RECLAMATION PROJECT ACT OF 1939—SEC. 9(d) tion Project Act of 1939; and section 2 of Power marketing and transmission operations of the Bureau of Reclamation under the reclamation laws have not been considered to be restricted to the reclamation states, and this administrative construction of the law has been concurred in by action of the Congress in appropriating funds for transmission lines in states such as Iowa and Minnesota. Memorandum of Associate Solicitor Weinberg to Director, Division of Budget and Finance, July 23, 1962, in re authority to construct the Creston-Fairport intertie. 15. Water-Municipal water supply Section 4 of the Act of April 16, 1906, authorizes the furnishing of project water to a town in the immediate vicinity of the project which has a pre-existing water right in the same source of water as the project source. The authority to furnish water in such a case under the 1906 Act is neither repealed by, nor subject to the conditions of, the Act of February 25, 1920, 41 Stat. 451, or section 9(c) of the Reclamation Project Act of 1939. Memorandum of Acting Commissioner Lineweaver to Regional Director, Boise, September 26, 1950, in re contracts with cities of Culver and Metolius, Deschutes Project, Oregon. 16.-Miscellaneous purposes A contract to permit the Public Service Company of Colorado to divert water from a canal of the Grand Valley project for cooling purposes may be entered into pursuant to the Act of February 25, 1920, or under section 9(c) or section 10 of the Reclamation Project Act of 1939. Revenues arising from the furnishing of water for this purpose should be credited as a tail end reduction of the water users organizations repayment obligation for construction and rehabilitation and betterment costs. Memorandum of Associate Solicitor Fisher, October 26, 1956. 651 Although section 5(d) of the Colorado River Storage Project Act fixed an over-all period of 50-years for return with interest of costs allocated to municipal water, the Act permits no other payment arrangements than those provided by section 9(c) (1) and 9(c) (2) of the Reclamation Project Act of 1939. Thus, although more than one contract covering such costs may be signed, none can have a term greater than 40 years. A 9 (c) (2) contract may be entered into for the maximum 40-year period, followed by either a 9(c) (1) or 9(c) (2) contract for 10 years. If the first contract is written under 9(c) (1), however, it would require that full repayment be accomplished in the permissible 40-year period. Memorandum of Associate Solicitor Fisher, March 5, 1958, and Memorandum of Acting Associate Solicitor Weinberg, September 20, 1957, in re contract negotiations for Vernal Únit. A water supply contract for municipal or miscellaneous purposes under section 9 (c) (1) of the Reclamation Project Act of 1939 is a contract "relating to construction charges" within the meaning of section 6, and therefore, it must include payment of operation and maintenance costs as provided in section 6 even though section 9(c) (1) does not mention such costs. Memorandum of Chief Counsel Fix to Commissioner, March 26, 1947. 18.-Rates It is clearly within the authority of the Secretary under section 9(c) of the Reclamation Project Act of 1939 to charge different rates for water from the Central Valley project delivered for municipal water supply than for water delivered for irrigation purposes. City of Fresno v. California, 372 U.S. 627 (1963). The Secretary has discretion to charge interest in a water supply contract for municipal or miscellaneous purposes under section 9 (c) (2) of the Reclamation Project Act of 1939. Although interest is not specifically mentioned, it is one of the items which properly can be included within the classification of "fixed charges." Memorandum of Chief Counsel Fix to Commissioner, March 26, 1947. (d) [No water delivered until repayment contract executed providing (1) development period for each irrigation block, (2) construction cost allocable to irrigation to be included in general repayment obligation-Distribution of construction charges on account productivity of land and benefits accruing, (3) repayment in annual installments over period not exceeding 40 years, (4) first annual installment on date fixed by Secretary.]