Mr. HAGIE. I do not see how it could. You have extended your period. It is completely neutralized. Mr. D'EWART. If under 1886, let us suppose that we have a project that costs $2,000,000; $1,000,000 was for irrigation, and $1,000,000 was for power; that was the total over-all cost of the project, and it was to run 2 percent for 50 years. If that 2 percent was applied to the irrigation project, it would wipe out your principal investment altogether-2 percent on $1,000,000, 50 years, $1,000,000. In other words, there would be no charge to the farmer at all, is that correct? Mr. HAGIE. I do not quite follow you. May I make an illustration and see if this applies. It may be a little more complicated, but I think it is a truer illustration. Suppose you have a million-dollar project where the irrigation costs chargeable to the land are half a million dollars, and half a million dollars chargeable to the power feature. Mr. D'EWART. Fifty years at 2 percent. Mr. HAGIE. Yes; under the 1939 act the Secretary is authorized to charge against the land only that portion which the farmer can reasonably be expected to repay. Assuming that he determines that the farmers cannot pay back the $500,000 that went into the construction of the irrigation features chargeable to the land, that the land can repay only $250,000 on a million-dollar project, the irrigation district enters into contracts with the farmers to repay $250,000 in 50 years with no interest. That amount is therefore fixed irrespective of any other problem. But in order to make this project feasible-and the Secretary has authority from the Congress to determine its feasibility-if what the farmer can afford to repay, and if what the power revenues can return, and any other miscellaneous revenues, will pay out in 50 years and pay interest on the commercial power investment, the Secretary can authorize the project. That is the present law. It is the 1939 act, as Congress intended it should be interpreted. In that case, it does not make any difference what you do with the interest component, because the amount which the farmer is asked to pay is what the law says he can reasonably be expected to repay. Regardless of what you do with the interest, it does not affect the farmer in any way. But in order to make the project feasible, the Secretary had to find that the power rates would have to be placed high enough to return the $500,000 invested in power and the $250,000 that was invested in the irrigation features, but which the Secretary found the land could not repay, so that is added to the power charges. The interest component, therefore, will affect, to the extent of the difference which arises from turning the interest into the Treasury of the United States for use of the money, or applying it to the income that has to be acquired to make the project feasible, or required to pay out $750,000 in 50 years with 2 percent, not just the $500,000 invested in commercial power features. Mr. D'EWART. If I figure that out right, leaving out amortization, 1 percent would do it. Mr. HAGIE. It is 2 percent on the unpaid balance. Mr. D'EWART. I would like to have somebody tell me how that would raise the rate to power users on the half a million dollars over the 50-year period that went into the construction features. Mr. HAGIE. You will have to ask that of somebody in the audience. I do not have it, but I am advised by Mr. McBride that Mr. Royce J. Tipton, an eminent engineer from Denver, has a chart worked out applying this to, I presume on the Colorado-Big Thompson project, and he will have that information for you next week, so the answer will be forthcoming. Mr. D'EWART. Then we will be able to tell what the cost of the power will be under the Lemke bill, and under the Rockwell bill? Mr. HAGIE. Yes, sir. That information will be before you when Mr. Tipton appears before you as a witness. Mr. CARROLL. One question, Mr. Chairman. Did you hear the testimony of Assistant Secretary Brannan the other day, Assistant Secretary of the Department of Agriculture? Mr. HAGIE. I am sorry I did not. Mr. CARROLL. As I remember his testimony, he is offering an amendment whereby he wants the Department of Agriculture to have a place, a position, in determining the feasibility of these programs. How do you feel about that? Mr. HAGIE. I am not familiar enough with the proposal to comment on it, sir. Mr. ROCKWELL. If there are no further questions, we will stand adjourned. (Thereupon, at 12: 15 p. m., an adjournment was taken subject to the call of the chairman.) TO AMEND THE RECLAMATION PROJECT ACT OF 1939 WEDNESDAY, MARCH 26, 1947 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON IRRIGATION AND RECLAMATION OF THE COMMITTEE ON PUBLIC LANDS, Washington, D. C. The subcommittee met at 10 a. m., pursuant to adjournment, in the committee room of the House Committee on Public Lands, the Honorable Robert F. Rockwell (chairman of the subcommittee) presiding. Mr. ROCKWELL. Gentlemen, the committee will please come to order. We shall continue the hearings on H. R. 1886 and H. R. 1977. The Honorable Fred Norman, from the State of Washington, has requested permission to make a statement at this time. STATEMENT OF HON. FRED NORMAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON Mr. NORMAN. Mr. Chairman, members of the Public Lands Committee, I appear before you as a friend of reclamation, realizing the need to modernize certain features of the reclamation laws, but out of duty I must strenuously oppose the rate-making provisions that have been injected into H. R. 1886. The power provisions of this bill are so loosely drawn that they do violence to the greatest resource that the Pacific Northwest possesses. The power-rate sections of H. R. 1886 have just become apparent to the people of my district. Consequently, I have had numerous wires and communications from representatives of all the different groups in my district protesting against these provisions of H. R. 1886. These protests come from real reclamationists, from farmers, from industrialists, and from organized labor. Union officials advise me that they interpret this bill as a means of stopping industrial pay rolls and halting forever the disposition of dinner-pail energy. It strikes me the people of my district have been amazed at the one-sided support of H. R. 1886. The impression has been created that the working people, farmers, and industrialists have not had a day in court. know that this is not the intent of this committee, but the suddenness of the situation has aroused suspicion, judging by the tenor of communications I have received. I will endeavor at this time to give a brief factual discussion of the objectionable features of H. R. 1886. In so doing I do not wish to be understood as offering opposition to the modernizing features of this bill. 99687-47-No. 4- -14 205 Unless there is a balance