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PROVIDING FOR THE ALLOCATION OF NET REVENUES
OF THE SHOSHONE POWER PLANT OF THE SHOSHONE
RECLAMATION PROJECT IN WYOMING

JUNE 17, 1935.-Ordered to be printed

Mr. GREEVER, from the Committee on Irrigation and Reclamation,

submitted the following

SUPPLEMENTAL REPORT

[To accompany H. R. 6875)

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The Committee on Irrigation and Reclamation, to whom was reserred the bill (H. R. 6875) providing for the allocation of net revenues of the Shoshone power plant of the Shoshone reclamation project in Wyoming, submit this supplemental report.

On November 4, 1926, the Shoshone Irrigation District, being the irrigation district comprising the Garland division of the Shoshone project, entered into a contract with the United States, by which the water users of the irrigation district, under authority of the Fact Finders Act of December 5, 1924, were to receive the profits from the Shoshone power plant, pursuant to the terms of subsection I of the act of December 5, 1924, which is as follows:

SUBSECTION I. That whenever the water users take over the care, operation, and maintenance of a project, or a division of a project, the total accumulated net profits, as determined by the Secretary, derived from the operation of project power plants, leasing of project grazing and farm lands, and the sale or use of town sites shall be credited to the construction charge of the project, or a division thereof, and thereafter the net profits from such sources may be used by the water users to be credited annually, first, on account of project construction charge; second, on account of project operation and maintenance charge; and third, as the water users may direct. No distribution to individual water users shall be

ade out of any ach profits before all obligations to the Government shall have been fully paid (U. S. C., title 43, sec. 501).

Section 31 of the contract of November 4, 1926, between the Shoshone Irrigation District and the United States, is as follows:

Should any net profits be realized by the United States from any of the various sources named in subsections I and I of said act of Congress of December 5, 1924, the same will be announced and determined each year by the secretary in & written statement to be sent to the district. The portion of such net profit, if any, as determined by the secretary, shall be credited each year as follows:

1

(a) On the annual installment project construction charges. (including the construction charges payable by nonconsenting application landowners) of the district beginning with the installment first coming due and continuing with succeeding construction installments as far as such credit will go until the entire construction indebtedness of the district has been paid;

Under the terms of this contract in accordance with the provisions of the act of December 5, 1924, the water users of the Shoshone project were entitled to the net profits of the Shoshone power plant as determined by the Secretary in accordance with the provisions of that act.

A similar contract was made with the water users on the North Platte project in Nebraska and Wyoming:

In 1929, however, there were introduced amendments to the Interior Department appropriation bill for that year which in effect repealed the provisions of subsection I of the act of December 5, 1924, so far as power revenues are concerned, and abrogated the contracts which were made by the water users and the United States in accordance with the Fact Finders Act. When the appropriation bill was under consideration upon the floor of the House the amendment applying to the North Platte project in Nebraska and Wyoming was stricken upon the point of order that it was legislation attached to an appropriation bill

. Through some oversight the point was not raised as to the Shoshone project, so that the act of March 4, 1929, provides with respect to the Shoshone project:

That the net revenues from the operation of the Shoshone power plant shall be applied, first, to the repayment construction cost of the power system; second, to the repayment of construction cost of the Shoshone Dam; and third, thereafter such net revenues shall be covered into the reclamation fund.

In other words the act of March 4, 1929, not only repeals the act of December 5, 1924, so far as it relates to the Shoshone project, but abrogates section 31 of the contract of November 4, 1926, between the water users and the United States. Not only that but it discriminates against the water users of the Shoshone project who are deprived of the rights which have been preserved to the water users on the North Platte project.

The Shoshone Irrigation District brought suit against the Secretary of the Interior in the District of Columbia for a writ of mandamus to compel him to carry out the provisions of the contract of November 4, 1926. The writ, however, was denied upon the ground that the suit was one against the United States and that the act which it was sought to require the Secretary to perform, was not ministerial nor was it a plain duty.

The case was tried before Justice Jesse C. Adkins of the Supreme Court of the District of Columbia. The court found that the water users had obligated themselves to pay a sufficient amount to include its cost of the power system:

The total cost represented by the total of all water right applications would be sufficient to pay the cost of construction of works for the Shoshone Irrigation District or Garland division, and would include an amount in excess of the pruportionate share of the Shoshone District to pay its part of the cost of the power system; in other words, the total of the public notices described in finding 2 exceeds the entire cost of the construction by more than enough to cover the charge against the Garland division if it were required to pay a proportionate share of the cost of the power system.

The court further found that the contract of November 4, 1926, provided that the irrigation district should receive a share of the power plant profits:

In the spring of 1926 representatives of plaintiff came to Washington and negotiated said contract with the Bureau of Reclamation. Said representatives of plaintiff requested the insertion of a paragraph in the contract which would give plaintiff a share of the power plant profits, and what became section 31 of the contract was inserted at plaintiff's request. During said negotiations the attorney for the Bureau stated said section 31 would fully cover plaintiff's interest in the profits in the Shoshone power plant.

At the hearings it developed that the Interior Department stipulated in open court that a sufficient amount had been charged against the settlers on the Shoshone project to cover the cost of the power system.