-No water may be delivered for irrigation of lands in connection with any new project, new division of a 652 RECLAMATION PROJECT ACT OF 1939-SEC. 9(d) project, or supplemental works on a project until an organization, satisfactory in form and powers to the Secretary, has entered into a repayment contract with the United States, in a form satisfactory to the Secretary, providing among other things (1) That the Secretary may fix a development period for each irrigation block, if any, of not to exceed ten years from and including the first calendar year in which water is delivered for the lands in said block; and that during the development period water shall be delivered to the lands in the irrigation block involved at a charge per annum per acre-foot, or other charge, to be fixed by the Secretary each year and to be paid in advance of delivery of water: Provided, That where the lands included in an irrigation block are for the most part lands owned by the United States, the Secretary, prior to execution of a repayment contract, may fix a development period, but in such case execution of such a contract shall be a condition precedent to delivery of water after the close of the development period: Provided further, That when the Secretary, by contract or by notice given thereunder, shall have fixed a development period of less than ten years, and at any time thereafter but before commencement of the repayment period conditions arise which in the judgment of the Secretary would have justified the fixing of a longer period, he may amend such contract or notice to extend such development period to a date not to exceed ten years from its commencement, and in a case where no development period was provided, he may amend such contract within the same limits: Provided further, That when the Secretary shall have deferred the payment of all or any part of any installments of construction charges under any repayment contract pursuant to the authority of the Act of September 21, 1959 (73 Stat. 584), he may, at any time prior to the due date prescribed for the first installment not reduced by such deferment, and by agreement with the contracting organization, terminate the supplemental contract by which such deferment was effected, credit the construction payments made, and exercise the authority granted in this section. After the close of the development period, any such charges collected and which the Secretary determines to be in excess of the cost of the operation and maintenance during the development period shall be credited to the construction cost of the project in the manner determined by the Secretary. (2) That the part of the construction costs allocated by the Secretary to irrigation shall be included in a general repayment obligation of the organization; and that the organization may vary its distribution of construction charges in a manner that takes into account the productivity of the various classes of lands and the benefits accruing to the lands by reason of the construction: Provided, That no distribution of construction charges over the lands included in the organization shall in any manner be deemed to relieve the organization or any party or any land therein of the organization's general obligation to the United States. (3) That the general repayment obligation of the organization shall be spread in annual installments, of the number and amounts fixed by the Secretary, over a period of not more than 40 years, exclusive of any development period fixed under paragraph (1) of this subsection, for any project contract unit or, if the RECLAMATION PROJECT ACT OF 1939—SEC. 9(d) 653 such project contract unit be divided into two or more irrigation blocks, for any block, or as near to said period of not more than forty years as is consistent with the adoption and operation of a variable payment formula which, being based on full repayment within such period under average conditions, permits variance in the required annual payments in the light of economic factors pertinent to the ability of the organization to pay. (4) That the first annual installment for any project contract unit, or for any irrigation block, as the case may be, shall accrue, on the date fixed by the Secretary, in the year after the last year of the development period or, if there be no development period, in the calendar year after the Secretary announces that the construction contemplated in the repayment contract is substantially completed or is advanced to a point where delivery of water can be made to substantially all of the lands in said unit or block to be irrigated; and if there be no development period fixed, that prior to and including the year in which the Secretary makes said announcement water shall be delivered only on the toll charge basis hereinbefore provided for development periods. (5) Repealed. (53 Stat. 1195; Act of August 8, 1958, 72 Stat. 542; Act of August 28, 1962, 76 Stat. 407; 43 U.S.C. § 485h (d)) EXPLANATORY NOTES 1962 Amendments. Section 1 of the Act of August 28, 1962, authorizes the Secretary of the Interior, prior to the commencement of the development period authorized by subsection 9(d)(1), to amend repayment contracts to provide for irrigation blocks, or add to or modify existing blocks. Section 2 of the Act added the second and third provisos in subsection 9(d)(1). The Act appears herein in chronological order. 1962 Amendment. Section 3 of the Act of August 28, 1962, authorizes the annual installment provided for in subsection 9(d) (3) to be paid in two parts. The Act appears herein in chronological order. 