between industry and agriculture, the economy in the entire Columbia Basin will be injured. According to census reports covering the most prosperous sections of this country, it can be seen that for every 100 farm workers there must be at least 500 industrial and associated workers. If power rates are elevated to the extent that one interpretation of H. R. 1886 indicates, then the basic industries in my and enjoining districts will be so handicapped that eventual shut-down will result. When this happens the agricultural products of reclamation projects will lose their markets, and then the large reclamation projects can never pay out. Also the rate proposals in H. R. 1886 are not good business for the Federal Treasury. The region that I represent is short of fuel sources. Consequently nature has been compensating by giving the region the greatest source of low-cost hydroenergy on the American continent. Whoever drafted the power provisions of H. R. 1886 cannot be familiar with the interrelations that exist in the Columbia Basin. The people in my district do not expect Texas or California oil to be delivered and sold to them as cheaply as it can in the coastal regions of Texas or California. The possession of the oil resource is their gain. In like measure, other sections should not endeavor to penalize the greatest resource that the Northwest possesses. I am particularly referring to the appropriateness of the ratemaking provisions appearing on pages 6 and 7 of H. R. 1886, which provisions are interwoven through the full provisions of this bill. According to the wording of this cited section, electric rates would be dependent on the cost of generating power by an alternate plant in the same area. The extent of the area is not defined, nor is the quantity or quality of the power interpreted. Obviously the large volumes of prime power available from Columbia cannot be placed on a competitive level with lower-grade dump or secondary power generated on smaller tributaries or less fortunate streams. The Columbia, like the St. Lawrence, is in a class by itself, due to the height of its waterfalls, the large volumes of water carried and the constancy of its flows. H. R. 1886 does not state whether the alternate plant be steam generation from wood, oil, gas or coal. The bill as written indicates a direct conflict between language on pages 6 and 7 and the other provisions of this bill, which set out that rates should be suflicient to cover cost and subsidy allocated to power. The provisions of H. R. 1886 are in direct conflict with the Bonneville Act, which is independent of the reclamation laws. The evident intent of the provisions on pages 6 and 7 are to require power rates to be fixed at a higher level than economics justify and costs would indicate. The intent of these sections is to gear low-cost power to the cost of higher competitive generating sources in the less fortunate areas. Whoever drafted these provisions of H. R. 1886 apparently worked on the assumption that hydro-cost will in all instances be the lowest cost power. The cited provisions of H. R. 1886 are most confusing and indefinite. These provisions of H. R. 1886 would certainly remove low cost hydro-power from the category of a natural resource. Also these provisions would retard development in regions where power costs are high, as well as regions where power costs are low. These provisions lose sight of what is actually needed to repay the entire reimbursible portions of the Federal investment in such projects. The district that I represent has two of the largest basic aluminum plants on the American continent. Columbia power and these plants provided the tools for victory. I interpret these rate provisions as a means of killing the aluminum industry and stopping the further development of electro-chemical and electro-metallurgical industries, which are so vital to national defense. While the world at large is uneasy, I cannot see why a rate provision should be injected into the organic law that would be deterrent to the development of critical materials which are so necessary in a defense program. Such a course is just as logical as a proposal to give away the secrets of the atomic bomb. You will no doubt recall that in the early days of the late war, that the shortness of light metal production capacity in this country prompted high Government officials to make large donations to a competitive Canadian aluminum industry. The Shipshaw development in Canada, which was subsidized by the American taxpayer in 1942, is the principal beneficiary of the rate provisions of H. R. 1886. The rate provisions of H. R. 1886 are unworkable. The Bonneville plant is partly in my district. The output from Bonneville is tied electrically to the same power grid as the output from the Grand Coulee plant. Bonneville, being a navigation project, cannot come under the provisions of H. R. 1886. When the output from these two plants are intermingled on a transmission line, I would like the sponsors of H. R. 1886 to tell us how the power delivered, say to the Alcoa or the Reynolds aluminum plant can be identified as to source. I would also like the sponsors of H. R. 1886 to advise Congress how it is possible to paint the kilowatts from these two plants with distinguishing colors, so that customers operating under power contracts can tell whether their power bill will be or will not be affected by H. R. 1886. The attempt to devise such rate-making formulas is unrealistic, unworkable, and destructive to the economy of a large section of this country. These rate provisions in H. R. 1886 do not warrant serious consideration by Congress. Such a proposal, for the reasons that I have given, should never be allowed to see the light of day. I thank you for the opportunity to discuss the matter." Mr. CARROLL. When you say that the people of your district are objecting to the rate-making provisions, do you mean to the present law? Mr. NORMAN. No. I am speaking of H. R. 1886, which is now before your honorable committee. They feel that it leaves the door open for a possible change in the rate structure there, and they are very much opposed to that. They are not opposed, however, to a clarification of the reclamation law of 1939 which I understand 1886 does modify to some extent. They are not opposed to that. Mr. CARROLL. I would like, if I may interrupt at this time, to say that you are the first witness who has come before this group from an outside source who has given any testimony on this point. Mr. NORMAN. I will read my statement, if you want. Mr. CARROLL. I do not think you need to do that. What worries the people of your district, generally? Just sum it up. Mr. NORMAN. The Bonneville power project is in my district. Their rate is 17.50 a kilowatt each year. There has been a great deal of apprehension out there, sir, that that being a quite low rate, |