The purpose of the bill which the committee hereby favorably recommends is to protect the water users of the Shoshone project in the contract rights of which they were deprived by the act of March 4, 1929. The contract provided that the net profits from the power plant should be applied on the project construction charges until the entire construction indebtedness of the district had been paid.

The act of March 4, 1929, provided that the net revenues should be applied, first, to the construction cost of the power system; second, to the construction cost of the Shoshone Dam; and, third, should de covered into the reclamation fund.

This bill preserves the first two provisions of the act of March 4, 1929, and directs that, after the repayment of the proportionate cost of the power system and of the dam, the net revenues should be applied to carry out the terms of the contract.

The Interior Department has submitted an unfavorable report upon the bill. This report, which is hereto attached, recites the act of March 4, 1929, and the adverse decision of the courts of the District of Columbia on the water users' application for a writ of mandamus in opposing the proposed legislation. That part of the report with reference to the Willwood division is correct, in that no public notice has been issued against the construction charges for return under that division, and the committee has recommended that the bill be amended on page 2, line 3, as follows:

After the word Garland" strike out the comma and insert the word "and", and after the word “Frannie" strike out the comma and the words “and Willwood."

The committee, after hearing a representative of the Interior Department and after hearing the witness for the Shoshone Irrigation District, unanimously recommended the passage of the bill. No appropriation is involved. The bill merely provides for the settlement of a dispute between the Reclamation Bureau and two irrigation districts operating divisions of the project. The committee believes that the settlers in these districts are entitled to their share of the net power revenues of the Shoshone power plant as were given to them under the reclamation law at the time the contracts were made, and that the rights to which the unit holders are entitled under their contracts entered into with the Department of the Interior and guaranteed to them by officials of the Bureau of Reclamation should be restored.

INTERIOR DEPARTMENT,

April 8, 1935. Hon. COMPTON I. WHITE, Chairman Committee on Irrigation and Reclamation,

House of Representatives. My Dear MR. CHAIRMAN: Further reference is made to your letter of March 22, transmitting, with request for report, copy of H. R. 6875, a bill providing for the allocation of net revenues of the Shoshone power plant of the Shoshone reclamation project in Wyoming.

The bill proposes two different methods of allocating the net revenues realized from the operation of the Shoshone power plant:

(1) Those net revenues that may be properly and equitably allocatable to the unconstructed portions of the project; and,

(2) Those net revenues that may be properly and equitably apportioned or to be apportioned to the Garland, Frannie, and Willwood divisions of the project, in accord with the terms and provisions of existing contracts with the water users on said project.

The proposed bill is based upon erroneous premises. It assumes that the water users in the Garland, Frannie, and Willwood divisions have rights under existing contracts to a proportionate part of the net revenues derived from power plant operations.

Public notice has been issued announcing the construction charges for lands under the Willwood division. In announcing these charges, no part of the construction cost of the power plant was included. As the water users have not assumed repayment of any part of the construction cost of the power plant, manifestly they have no contractual rights to the net revenues derived from the power plant operations.

A contract has been entered into between the United States and the Deaver Irrigation District for the repayment of construction cost of the project allocated to lands in the Frannie division. Pursuant to contract provisions, announcement of such construction cost was given the district on January 24, 1931. This announcement took into consideration the provision of the Interior Department appropriation act of March 4, 1929 (45 Stat., 1592), as follows: "Shoshone project, Wyoming: * * Provided,

That the net revenues from the operation of the Shoshone power plant shall be applied, first, to the repayment of the construction cost of the power system; second, to the repayment of the construction cost of the Shoshone Dam; and, third, thereafter such net revenues shall be covered into the reclamation fund."

The water users of the Frannie division are not obligated to repay any part of the construction cost of the power plant, and, therefore, have no contractual right to the net revenues derived from the operations of the plant.

The Shoshone Irrigation District, the organization of the water users on the Garland division, entered into a contract in 1926 with the United States. In 1932 the district filed in the Supreme Court of the District of Columbia petition for writ of mandamus against Ray Lyman Wilbur, then Secretary of the Interior, to compel the crediting of Shoshone power plant revenues to the district. The application for the writ of mandamus was denied. In 1933 the district appealed to the Court of Appeals for the District of Columbia, from the judgment of the Supreme Court of the District of Columbia and the judgment of the lower court was affirmed (70 Fed. 2d 771). The district then filed in the Supreme Court of the United States a petition for a writ of certiorari which was denied (293 U. S. Preliminary Volume No. 1, p. XVII). No part of the cost of the Shoshone power plant or system is charged to the water users of the Garland division.

It follows from the foregoing that none of the divisions of the Shoshone project now have an interest in the Shoshone power plant. To vest them by the proposed legislation, with an interest in the power profits would be granting them a gratuity contrary to the policy set out in the redraft of H. R. 9124, Seventy-third Congress, second session, upon which I reported to you February 23, 1935. It is my belief that the practice of allowing the profits from Government power plants to inure permanently to individual water users on Federal reclamation projects should not be extended in the future. This bill would initiate the practice for the Shoshone project, contrary to the theory of H. R. 9124. In view of this and of the facts set out above, I recommend that the bill be not enacted. Sincerely yours,

T. A. WALTERS, Acting Secretary of the Interior.

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