1958 Amendment. Section 1 of the Act of August 8, 1958, amended paragraph (3), subsection (d) of section 9 to read as it appears above, thereby authorizing a variable repayment plan in place of the "normal and percentage plan” of repayment formerly authorized by section 4, which was repealed by the 1958 act. The original language read as follows: "The general repayment obligation of the organization shall be spread in annual installments, of the number and amounts fixed by the Secretary, over a period not exceeding forty years, exclusive of any development period fixed under subsection (d)(1) of this section, for any project contract unit, or for any irrigation block, if the project contract unit be divided into two or more irrigation blocks." The 1958 Act appears herein in chronological order. Provision Repealed. Section 3 of the Act of August 8, 1958, repealed paragraph (5), subsection (d) of section 9, the text of which appears below. It also repealed section 4, which authorized the "normal and percentage plan" referred to below. In place of that plan, the same Act amended paragraph (3) of section 9, subsection (d), to provide for a variable plan of repayment. "(5) Either (A) that each year the installment of the organization's repayment obligation scheduled for such year shall be the construction charges due and payable by the organization for such year; or (B) that each year the installment for such year of the organization's repayment obligation shall be increased or decreased on the basis of the normal and percentages plan proIvided in section 4 of this Act for modification of existing obligations to pay construction charges, and the amount of the annual installment of the organization's obligation, as thus increased or decreased, shall be the construction charges due and payable for such year. Under (B) of this subsection the provisions of section 4 of this Act shall be applicable, as near as may be, to the repayment contract made in connection with the new project, new division of a project or supplemental works on a project; and the organization shall make payments on the basis therein provided until its general repayment obligation has become due and payable to the United States in full." 654 RECLAMATION PROJECT ACT OF 1939—SEC. 9(d) The 1958 Act appears herein in chronological order. Supplementary Provision: Variable Payment Plan. Section 2 of the Act of August 8, 1958, provides as follows: "The benefits of a variable payment plan as provided in the amendment to paragraph (3) of section 9, subsection (d), of the Reclamation Project Act of 1939 contained in section 1 of this Act may be extended by the Secretary to any organization with which he contracts or has contracted for the repayment of construction costs allocated to irrigation on any project undertaken by the United States, including contracts under the Act of August 11, 1939 (53 Stat. 1418), as amended, and contracts for the storage of water or for the use of stored water under section 8 of the Act of December 22, 1944 (58 Stat. 887, 891). In the case of any project for which a maximum repayment period longer than that prescribed in said paragraph (3) has been or is allowed by Act of Congress, the period so allowed may be used by the Secretary in lieu of the forty-year period provided in said amendment to paragraph (3).” The 1958 Act appears herein in chronological order. The Act of August 11, 1939 (53 Stat. 1418), as amended, which is the Water Conservation and Utilization Act, and extracts (including section 8) from the Act of December 22, 1944 (58 Stat. 887, 891), which is the Flood Control Act of 1944, both referred to in this note, are found herein in chronological order. Supplementary Provisions: Administration of Contracts. The Act of July 2, 1956, 70 Stat. 483, is an act relating to the administration of contracts under this subsection and subsection (e). The 1956 Act appears herein in chronological order. Reference in the Text. The Act of September 21, 1959 (73 Stat. 584), referred to in the text, amended subsection 17(b) of this Act. The amended subsection authorizes the Secretary to defer the payment on installments of construction charges under any repayment contract or other form of obligation as he deems necessary to adjust such installments to amounts within the probable ability of the water users to pay. The 1959 Act appears herein in chronological order. NOTES OF OPINIONS The reference in subsection 9(d) (2) to "the part of the construction costs allocated by the Secretary to irrigation" is to the amount assigned by the Secretary to be repaid by the irrigators and not to the total costs allocated to irrigation in the accounting or engineering sense. Memorandum of Chief Counsel Fisher, September 12, 1952, in re procedure on use of surplus power revenues for assistance in financing irrigation distribution systems. 