B. Negotiations

(1) Invitations for applications.-The following is reprinted from the first edition (p. 17):

Invitations for applications for the purchase of power were published on September 10, 1929. October 1 was fixed as the application date. Upon that date the Secretary had at hand applications from 27 parties. Some of these applications were conditional and others were indefinite; but the three principal applicants were the City of Los Angeles, the Southern California Edison Co., and the Metropolitan Water District of Southern California. Each of the first two asked for the entire power output, which was assumed at that date, prior to decision on the final height of the dam, to be 3,600,000,000 kilowatt-hours. The Metropolitan Water District asked for about half that amount of energy and the State of Nevada asked for a third of it. The total of the applications was thus well over three times the amount of power available."

(2) Tentative allocation.-The following is reprinted from the first edition (p. 18):

The Secretary was accordingly faced with the problem of allocating the energy available among the conflicting applicants.

The allocation of the energy was undertaken on the premise that the Project Act required that the public interest be the governing factor, and that the first requisite in protecting the public interest was to provide adequate security for the taxpayers' money. It was recognized that the absorption of this quantity of power represented a serious problem and that adequate security for the Government required that the risk be spread among several agencies. It was recognized also that it was desirable that as broad a regional benefit be obtained from this power as was consistent with financial soundness. The dam would rest on the border between Arizona and Nevada, and it was desired to give them an opportunity to use its energy; but neither of them was in a position to make a firm contract for use of any power within its borders. The California applicants included agencies serving cities, great rural areas, and the Metropolitan Water District, which proposed to construct an aqueduct from the Colorado River to the Coastal Plain. It was recognized that the water needs of this area were the great motive force behind the financing of the dam.

On October 21 the Secretary announced a tentative allocation of power. November 12, 1929, was set for hearings on protests to the proposed allocation."

(3) Hearing, November 12-13, 1929.-All of the major parties interested in power except Arizona were represented at the hearing held by the Secretary of the Interior, November 12-13, 1929, in Washington. Arizona declined to attend.

During the hearing Secretary Wilbur announced three points of policy. These concerned (1) the desirability of spreading the benefits of the project as widely as possible; (2) the limitations imposed by

For a tabulation of the applications, see appendix 32 to the first edition. The tentative allocation of October 21, 1929, appears as appendix 33 to the first edition.

the necessity for a sound economic basis; and (3) the desirability of having all parties contract with the Government rather than with each other.

At the close of the hearing, November 13, 1929, Secretary Wilbur made the following statement: 7

I propose not to complete these contracts before the second week in December in the hope that we can bring Arizona into the picture, and I assign each of you and all of those who represent you as agents to make this if possible a sevenState compact.

It will be a most unfortunate thing in this great series of epochs that the West is necessarily to go through in the development of the water, not to carry this thing through upon a uniform program. This must go through so when the Flaming Gorge and all the other projects come on, as they will, we can have a united front against all of those who do not have the vision to see the necessity. Do not forget in your particular thing that you are involved in that your real interest is in this country and its development, and that the western part of the United States must depend upon water and its controlled use for its further development. We must not lose this first battle since otherwise years must elapse before we can do as we should in the maturing of the necessary plans for the West. The easy things have all been done. We are now facing the hard things like this where we must all get together. I hope we may close this conference in that spirit.

Active negotiation of the contracts was suspended until the latter part of February, 1930 to afford an opportunity for further negotiations among the lower-basin States.

(4) Negotiations among the States.-Section 8 (b) of the Project Act held out an invitation to the States of Arizona, California, and Nevada "or any two thereof" to enter into a compact for division of the water allocated to the lower basin by the Colorado River compact and

for the equitable division of the benefits, including power, arising from the use of water accruing to said States.

If such compacts should be negotiated and approved by the States and by Congress prior to January 1, 1929, section 8 (b) stipulated that the United States and its contractors "shall observe and be subject to" such compact; but if the States should approve the agreement or Congress give its consent after January 1, 1929, it was provided

that in the latter case such compact shall be subject to all the contracts, if any, made by the Secratary of the Interior under section 5 hereof prior to the date of such approval and consent by Congress.

'Appendix 33-A, first edition.

While plans for construction of the dam went forward, the Department made a series of efforts to bring the three States into accord. None of these attempts was successful.'

(5) Conferences with congressional committees.-Following the breakdown of the final attempt at a lower-basin agreement, Secretary Wilbur invited the members of the House and Senate Committees on Irrigation and Reclamation to a conference in his office, held February 15, 1930, to advise as to further course of action: whether to continue with an effort to reach a settlement of water and power questions by compact, or to abandon the effort and proceed by contract between the Interior Department and the proposed users.

