646 RECLAMATION PROJECT ACT OF 1939-SEC. 9(b) quent enactments, including section 9 of the Reclamation Project Act of 1939, Act of August 4, 1939, 53 Stat. 1187, 1193, 43 U.S.C. § 485h; and has repeatedly been recognized and accepted by Congress. Letter from Acting Commissioner Markwell to Rep. Leroy Johnson, April 2, 1948. Subsections (c), (d), and (e) require repayment or return of all actual costs, not estimated costs, allocated to irrigation. The requirement for full return of such costs can be met by assigning for return from power revenues, where such revenues are available, all increased costs properly allocable to irrigation but which are beyond the water users' ability to pay. Memorandum of Chief Counsel Fix to Commissioner, April 20, 1948, at 26, in re questions of law raised by House Appropriations Subcommittee; reprinted in Hearings on Interior Department Appropriation Bill for 1949 Before a House Appropriations Subcommittee, 80th Cong., 2d Sess., pt. 3, at 885 (1948). The Reclamation Project Act (53 Stat. 1193), specifies no period within which there must be repaid that portion of the costs "properly chargeable to irrigation but which are beyond the ability of the water users to repay" (the irrigation subsidy). The repayment period accordingly may be such as the Secretary of the Interior in his discretion shall determine to be proper for each project, within the useful life of that project. Solicitor Harper Opinion, M33473 (Supplemental) (September 10, 1945). Except for contracts under subsections 9(c)(1) and 9(d), which are governed by a 40-year maximum limit, there is no legal objection under general reclamation law to utilizing a depreciation method for repayment of Federal investment, that is, repayment within the useful life of the property. Memorandum of Chief Counsel Fisher to Commissioner, April 10, 1952. 7. Authorization A project is an authorized project when a report thereon under section 9(a) has been submitted as provided in that section, and therefore the initial appropriation for such project is not subject to a point of order. Ruling of Chairman of the Committee of the Whole House on the State of the Union, May 14, 1941, Cong. Rec. p. 4138. Section 9(a) of the Reclamation Project Act of 1939, as amended, makes provision for the administrative authorization (without further Congressional action) of projects, parts of projects, and individual units embracing one or more of the purposes of irrigation, flood control, navigation, power, fish and wildlife, and municipal water supply or other miscellaneous purposes. These purposes stand on a par with each other, and there can be no question that the language covers construction of single-purpose or multiple-purpose projects that do not include the function of irrigation. Solicitor Bennett Opinion, 65 I.D. 129 (1958), in re authority to investigate Pleasant Valley Development. (b) [Secretary may allocate part of cost to flood control or navigation— Consult with Chief of Engineers-Perform investigations under cooperative agreement with Secretary of War.]—In connection with any new project, new division of a project, or supplemental works on a project there may be allocated to flood control or navigation the part of said total estimated cost which the Secretary may find to be proper. Items for any such allocations made in connection with projects which may be undertaken pursuant to subsection (a) of this section shall be included in the estimates of appropriations submitted by the Secretary for said projects, and funds for such portions of the projects shall not become available except as directly appropriated or allotted to the Department of the Interior. In connection with the making of such an allocation, the Secretary shall consult with the Chief of Engineers and the Secretary of War, and may perform any of the necessary investigations or studies under a cooperative agreement with the Secretary of War. In the event of such an allocation the Secretary of the Interior shall operate the project for purposes of flood control or navigation, to the extent justified by said allocation thereof. (53 Stat. 1194; 43 U.S.C. § 485h (b)) RECLAMATION PROJECT ACT OF 1939-SEC. 9(c) Effect of allocation 2 1. Supplemental works NOTES OF OPINIONS The distribution system for Coachella Valley, with respect to which an appropriation had been made prior to the enactment of the Reclamation Project Act of 1939 but a repayment contract had not been executed, is a "supplemental work" within the meaning of section 9 of the Act with respect to which costs may be allocated to flood control on a nonreimbursable basis. Solicitor White Opinion, M-34900 (March 27, 1947), in re flood protection works in Coachella Valley. 2. Effect of allocation Section 7 of the Flood Control Act of 1944, which requires the operation of Federal reservoirs for flood control or navigation under regulations issued by the Secretary of the Army, applies only to reservoirs in which storage has been allocated to flood control or navigation, and does not apply to reservoirs for which only costs, not 647 storage, have been allocated to either purpose. In the latter case, the Secretary of the Interior is charged by section 9(b) of the Reclamation Project Act of 1939 with the responsibility for operating the project for such purposes. Memorandum of Chief Counsel Fisher, April 30, 1952, in re operation of Shasta Dam, Central Valley project, for navigation. Accord: Memorandum of Chief Counsel Fix, May 2, 1946, in re application of section 7 of the Flood Control Act of 1944. 