2. Additional costs Where a repayment contract is entered into with the water users, based on estimates of costs at that time, and provides for a determination by the Secretary as to continuation of work when increased costs reach a ceiling fixed in the contract, the Secretary may require an additional obligation to be assumed by water users as a condition to continuation of construction when that ceiling is reached. In reaching a decision the Secretary must consider the ability of water users to bear increased costs as well as the ability of purchasers of power to absorb them. Solicitor Barry Opinion, 68 I.D. 305 (1961), in re Columbia Basin repayment problems. The Coachella Valley County Water District is not required to pay for the additional costs-i.e., those in excess of the $13,500,000 fixed in the repayment contract of December 22, 1947—incurred by the United States in completing the distribution system pursuant to the provision in the Interior Department Appropriation Act, 1952, and subsequent appropriations. United States v. Coachella Valley County Water District, 111 F. Supp. 172 (S.D. Cal. 1953). 3. Repayment-Generally 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 last sentence of section 9(e) does RECLAMATION PROJECT ACT OF 1939-SEC. 9(e) 655 not require that the entire cost of a distribution system must be covered by a repayment contract under section 9(d), and therefore, surplus power and municipal and industrial water supply revenues may be applied to assist in payout of part of the distribution system costs. Memorandum of Chief Counsel Fisher, September 12, 1952, in re procedure on use of surplus power revenues for assistance in financing irrigation distribution systems. The Department of the Interior is without authority to charge interest on the return of costs allocated to irrigation because Congress has not specifically authorized such charge. Letter of Acting Commissioner Lineweaver to Mr. William A. Owen, February 12, 1952. 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. The estimated accumulated revenues representing the interest component on the sale of power from the Columbia Basin project are not available to reduce the average amount per acre of construction cost contracted to be repaid by the project water users. Solicitor Barry Opinion, 68 I.D. 305, 306-09 (1961). 4.-Installments The verb "to fix", as used in that part of subsection (d), section 9, Reclamation Project Act of 1939, stating that the general repayment obligation of a contracting organization "shall be spread in annual installments, of the number and amounts fixed by the Secretary," means to establish definitely, so that the contracting parties know how many installments are contemplated by the contract and how much money is involved in each installment. Solicitor White Opinion, 60 I.D. 150 (1948), in re proposed contract with Savage Irrigation District. A repayment contract entered into under subsection 9(d) which prescribes a formula pursuant to which the amount of each annual installment is to be determined, which formula has no relationship to the "normal and percentages plan" authorized by Congress in subsection 9(d) and section 4 for variable payments, is not in conformity with the requirements of the Reclamation Project Act of 1939. Solicitor White Opinion, 60 I.D. 150 (1948), in re proposed contract with Savage Irrigation District. 9. Ownership of facilities A repayment contract is not invalid because of absence of provision that the district will obtain title to the distribution system when its obligation therefor has been totally discharged. Ivanhoe Irr. Dist. McCracken, 357 U.S. 275, 289-9(1958). V. While water users under section 9 contracts acquire a water right, they acquire no equity in the physical assets of the project which would be required to be reflected as such in the balance sheets of the Bureau of Reclamation. No legal objection is perceived, therefore, to considering receipts from both section 9(d) and section 9(e) contracts as income. Dec. Comp. Gen. B91527-O.M. (January 18, 1950). 10. Water rights Objections of appellees that contracts executed under section 9 of the Reclamation Project Act of 1939 are invalid because they imply that water users are not entitled to water rights beyond the 40-year terms of the contracts and because they do not make clear that the districts and landowners become free of indebtedness upon repayment, are answered by the Act of July 2, 1956, 70 Stat. 483. Ivanhoe Irr. Dist. v. McCracken, 357 U.S. 275, 297-8 (1958). (e) [Short- or long-term contracts to furnish water for irrigation-Payment in advance of delivery of water-Cost of works to be covered by repayment contract under subsec. (d).]-In lieu of entering into a repayment contract pursuant to the provisions of subsection (d) of this section to cover that part of the cost of the construction of works connected with water supply and allocated to irrigation, the Secretary, in his discretion, may enter into either short- or longterm contracts to furnish water for irrigation purposes. Each such contract shall be for such period, 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, due consideration being given to that part of the cost of construction of works connected with water supply and |