AZ vs. CA:25 California Exhibits, Vol. XXV; Nos. 7501-7859

page 2

under the contract of February % 1944. Article 7(a) of that contract grants to Arizona annually out of Lake Mead storage (subject, of course, to availability under the Project Act and compact), so much water mm is necessary for the beneficial consumptive us* of a maximum of 2,000,000 acre-feet. Article 7(4) provides that the obligation of the United states to deliver water at or below Boulder Dam shall be diminished to the extent that consumptive use* (i.e., diversions less returns to the river) in Arizona above lake Mead diminish the flow Into Lake Mead. Mr* Caffey's construction of Article 7(d), in which 7 concur, simply means, in my opinion, that under the facts stated in Mr. 'iter's letter of May 2, the United taten, under the contract of February 9, 1944, will be credited with 2,000,000 acre-feet against its obligation to deliver water from lake and storage under that contract. However, that contract is, of course, subject to the Compact. Under the Coat-pact,, Arizona may well have additional rights to Colorado River water beyond the onntrnct, in that Arizona*s Compact rights are not Halted to Lake Mead storage. If we assume that the term beneficial consumptive use" as used in the Compact means diversions less returns to the river, Arizona would not be charged under the compact with the beneficial con-auraptive use of water which It diverted above Lake Mead and returned to the river below Lake Mead, even though by virtue of Article 7(d) of the contract, the full amount of such a diversion lr chargeable against the obligation of the United States to deliver water under the 1944 contract. Thus>, 7 do not believe that Arizona's Compact righsp are threatened or affected adversely by our interpretation of the Arizona contract, even though the entire Arizona diversion takes place above Lake Mead, and return flow enters the river solely below Lake Mead. The comments of *lr. Coffey and Mr. Riter, as well aa your own on this point, are invited. 2. Point (2)--No doubt you have received a copy of Mr. Coffey*s recent letter to this office concerning this point. By separate letter to Mr. Coffey, -m are requesting him to review this natter and a oopy of that letter is being aw* Jo you. 3. WJit (4>-The Solicitor*s opinion in the Grand coulee power revenue eatter doee not of itself necessitate any departure from the policy Inherent in the estimate ao far made on the Central Arizona Project. If the policy of amortizing the power investment in 50 years at 3 percent interest la desirable, we are not required to depart from that policy by virtue of the Solicitor1 d opinion. Tho Soliciltor*a opinion was concerned with the minimum requirements of Section 9(o) of the Reclamation Project Act of 1^39. ft does not purport to prevent the secretary from following a ,*>lioy (ouon as full amortisation In 30 ywre idth Interest at 3 percent rittuld Ut&t bo detenoined to be a,ji«o,jrj -Ate) -nhloh would return twenuee greater than that alnlaua. One ottier ooarent ur«n your letter earns to ¦» to be ap;Tt>priate. I rttoot-nlBe, ao did you, in the 4th £arafcra;jh of yaw* iit'or, thr danger U«t Uw uae of only one vater quantity ad^ht be int«r»>reteri no a determination on the ;«rt