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9. Inspection and Acce88.-(a) Secretary and representatives to have access to works for inspection, for work upon properties operated directly by U. S., and for all proper purposes.

(b) Secretary and representatives to have reasonable access to books, records, and accounts of Operating Agents relating to duties as such.

(c) Allottees to have similar right of inspection of books, etc., limited to matters affecting them.

10. Generation in Accordance with Contracts.—(a) Operating Agents to deliver electrical energy to various contractors in accordance with contracts and load requirements. In event of disputes, deliveries to be in accordance with instructions of Director,

(b) In event of shortage of water, and so far as practicable, in event of shortage due to other causes, electrical energy to be prorated among contractors on basis of contract rights.

11. Eleotrical Energy Reserved for United States.-U. S. to reserve right to require each Operating Agent to generate and deliver not to exceed 5,000 kilowatts of energy for construction and other purposes, to be paid for at cost.

12. Compensation of Operating Agents.—Operating Agents to be compensated for all expense reasonably incurred in the performance of their duties, with neither profit nor loss to them, and, so far as practicable, settlements to be on the basis of credits on the accounts of the Operating Agents, in their capacities as allottees, for energy charges; and with provision for Operating Agent submitting for approval of Secretary an annual budget or estimate of such expenses.

NOTE.—This Item 12 is tentative. The Reclamation Bureau and the representatives of the power contractors are in accord in feeling that the basic principles should be compensation for all expenses reasonably incurred. However, there are two circumstances which may render this impracticable. First: Such basis may be affected by the basis adopted for the making of generating charges against the allottees. The bill as drawn contemplates that such basis will be determined by the Secretary after hearing and promulgated simultaneously with the promulgation of energy rates. Inasmuch as the rights of all allottees are affected, it is impracticable that such determination should be made in advance of the submission of the legislation to Congress. Second : Practical considerations arising out of Federal and state laws, and regulations and procedures of the General Accounting Office, require further study by all parties, which may affect the form of the provisions.

13. Accounts.-Accounts of expenditures by Operating Agents to accord with system of accounting prescribed in rules and regulations duly promulgated by the Secretary.

14. Termination for Breach.-(a) If either Operating Agent shall commit any breach of the Agency Contract which deprives another allottee of electrical energy which it is the duty of such agent to deliver under Item 10 hereof, or shall commit any other material breach of such Agency Contract, the Secretary may enter and take possession of, and operate, so much of the plant as may be necessary to correct such breach, and may thereupon give 4 years' notice of termination. At any time prior to the expiration of said period, the defaulting agent may be reinstated by removal, or by giving assurances satisfactory to the Secretary of the removal, of all causes which resulted in such entry and taking possession, and payment to the U. S. of any and all loss incurred thereby. If default not so cured, contract to be of no further effect as to such agent after expiration of such notice.

(6) Agency not to be subject to termination for any cause other than breach as provided in Item 14-a, adding substance of such provisions of act as are designed to give adequate assurance against termination except for default, referred to in note to Item 3 above.

15. Rules and Regulations.-Agency Contract to be subject to rules and regulations duly promulgated prior to its execution, and to future rules and regulations duly promulgated, subject to the provision that no right of either Operating Agent shall be impaired, or obligation of either Operating Agent extended by any rule or regulation hereafter promulgated, and with provisions for hearing before promulgation of further rules.

NOTE.—This assumes that prior to the execution of the Agency Contract rules and regulations appropriate to the carrying out of the terms of the Adjustment Act will have been promulgated, as contemplated by that Act, and that the regulations inconsistent therewith will have been rescinded.

16. Transfer of Interest in Contract.—No voluntary transfer without approval of Secretary; successors and assigns, by voluntary transfer, judicial sale, etc., to be subject to Project Act, Adjustment Act, and all provisions of Agency Contract; the execution of a mortgage or trust deed not to be deemed a voluntary transfer.

17. Disputes and Disagreements.-(a) The instructions, directions, and determinations of the Director shall be subject to appeal to the Secretary.

(6) They shall be complied with unless and until reversed or modified upon such appeal.