3. Report The Secretary is required by section 9(b) of the Reclamation Project Act of 1939 to consult with the Chief of Engineers and the Secretary of the Army with regard to the allocation of costs of the emergency reconstruction of Ochoco Dam to flood control; but because this work was authorized by the Interior Appropriation Act for 1949, it is not legally necessary to submit a report on such allocation to Congress. Memorandum of Acting Chief Counsel Devries, August 4, 1949. (c) [Sales or leases of water or power-Appropriate share of cost to be repaid in not to exceed 40 years-Preference to municipalities and other public corporations and agencies.]—The Secretary is authorized to enter into contracts to furnish water for municipal water supply or miscellaneous purposes: Provided, That any such contract either (1) shall require repayment to the United States, over a period of not to exceed forty years from the year in which water is first delivered for use of the contracting party, with interest not exceeding the rate of 32 per centum per annum if the Secretary determines an interest charge to be proper, of an appropriate share as determined by the Secretary of that part of the construction costs allocated by him to municipal water supply or other miscellaneous purposes; or (2) shall be for such periods, not to exceed forty years, and at such rates as in the Secretary's judgment will produce revenues at least sufficient to cover an appropriate share of the annual operation and maintenance cost and an appropriate share of such fixed charges as the Secretary deems proper, and shall require the payment of said rates each year in advance of delivery of water for said year. Any sale of electric power or lease of power privileges, made by the Secretary in connection with the operation of any project or division of a project, shall be for such periods, not to exceed forty years, and at such rates as in his judgment will produce power revenues at least sufficient to cover an appropriate share of the annual operation and maintenance cost, interest on an appropriate share of the construction investment at not less than 3 per centum per annum, and such other fixed charges as the Secretary deems proper: Provided further, That in said sales or leases preference shall be given to municipalities and other public corporations or agencies; and also to cooperatives and other nonprofit organizations financed in whole or in part by loans made pursuant to 648 RECLAMATION PROJECT ACT OF 1939—SEC. 9(c) the Rural Electrification Act of 1936 and any amendments thereof. Nothing in this subsection shall be applicable to provisions in existing contracts, made pursuant to law, for the use of power and miscellaneous revenues of a project for the benefit of users of water from such project. The provisions of this subsection respecting the terms of sales of electric power and leases of power privileges shall be in addition and alternative to any authority in existing laws relating to particular projects. No contract relating to municipal water supply or miscellaneous purposes or to electric power or power privileges shall be made unless, in the judgment of the Secretary, it will not impair the efficiency of the project for irrigation purposes. (53 Stat. 1194; 43 U.S.C. § 485h (c)) EXPLANATORY NOTES Supplementary Provision: Right of Renewal; First Right to Share of Water Supply. The Act of June 21, 1963, directs the Secretary of the Interior, upon request, to provide for renewal of water supply contracts under clause (2), and to grant parties to water supply contracts under clauses (1) or (2) a stated share of project water supply available for municipal, domestic or industrial use. The Act appears herein in chronological order. Reference in the Text. The Rural Electrification Act of 1936, referred to in the text, was enacted May 20, 1936, 49 Stat. 1363, and has been amended at intervals since its enactment. The Act as amended is found in title 7, United States Code, section 901, et seq. Administrative Practice: Charging of Interest. Since 1949 it has been the policy of the Department, as a general rule, that costs allocated to municipal water supply should be repaid with interest on the unpaid balance. See Memorandum of Secretary Krug to Commissioner, October 12, 1949. NOTES OF OPINIONS Subsections 9(a) and 9(c) of the Reclamation Project Act of 1939, although related, serve two different purposes: Subsection 9(a) embodies the test for feasibility, while subsection 9(c) contains the criteria for rates to be charged by the Secretary for the sale of power. Solicitor Harper Opinion, M-33473 (September 29, 1944). The Hayden-O'Mahoney amendment Ideals with the cash distribution of revenues in the Treasury as between the reclamation fund and the general fund. Its purpose was to assure that the reclamation fund would receive as to each reclamation project an amount of dollars equal to that required to amortize the power investment plus the irrigation assistance. It does not, however, purport to deal with payout requirements of reclamation projects. These, except for special requirements applicable to given projects, are governed by Section 9(c) of the Reclamation Project Act of 1939. Statement furnished by Asst. Secretary Holum for Hearings on H.R. 2337, to Provide for the Construction of the Lower Teton Division, Teton Basin Federal Reclamation Project, Before the Irrigation and Reclamation Subcommittee of the House Committee on Interior and Insular Affairs, 88th Cong., 2d Sess. 38 (1964). 