Title: Project Financing
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Permanent Link: http://ufdc.ufl.edu/WL00003128/00001
 Material Information
Title: Project Financing
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Language: English
Publisher: President's Water Resources Policy Commission
 Subjects
Spatial Coverage: North America -- United States of America -- Florida
 Notes
Abstract: Richard Hamann's Collections - Project Financing
General Note: Box 12, Folder 9 ( Water Resources Law - Vol #3 - 1950 ), Item 46
Funding: Digitized by the Legal Technology Institute in the Levin College of Law at the University of Florida.
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Bibliographic ID: WL00003128
Volume ID: VID00001
Source Institution: Levin College of Law, University of Florida
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electric integration, greater benefits can be derived than when
the same projects are operated independently.'"

Project Financing

In discussing legislative review in connection with project
selection, we noted the general necessity for annual appropia
tions in the financing of water-resource projects. An P al ap-
propriations from tie general fund of the Treasury are in fact
thbe means by whieh most such projects have been financed.
SPiCuL FuND .--A substantial portion of water-resource
project financing, however, is accomplished through the me-
diumof specialfunds, But the establishment of such funds
does not remove the financing process from legislative scrutiny
since each agency must submit to Congress its annual budget
program and summary of project activities for review by the
appropriation committees of Congress.8 IntPost cases, as we
shall see, the us of such a fund requires affirmative appropria,
tiof action. In general, the effect of such a fund is to segregate
from the gene~ l fund of th. Treasury an amount to be
expended for peciid purposes.
Reclamation Fund.-The outstanding example is the Recla-
mation Fund created for financing irrigation works and activi-
ties by reserving, setting aside, and appropriating moneys re-
ceived from the disposal of public lands in the 16 Western
States and Territories namedin the Act." After the Act creat-
ing the Fund was judicially determined in 1909 to be an appro-

"For example, It is estimated that the operation of Hungry Horse Dam in
Montana tn coordination with downstream dams of the Columbia River
syhtm :Wi'lproduce 40,0 more, kilowatts of firm p`wbr than would th
tsolateldperation of this dam. ADVANidE PlOGAi OF-T1AiMeidsOiio StBTEM
Duviarxausw 1 95G1 h5smBoneville Powier Adminidti'lon, p. 26 (1950).
"'Act of June 10, 192, 42 Stat. 2f, ,as amended, 81 U. .' 1 et seq.; zr.
oa. No.:894, etelrb:4, 1 M1 F. 1 38782, 81 U. S. 0. 21 note following;
See the dponition of "appropriations" .4a the Act of September 12, 19-0,
Title I, Part 1, 1 101, 64Stat.882, -.
Act.a June 17, 1902,. 1, 82 Stat. 388, as amended, 43 U. S. C. 391. For
a more detailed discussion of the Fund, and reference to the addition of Texas
as the 17th state, see supra, pp. 198-202.






priation of the proceeds, Congress in 1914 prohibited expendi-
t~ies "except out of appropriations made annually by
Congress."-0
By a number of statutes, Congress authorized the disposal of
certain other lands connected with Reclamation projects and
provided for covering the receipts into the Fund.4 In addi-
tion, a number of statutes provided for further augmenting the
Fund by other revenues.4' These included a wide variety of
sources such as receipts from bonuses, royalties, and rentals
from mining on the public domain of coal, phosphates, oil, oil
shale, gas, and sodium; a portion of charges for use of public
lands and national forests by Federal Power Commission
licensees; certain moneys accrued from naval petroleum re-
serves; andvarious sums derived from operations in connection
with 'Reclamation projects, including incidental power
features."
SNavigation and Headwater Improvements.-Another special
fimd derived from income from natural resources is established
by the Federal Power Act. With specified exceptions, 50% of
the charges collected from certain licensees is "reserved and
appropriated as a special fund" to be expended under the direc-
tion of the Secretary of the Army in the maintenance and op-
eration of federal navigation structures or in the construction,
maintenance, drooperation of "'headwater or other improve-
ments of navigable waters of the United States." "
Tennessee Valley Authority.-In directing that the proceeds
from the sale of power and other products manufactured by
TVA be paid into the Treasury, Congress provided for a special
fund by exepting frontithat requirement such part "as in the
opinion of the Board shall be necessary for the Corporation in
the operation of dams andtreservoirs, in conducting its business