(c) Every instruction, direction, and determination of the Secretary (whether on appeal from the Director or otherwise) arising out of the Agency Contract, shall be final as to the Operating Agents, excepting only that any such instruction, direction, or determination affecting the rights of the City or the Edison Company

(i) under other contracts with the U. S. relating to the project; (ii) under Item 6_j hereof (i. e., relating to reasonable integrated operation);

or

(iii) under Item 14 (i. e., relating to U. S. taking possession or terminating lease); shall be subject to arbitration or court proceedings.

(d) Arbitration provisions substantially in accordance with form in general use in Boulder contracts applicable to disputes with U. S., except 3 arbitrators instead of 5.

18. Contingent upon Appropriations.—The usual clause, with additional provision that Operating Agents shall not be required to incur expenses for the reimbursement of which appropriations have not been made, but neither this nor anything in contract to preclude Operating Agents' making such repairs or replacements as they may desire, notwithstanding nonavailability of appropriations or provision for reimbursement.

19. Contingent upon Final Effectiveness of Adjustment Act.—If Adjustment Act not effective as to all provisions prior to July 1, 1941, contract be of no further force or effect.

20. Modifications.-Any modification, extension, or waiver of terms of contract for the benefit of either Operating Agent, shall not be denied to the other.

21. Contract Subject to Colorado River Compact.Provision conforming to requirements of Project Act.

22. Members of Congress Clause.-Usual clause,

Senator McCARRAN. Gentlemen, since tomorrow is a holiday, we will meet again at 10:30 on Friday morning.

(Whereupon, at 12:15 p. m., the committee adjourned until 10:30 a. m., Friday, May 31, 1940.)

BOULDER CANYON PROJECT ADJUSTMENT ACT

FRIDAY, MAY 31, 1940

UNITED STATES SENATE,
COMMITTEE ON IRRIGATION AND RECLAMATION,

Washington, D.C. The committee met, pursuant to recess, at 10:30 a. m., in Room 101, Senate Office Building, Senator Henry F. Ashurst (presiding).

Present: Senators Ashurst (presiding), McCarran, Chavez, Clark, and Johnson.

Also present: Senator Downey.
Senator ASHURST. The committee will come to order, please.
Senator Chavez, you have some amendments to offer?

Senator CHAVEZ. Yes; I have. Our State engineer and chairman of the water commission will be here by Monday. That is the earliest they can get here. They were under the impression that a meeting of the State representatives was to be held at Salt Lake on Monday, and made arrangements to attend that meeting. I had a wire that it would be impossible for them to be here before Monday.

Senator ASHURST. You are not prepared to present the amendment yourself!

Senator CHAVEZ. I would rather not, because they have been attending some of these hearings. We may also have some further testimony for the hearings from the representatives of the Indian Bureau who are interested in whatever rights the Navajo Tribe of Indians may have in the waters of the San Juan.

Senator ASHURST. All right, Senator.

Senator CHAVEZ. I would like to ask Judge Stone one or two further questions.

Senator ASHURST. Judge Stone.

STATEMENT OF CLIFFORD H. STONE-Resumed

Senator CHAVEZ. Judge Stone, I wish you would tell the committee, if you will and can, just under what circumstances the wording of the bill on page 6, line 18, was brought about. That is the item that contains the $1,500,000 that shall be used for investigation by the Bureau of Reclamation for the formulation of a comprehensive plan for the utilization of waters of the Colorado River system for irrigation, electric power, and other purposes, in the States of the upper division and the States of the lower division. Why was the language inserted in that manner?

Mr. STONE. Do you refer to the words "States of the upper division and States of the lower division?”

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Senator CHAVEZ. That is right.

Mr. STONE. That language is the language used in the Colorado River compact, and those terms have come to have a significance, because of the Colorado River compact and their definition in that compact.

Senator CHAVEZ. Was not the purpose of creating this fund of $1,500,000 to take care of the investigatory needs of the upper basin States only?

Mr. STONE. No; that was not the purpose; it is obvious that if there is to be a comprehensive investigation it must cover the entire basin. The use of water in the lower basin, according to plans which may be developed, has a definite relation to the use of water in the upper division, and obviously it would be unfair to devote all of those funds to investigate just projects in the upper basin. There are projects yet in the lower basin to be investigated, but according to the list-which, may I explain, is only a tentative list-which I submitted, you will observe that it is recognized that there is much more work to be done in the upper division than in the lower division. For that reason all but approximately $250,000 of that money is indicated for investigation in the upper division.