5. Power-Exceptions On July 1, 1941, the Secretary approved a rate schedule for the sale of commercial electrical energy from the Minidoka project. The approval was based on a financial study which assumed and expressly stated that contracts with water users organizations for the furnishing of power for pumping, as a part of the project irrigation operations, are not sales of electric power within the meaning of Section 9(c) of the Reclamation Project Act of 1939. 6. Falling water The reference in section 9(c) to the "lease of power privileges," as distinguished from the "sale of electric power" is suffi RECLAMATION PROJECT ACT OF 1939-SEC. 9 (c) ciently broad to comprehend a so-called In view of the Secretary's authority under section 2 of the Act of August 26, 1937, 50 Stat. 850, to acquire property for the Central Valley project by any means he deems necessary, including donation, and the broad authority of section 9(c) of the Reclamation Project Act of 1939 to fix rates, the Secretary may grant rate discounts to power customers that reflect the amortization of construction costs of transmission facilities built by the customer and conveyed to the Government or that reflect the operation and maintenance costs of facilities built and retained by the customer. (Dec. Comp. Gen. B-62789, letter of Assistant Comptroller General Weitzel to Chairman John E. Moss, Special Subcommittee on Assigned Power and Land Problems, House Committee on Government Operations, June 28, 1960). Under the authority of the Act of March 4, 1921, 41 Stat. 1404, to accept and expend advances as if appropriated, and the broad authority of section 9 (c) of the Reclamation Project Act of 1939 to fix the rates at which electric power is sold, the Secretary is authorized to enter into a contract with a commercial customer of the Kendrick project whereby the customer advances the cost of constructing the necessary feeder transmission facilities, the Bureau constructs the facilities, and power is sold to the customer at a discount rate until the customer has paid the United States, in the form of the reduced rate plus the advanced funds, the same amount for the power received as it would have paid at standard rates if the Bureau had constructed the facilities with appropriated funds. Dec. Comp. Gen. B-62789 (January 9, 1947). In an appropriate case the Commissioner of Reclamation may condition the sale of temporary, withdrawable Central Valley project power to a potential municipal customer on the customer's demonstrating, by some appropriate means, that it has an ability to obtain a source of power to meet its requirements upon the withdrawal of the Bureau's supply. Memorandum of Associate Solicitor Fisher to the Commissioner of Reclamation, May 6, 1960. 8.-Rates Although the principles stated in section 9(c) of the Reclamation Project Act of 267-067-72-vol. I-44 649 1939 pertaining to power rates are stated in terms of the minimum charge for power, they are also clearly intended to set the maximum charge. The Government of the United States markets power to serve the public interest, not to make a profit. We believe that the public interest is best served by marketing power at the lowest rate consistent with orderly repayment of all proper costs, and we believe that is what Congress intended. Letter of Secretary Udall to Representative Aspinall, May 15, 1965, in re basis for establishing power rates for the Colorado River Storage project. The provisions relating to power marketing and power rates in section 9(c) of the Reclamation Project Act of 1939, section 5 of the Flood Control Act of 1944, and section 6 of the Bonneville Power Act are in pari materia, and each may be examined to shed light on the Congressional intent with respect to the others. Indeed, as a practical matter, as illustrated by the Bonneville Power Administration, because a single system may be used to market power from three different sources, the three statutes have to be read together and interpreted as establishing identical criteria for power rates. Consequently, the mandate of the Flood Control Act of 1944 to market power from Army projects "in such manner as to encourage the most widespread use thereof at the lowest possible rates to consumers consistent with sound business principles," applies also to power marketed from reclamation projects under reclamation law. Letter of Secretary Udall to Representative Aspinall, May 15, 1965, in re basis for establishing power rates for the Colorado River Storage Project. Under section 9(c) of the Reclamation Project Act of 1939, as construed consistently with the Hayden-O'Mahoney amendment to the Interior Department Appropriation Act, 1939, the minimum rates for the sale of power must be such as will cover (1) an appropriate share of annual operation and maintenance costs and (2) an amount equal to 3 percent per annum of the original power construction costs; however, if the 3 percent factor is not enough to return power construction costs plus the irrigation subsidy (the amount of irrigation construction costs beyond the ability of the water users to repay) within a reasonable period