The consensus of opinion was that the Secretary should proceed at once with the negotiation of the necessary contracts, so that appropriations could be sought before adjournment of the current session of Congress.

• From February 14 to March 5, 1929, a formal conference of representatives of the lower-basin States was held at Santa Fe, N. Mex., adjourned March 6 to 8 at Albuquerque, N. Mex. Col. W. J. Donovan presided as representative of the Federal Government. Representatives of the upper-basin States attended as

observers.

On April 5 to 7, 1929, informal conferences between California and Arizona were held at Los Angeles.

On May 28 to June 16, 1929, the lower-basin State commissioners met informally in Washington.

On August 28, 1929, at Salt Lake City, representatives of Arizona, California, Nevada, Colorado, New Mexico, Utah, and Wyoming met primarily on power matters.

On January 21, 1930, the lower-basin commissioners resumed formal conference at Reno, Nev., under the chairmanship of Chairman W. J. Donovan. At the suggestion of the Secretary of the Interior, advisers were added by each State: For Arizona, Senator Carl Hayden; for Nevada, Senator Pittman and Thomas Cole; for California, W. J. Carr.

On February 6 to 9, 1930, the commissioners met at Phoenix, having recessed at Reno. They failed to agree.

Matters remained in this inconclusive state. Extended conferences were held in 1933-34 and again in 1940, and once more in 1943-44 with reference to the proposed Arizona contract. (See ch. IV.)

• For a summary of the negotiations between Arizona, California, and Nevada, 1929-30, see the testimony of Col. William J. Donovan, hearings on the second deficiency appropriation bill for 1930 (46 Stat. 860), Senate, pp. 173-185, 192-193; Congressional Record, 71st Cong., 2d sess., June 26, 1930, p. 12203 et seq.

(6) Negotiations in the field.-Negotiations among the conflicting applicants, and among the lower-basin States, having failed to crystallize in an agreement, direct negotiations with the individual power applicants were initiated in Los Angeles in February 1930.10

On March 20, 1930, an agreement was reached among the southern California applicants in the form of a recommendation to the Secretary for the allocation of 64 percent of the total firm energy which the Secretary's tentative allocation of October had proposed be made available to California."1

The formulation of an acceptable formula, which would commit. California interests to pay for 100 percent of the firm energy, but enable the Secretary to draw back 36 percent of it for use in Arizona and Nevada at any time during 50 years, proved to be one of the most serious difficulties in the negotiations.

Agreement on all of these points was finally reached on April 25, 1930, and embodied in general regulations, a lease, and energy contracts, referred to below 12

C. Regulations and Contracts

(1) "Underwriting" contracts of 1930.-On April 25 regulations were promulgated, and on April 26 two contracts executed thereunder, satisfying the revenue requirements of the Boulder Canyon Project Act. The first was a lease of power privileges, 13 to which the United States, the city of Los Angeles (through its department of water and power), and the Southern California Edison Co., Ltd., were parties. The second was a contract for the purchase of electric energy to which the United States and the Metropolitan Water District of Southern California were parties.14

The general framework of these instruments established the city and company as several, not joint, lessees of the power plant, obligated to generate at cost for certain other allottees, of which the Metropolitan Water District was the major one. Allottees other than the Metropolitan Water District were accorded by these regulations and contracts various time periods within which to execute their separate contracts with the United States for the purchase of energy. Ultimately, the Los Angeles Gas & Electric Corp., the Southern

10 See first edition, pp. 20-24. The negotiations, under the direction of Secretary Wilbur and Commissioner of Reclamation Elwood Mead, were carried on for the Department by Northcutt Ely, assistant to the Secretary, R. J. Coffey and L. N. McClellan of the Bureau of Reclamation, and Louis C. Hill, consulting engineer.

11 Appendixes 34 and 35, first edition.

12 Appendixes 1-9, first edition.

13 Appendix 2, first edition.

14 Appendix 3, first edition.

Sierras Power Co. (now California Electric Power Co.), the cities of Pasadena, Burbank, and Glendale and (considerably later) the States. of Nevada and Arizona entered into such contracts. Each of these agreements carried a uniform clause on allocation of energy, the general effect being to obligate the California contractors for 100 percent of the firm energy, but requiring them to yield 36 percent thereof to Arizona and Nevada, under a "draw-back" provision which entitled those States to take blocks of power on specified notice and to relinquish its use on like notice. The city and the Edison Co. were required to underwrite these State allotments in the sense that they were required to take all energy not contracted for by the States. This allocation is illustrated by table 1, infra.

(2) Completion of other power contracts, 1931.-By November 16, 1931, the periods for execution of firm contracts (other than by Nevada and Arizona) had expired, and contracts had been executed under which the following became the fixed allocations, in terms of percentages of 4,240,000,000 kilowatt-hours of firm energy annually: