenance costs; that is another block. The irrigation costs which may be paid by the irrigations; that is another block. The irrigation construction costs which will be paid from revenues from power, that is the fourth block. And if the revenues from power and from water equal those costs, then the project may be authorized as feasible. Under the legislation now proposed, we would simply add another block which will be a block of interest, and in the Colorado-Big Thompson project I think you say it would amount to about $43,000,000. That would have one of two results: First, as to those projects which have already been authorized, we would break faith with the people who have entered into those contracts, because, necessarily, the rates would have to be increased. Second, if those rates have to be increased in order to meet the additional block to the extent that that power cannot be sold successfully, then the Department necessarily must say that the project is not feasible. Mr. STONE. No, Congressman Fernandez, I cannot follow you in two respects. In the first place, you say you will have to break faith. We are talking about a project and the test of feasibility where you have contracts. You are not interfering with them. You refer to the Colorado-Big Thompson. Except for one small feature, it is all prospective. The power features have not been constructed and, of course, are not in operation, and no contracts have been made. As I understand it, the contracts for what we call the Green Mountain unit, which is a very small part of it, are merely temporary contracts. In the Rockwell bill, as well as the Lemke bill, they will have the effect of reducing the rate as to that particular power. So I think that that construction, that conclusion, would not be justified that you are breaking faith. You do not in either case interfere with the existing repayment contract with the water users. That is a fixed amount. And on your second statement that it renders the project unfeasible, according to our studies, which have been very carefully made by competent men, fully familiar with all of these problems, the project is feasible under the 2 percent interest rate and the 67-year pay-off period. The only difference is that, according to our view, in 67 years the project will have been paid out in full, it will have paid its way, and you would not throw into the picture this additional subsidy which in reality is a subsidy to the power users. If you take the Lemke bill with a 2-percent interest rate and a pay-out period of 67 years, and then add to it the capture of the interest component, you increase, of course, materially, the subsidy for power. Our point is that that subsidy comes from the public Treasury when you make appropriations from the general Treasury for that project. If that $43,000,000, on the other hand, is paid back-that is interest, let us say, I do not recall the exact figure, but it is something like that-it would go into the reclamation fund under the present law and be subject to being used. Forty-three million dollars in the reclamation fund would go a long way in aiding in the construction of projects that we desire in Colorado. If you follow the capture of it for the use of the one project and give the benefit to the power users, then the money, the control of the money, is handled by the Secretary in fixing his pay-out schedule. It does not get into the Treasury to be reappropriated. Mr. FERNANDEZ. You would still have to have revenues equal to the construction costs in order to find it feasible. You merely extend them horizontally to do that. But the fact remains that you still have an additional block, and that even though you extend them horizontally, if you do add the additional block, in some cases the revenues would not equal the costs plus the additional block of interest, and therefore the project would not be feasible. You admit that, do you not? Mr. STONE. Conceivably you could find a project, as we are finding them today, that cannot be found feasible under the 1939 act. Mr. FERNANDEZ. You concede that you would have to cover that additional block? Mr. STONE. But the benefit of that block flows to the power users. Mr. FERNANDEZ. The answer to that, I suppose, is, as has been stated sometimes, that if the revenue is not sufficient to cover all these construction costs plus the additional block of interest, then it should not be authorized, period. And that means period as to many new projects otherwise feasible. Mr. STONE. That is not true, Congressman Fernandez, because under the 1939 act, which in this streamlined bill would not be changed, if the Secretary cannot find it feasible under that standard of feasibility, then it may be authorized by Congress. In other words, you have to set up a certain standard of feasibility. Mr. FERNANDEZ. Whoever authorizes it, you have to find it feasible by showing that the revenue will equal the costs. Mr. STONE. Not necessarily. Congress can do anything it wishes. Mr. FERNANDEZ. Another point: These other projects which have already been authorized-some of which are under construction, some of which have been finished-you have not had that additional block to consider in making determination that they are feasible. The rest of us are going to be asked to conform to a higher standard. I think that is discrimination. Mr. STONE. We have not had in any instance that benefit which you mention. The only project in Colorado, and the only places