Senator CHAVEZ. All right. Then from a practical standpoint and an equitable standpoint, there should be investigation in the lowerbasin States, we will say, of California and Arizona!

Mr. STONE. And Nevada. Senator CHAVEZ. For instance, can you state to the committee one site in the entire area in Nevada where an investigation for the development of power should be made on the Colorado River?

Mr. STONE. Well, there is both power and some irrigation development in Nevada.

Senator CHAVEZ. That is in the tributaries?

Mr. STONE. Well, along the main stream. I understand that Congressman Scrugham has a plan for some small projects in small areas along the river which he desires investigated, and obviously, if we are to have a complete and comprehensive plan, they will be investigated.

Senator CHAVEZ. Now, I believe I understood you to say that some members of the committee in the lower House wanted to change that word "equitably" to "equally" distributed in the upper-basin States and lower-basin States.

Mr. STONE. I do not know as any of them wanted it done. It was mentioned, and the bill as reported out of the committee leaves the word “equitably.” It has been mentioned; yes.

Senator Chavez. Don't you think it would be fair and just, if we wanted to do what is right by all the States, that they should share equally?

Mr. STONE. I see no objection to changing that word "equitably” to "equally.”. May I say here if you use the word “equitably,” Colorado, producing 70 percent of the water probably having more land susceptible of irrigation than the other States, might have more claim than the other States, and yet I feel that this $500,000 should be equitably apportioned, and probably an equal portion would be an inequitable apportionment, because, after all, this $500,000 will only be part of the money that is needed to develop those basins, and

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changing that to “equally,” making the division equally between the four States, in my opinion, would be an inequitable adjustment.

Senator CHAVEZ. Of course, you understand, Judge Stone, as far as New Mexico is concerned, the only possibility of development will be along the San Juan River.

Mr. STONE. Yes. There is a large project, however, which has been investigated, which considers water from the Animas over to the La Plata, and then there is the Chama-San Juan diversion. Both of those projects should be investigated. The Chama-San Juan diversion was investigated in the Rio Grande joint investigation, but no doubt there is other work to be done there. It is my opinion that unquestionably the completion of that survey will be made. That is in the discretion of the Bureau of Reclamation.

Senator CHAVEZ. That is right; it has to be in the discretion of the Bureau of Reclamation. They could do it if they wanted to, and not do it if they do not want to.

Mr. STONE. I do not see how a plan of comprehensive development could be worked out, according to the terms of this, without exhaustively investigating each and every project, particularly a major project of this nature.

Senator CHAVEZ. If you notice the chart that has been inserted in the record here, presented by Mr. Debler, the San Juan-Chama was not included.

Mr. Srone. Neither was the Blue diversion in Colorado, which was larger than the San Juan. The reason that was not included is because this was a mere tentative list, and both the San Juan and the Blue have been, in a large degree, investigated. No doubt the purpose was to list projects which had not yet been investigated in any degree. I suppose there is a list of 15 small projects not completed in Colorado, in the Colorado River Basin, but there is no doubt in our mind but what that investigation will be completed.

Senator CHAVEZ. That is, if the Bureau finds, in their discretion, it is feasible, then it should do it?

Mr. STONE. I do not believe they will determine the feasibility prior to investigation. The feasibility will have to be founded upon an investigation.

Senator CHAVEZ. All right. What objection would there be, in order that New Mexico may get its proportionate share of whatever benefits may accrue, for this legislation to be used as New Mexico desires ?

Mr. STONE. The fact of the matter, Senator Chavez, is that through the activities of the Committee of 14 working with the Bureau of Reclamation, particularly through Mr. E. B. Debler, chief hydraulic engineer, the Bureau has been very cooperative in recognizing the desires of the States for investigation. Under that procedure, in a number of meetings which we have had, each State has brought into the meetings and put on the table the projects which they desired to have investigated, and have talked that matter over with Mr. Debler. The proceedings of that committee will show that Mr. Debler expressed the desire and policy of investigating all projects which the States desire, which were within reason of consideration.

Senator CHAVEZ. Even if that was in his mind, the chart still shows that Mr. Debler has only allocated out of this $1,500,000, $35,000 for the State of New Mexico. We do not think that is either equitable, just, or fair.

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