of time, then the rates must be increased accordingly. There is no statutory obligation for the Government to recover a profit (in the form of interest) on the investment in power construction costs, and therefore all of the power revenues are available to return power construction costs and the irrigation subsidy. Three percent per 650 RECLAMATION PROJECT ACT OF 1939—SEC. 9(c) annum is a minimum rate of return which continues without regard to pay-out. Solicitor Harper Opinion, M-33473 (September 29, 1944) and M-33473 (Supplemental) (September 10, 1945). [Editor's Note: Although this opinion has not specifically been overruled, it is not followed in two respects. First, the 3 percent factor used in section 9(c) is regarded as annual interest on the unamortized balance of power construction costs, rather than as a constant annual percentage of the original power costs. Second, the revenues represented by the interest component (that part of power revenues attributable to a recovery of interest on the power construction costs) are not considered to be available to return irrigation costs. This latter policy was adopted following a period of controversy culminated by the recommendation of the House Appropriations Committee against use of the interest component to return irrigation costs. H.R. Rept. No. 314, 83rd Congress, 1st Sess. 12 (1953).] 9.-Repayment Subsections (c), (d), and (e) require repayment or return of all actual costs, not estimated costs, allocated to irrigation. The requirement for full return of such costs can be met by assigning for return from power revenues, where such revenues are available, all increased costs properly allocable to irrigation but which are beyond the water users' ability to pay. Memorandum of Chief Counsel Fix to Commissioner, April 20, 1948, at 26, in re questions of law raised by House Appropriations Subcommittee; reprinted in Hearings on Interior Department Appropriation Bill for 1949 Before a House Appropriations Subcommittee, 80th Cong., 2d Sess., pt. 3, at 885 (1948). There is no limitation in reclamation law on the number of years in which power costs have to be paid out. The 40-year limit specified in section 9 (c) of the Reclamation Project Act of 1939 is a limit on the length of a contract for the sale of power, but not a limit on payout. Fifty years have been selected as a matter of policy but not of law. Testimony of Assistant Solicitor Weinberg, Missouri Basin Water Problems: Joint Hearings Before the Senate Committees on Interior and Insular Affairs and Public Works, 85th Cong., 1st Sess. 334 (1957). There is no specific statutory period under the Reclamation Project Act of 1939 (53 Stat. 1193), within which the costs allocated to be repaid from net power revenues thereunder must be repaid. The repayment period accordingly may be such as the Secretary of the Interior in his discretion shall determine to be proper for each proj ect, within the useful life of that project. Solicitor Harper Opinion, M-33473 (Supplemental) (September 10, 1945). Neither the Hayden-O'Mahoney amendment nor the power marketing statutes involved in the power operations of the Bonneville Power Administration (section 7 of the Bonneville Project Act, section 9(c) of the Reclamation Project Act of 1939, and section 5 of the Flood Control Act of 1944) require that the costs of each project to be met from power revenues have to be amortized on the basis of a fixed annual obligation. The legal requirements are satisfied if such costs are returned within a reasonable period of years whatever accounting procedure is applied. Statement furnished by Assistant Secretary Holum in regard to statutory authority for revised procedure for presenting Bonneville Power Administration rate and repayment data on a consolidated system basis, printed in Hearings on H.R. 2337, to Provide for the Construction of the Lower Teton Division, Teton Basin Federal Reclamation Project, Before the Irrigation and Reclamation Subcommittee of the House Committee on Interior and Insular Affairs, 88th Cong., 2d Sess. 36–38 (1964). Except for contracts under subsections 9(c) (1) and 9(d), which are governed by a 40-year maximum limit, there is no legal objection under general reclamation law to utilizing a depreciation method for repayment of Federal investment, that is, repayment within the useful life of the property. Memorandum of Chief Counsel Fisher to Commissioner, April 10, 1952. 10.-Preference customers The Bureau of Reclamation has authority to contract with the Arizona Power Pooling Association a proposed nonprofit corporation formed by Arizona preference customers for the purpose of representing them collectively as a purchasing agent under their Colorado River Storage project allotments to obtain the maximum benefits of their respective diversities-as a preference customer. Memorandum of Acting Associate Solicitor Coulter to Commissioner of Reclamation, February 25, 1965. The Navajo Indian Tribe qualifies as a preference customer for the purchase of power marketed by the Bureau of Reclamation under section 9(c) of the Reclamation Project Act of 1939. Memorandum of Associate Solicitor Weinberg, April 14, 1961. 12. Transmission lines The Secretary of the Interior has authority under subsection 2(b), 2(f), 5(a), 5(b) and 9(b) of the Bonneville Project Act; section 5 of the Flood Control Act of 1944; sections 9(c) and 14 of the Reclama |