where this question is coming up were on the larger power projects. It is the new ones. It would apply to the proposed development in the Columbia Basin, it would apply to the Central Valley, which is under construction, and it is proposed to be applied to the ColoradoBig Thompson. On the Colorado-Big Thompson, we have our choice, as I see it, depending upon the action taken by Congress, in presenting the matter to Congress, of whether we will pay out in full in 67 years, or whether we will be, by the mandate of Congress, told that that $43,000,000 subsidy is granted. Mr. FERNANDEZ. Let us look at the Rio Grande. You will grant, will you not, if we have the additional block for interest, it will be harder to find the Rio Grande projects feasible either by Congress or the Department, than it would if we included or recaptured that interest and paid in into the reclamation fund as repayment for irrigation construction costs? Mr. STONE. Assuming that the Department would be willing not only to use the interest component, but perhaps some other power revenues to aid; you would have to assume that that is correct. The whole question is whether you believe that, as a matter of reclamation policy, that will aid or detract from continued reclamation. In my very considered judgment, I think that you may, by trying to grab off this additional aid and this great additional help, that you are going to have so much objection to it that maybe you cannot get appropriations for the projects which you desire. I have stated that before and I will not dwell upon it any further. That is a matter for you men to decide. It is a difference in judgment, perhaps. Mr. ROCKWELL. Mrs. Lusk, do you have any questions you want to ask? Mrs. LUSK. No, I do not, Mr. Rockwell. I am just listening in for general information. Mr. ROCKWELL. There is a lot of information going on around here. Mrs. LUSK. I am interested in the developments, particularly in my own area. I cannot follow all the hearings, and I am just coming in when I can. Mr. ROCKWELL. If there are no further questions, we will stand recessed until 2: 30 this afternoon. (Thereupon, at 12: 40 p. m., the subcommittee recessed until 2:30 p. m. of the same day.) AFTERNOON SESSION The subcommittee reconvened at 2:30 p. m., upon the expiration. of the recess. Mr. ROCKWELL. The committee will please come to order. The next witness is Mr. Clyde T. Ellis, executive manager of the National Rural Electric Cooperative Association. STATEMENT OF CLYDE T. ELLIS, EXECUTIVE MANAGER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION Mr. ELLIS. My name is Clyde. T. Ellis. I am executive manager of the National Rural Electric Cooperative Association, which is the national service organization of the rural electric cooperatives in the several States. There are 677 of them in 41 States, members of the national organization, with 1,152,018 farm members. First, Mr. Chairman, we have submitted to the clerk of the committee 27 statements in triplicate of 30 copies each from the rural electric cooperatives in States of the West. I should like to ask that those statements-they are all short, none over a page, and most of them considerably shorter-be made a part of the record. Mr. MURDOCK. I suggest we put them in, in their entirety, Mr. Chairman. 99687-47-No. 4 -25 Mr. ROCKWELL. All right. (The statements referred to are as follows:) CLYDE T. ELLIS, MILNOR, N. DAK., March 25, 1947. National Rural Electric Cooperative Association, Washington, D. C. House Public Lands Committee, Congress of the United States: We understand that H. R. 1886 would require that reclamation power be sold at as high a rate as that of the private utilities. This would render the REA cooperatives in western North Dakota as unfeasible as they were considered feasible only after the establishment of low-cost reclamation power. We strongly urge that this bill be killed. NORTH DAKOTA ASSOCIATION OF RURAL ELECTRIC COOPERATIVES, R. A. JACOBSEN, Secretary. CLYDE T. ELLIS, MILNOR, N. DAK., March 25, 1947. Washington, D. C: We authorize you to present our statements on H. R. 1886 and H. R. 1997 to the House Public Lands Committee. NORTH DAKOTA ASSOCIATION OF RURAL ELECTRIC COOPERATIVES, R. L. JACOBSEN, Secretary. CLYDE T. ELLIS, MILNOR, N. DAK., March 25, 1947. National Rural Electrical Cooperative Association, House Public Lands Committee, Congress of the United States: We understand that H. R. 1997 would reduce the interest rate from 3 to 2 percent in calculating power rates, thereby reducing the rate structure for sale of electricity by public power projects. Any reduction in power rates will aid our REA projects in North Dakota in reaching their goal of complete area coverage. We, therefore, urge passage of this bill. NORTH DAKOTA ASSOCIATION OF RURAL ELECTRIC COOPERATIVES, R. L. JACOBSEN, Secretary. CLYDE T. ELLIS, Manager, Washington, D. C.: ASHTON, IDAHO, March 23, 1947. Wholesale power largest single operations cost. H. R. 1977 passage vital to electrification of rural Idaho. FALL RIVER RURAL ELECTRIC COOPERATIVE., CLYDE T. ELLIS, HAZEN, N. DAK., March 25, 1947 Executive Manager, National REA Association, Washington, D. C.: We urge the House Public Lands Committee to kill H. R. 1886, by Rockwell, and pass H. R. 1977, by Lemke. We believe the Lemke bill will make sound policy and benefit cooperatives. In our sparsely settled area it is essential that we receive reasonable power rates. OLIVER MERCER ELECTRIC COOPERATIVE, INC. |