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Show subsidized, but whether it should be subsidized by power revenues, and in particular by the interest component on the capital investment which is al~ located to power. Under the plan for the Columbia Basin recently proposed by the Department of the Interior, the account would be credited with all power revenues from projects covered by the plan and would be charged with (1) the cost of the power facilities of projects covered by the plan, and (2) as much of the cost of the irrigation facilities of projects covered by the plan as exceeds the repayment abil- ity of the water users. Interest on the cost of such power facilities8 would be included in the power revenues and would be used to the extent neces- sary to pay irrigation costs. Such assistance is not available in the Columbia River Basin for irriga- tion developments that do not have associated pow- er facilities. Use of the interest component of the pooled power revenues, however, would make it possible to undertake irrigation projects without associated power development that may be econom- ically justifiable but which otherwise might not be initiated because the cost of the needed irrigation facilities is beyond the capacity of the water users to repay within a reasonable period of time. Continuance of the reclamation program on any considerable scale depends upon bridging the gap between high construction costs and annual farm returns. If the power interest component is not used for this purpose, some alternative solution will be required if further substantial irrigation devel- opment in the West is to continue. The principle of furnishing Federal assistance to irrigation de- velopment was established by the Reclamation Act of 1902 which provided interest-free money for ir- rigation projects.9 The Federal contribution rep- resented by interest-free money over a 50-year repayment period amounts to about 50 percent of the total economic cost of Federal irrigation devel- opment exclusive of maintenance and operation. Revenues from power development integral with irrigation projects are now being used to provide further assistance in repayment of the reimbursable irrigation costs of those projects. Extension of this arrangement to provide for use of pooled power revenues (including the interest component) from all Federal power developments, whether or not 8 Includes Bureau of Reclamation and Corps of Engi- neers power projects, and Bonneville Power Administra- tion transmission facilities. "Act of June 17, 1902, § 4, 32 Stat. 388, 389, 43 U. S. G. 419. directly associated with irrigation projects, has been proposed by the Department of the Interior. This would provide large funds for further Federal assist- ance required to meet the high construction costs and allow continuance of the reclamation program.10 The view has been advanced that the public interest would best be served if the interest element in power rates is not used to amortize the cost of irrigation features, at least until cost allocated to power and the interest applicable thereto have been recovered by the United States. Interest on power investment, according to this view, is a real cost to the Government which should be repaid in full into the Federal Treasury as a return of power cost. The policy of using such interest costs as a measure of the amount of financial assistance or Federal contribution to be given to irrigation projects by the public at large, while politically expedient in the past, is logical only as a means of passing on to the general public a share of the costs of the indirect benefits of the project. If Federal con- tributions to an irrigation development are desirable and in the public interest, as determined by studies of the present and future agricultural economy in the area under consideration and of the Nation's needs for the proposed development, it has been suggested that they be granted on the basis of their contributions to the national economy. The in- terest cost of a power project located either in close physical proximity to the irrigation feature or at some distance therefrom in the basin, does not appear to be a logically related factor. Additional disadvantages of such use of the in- terest component are that the uninformed often have the false understanding that the payment ac- tually does come from power revenues rather than being a contribution from the public at large over the Nation; and that it results in discrimination against areas in need of irrigation where Federal power revenues are not available. Conclusions If further irrigation developments in the Colum- bia Basin are desirable, some modification of the 10 In the Columbia Basin the interest component of the power investment is so large that only part of it would be used in any conceivable irrigation development which is physically feasible. For 12 million kilowatts capacity existing, authorized, or recommended for construction the interest component is about six times the subsidy require- ments of about 1.5 million acres authorized or proposed for irrigation development, paying out over a 50-year period. 911610-51- 43 |