United States v. Hanson, 167 Fed. 881, 884-885 (C. A. 9, 1909); Act of
August 13, 1914, 16,88 Stat. 686, 690,43 U. S. C. 414.
See supra, n. 276, p. 199.
= See supra, n. 281, pp. 199-200.
See upra, pp. 199-202.
"Act of June 10, 1920, 17, 41 Stat. 1063, 1072, as amended, 16 U. S. C.
810.
9116111-- --38






in generating, transmitting, and distributing electric energy"
and in its fertilizer business." This provision is an amend-
ment of the original act which required that the net proceeds
derived from the sale of power and manufactured products be
paid into the Treasury at the end of each calendar year, after
deducting the cost of operation, maintenance, depreciation,
amortization, and an amount deemed by the Board to be neces-
sary to withhold as operating capital, or devoted by the Board
to new construction."
One noteworthy aspect of the amendment is the changed
language setting aside so much of the:proceeds as the Board
deems necessary in the "operation" of dams and reservoirs,
whereas the original language permitted the withholding of
amounts for new construction. Furthermore, Congress in 1947
directed that none of TVA's power revenues be used for con-
struction of "new power producing projects (except for replace-
ment purposes) unless and until approved by Congress." "
This provision, of course, applies to steam-electric plants as well
as hydroelectric plants.
Colorado River Funds.-The Boulder Canyon Project Act
established a special fund called the "Colorado River Dam
Fund." It is limited to the financing of a single project, and
the statute authorizes the necessary appropriations for ad-
vances to the Fund." Project revenues are to be paid into the
Fund, and expenditures therefrom are available "for construc-
tion and the payment of interest, during construction." "4 But
no expenditures from the Fund may be made for operation
and maintenance except from appropriations therefore '
Subsequently, the Boulder Canyon Project Adjustment Act

SAct of August 31, 1935, 10, 49 Stat. 1075, 1079, see 16 U. S. C. 831y.
'm Act of May 18, 1988, 26,48 Stat. 58, 71.
SAct of July 30, 1947, 201, 61 Stat. 551, 572, 16 U. S. C. 831h-2
(Supp. XII).
SAct of December 21, 1928, 2(a), 45 Stat. 1057, 43 U. S. C. 617a(a).
Id.; 3, 45 Stat. 1058, 43 U. S. C. 617b.
M 2(b), 2(c), 45 Stat. 1057, 43 U. S. C. 617a(b), 617a(c).
2(c), 45 Stat. 1057, 43 U. S. C. 617a(c) ; Act of July 19, 1940, 2(a),
54 Stat. 774, 43 U. S. C. 618a (a).







provided for the transfer of $500,000 a year to a special fund
designated the "Colorado River Development Fund." Re-
ceipts of this Fund are authorized to be appropriated for
studies and investigations and for construction of projects in
the Colorado River Basin."3
Other Funds.-In addition to the foregoing funds designed
for pse in connection with water-resource projects, Congress
has from timeto time created still other funds from receipts in
connection with natural resources"
New Construction.-Even with the variety of sources of
revenue made available to the Reclamation Fund, the amounts
have proved. insufficient for the program of project construe-
tion envisioned, making appropriations from the general fund
necessary."5 Thlough.previously authorized in the form of ad-
vances to the Reclamation Fund,'",such appropriations are now
made directly available for expenditures7 So far as project
construction goes, the other special funds have a limited im-
pact.: Moreover, to the extent that nonreimbursable expendi-
tures from such funds are authorized, each becomes self-de-'

Act of June 19,1940, 2(d), 54 Stat. 774,43 U. 8. 0. 618a(d) (Supp. II).
"Id. See also supra, p. 802.
For example:
Twenty-flye percent of certain receipts collected under an authorization
for the lease of grazing lands outside grazing districts, when appropriated
by Congress, is avkiluble until expended "solely for the construction, pur-
chase, or maintenance of range improvements." Act of August 6, 1947, 2,
61 Stat 790 43 U 3151 (Supp. III). Moreover, moneys received by the
Secretary of the Interior in the administration of certain nonfederal grazing
lands are made available, when appropriated by Congress, for leasing such
nonfederal lauds. Act of June 28,1938, 4,62 Stat 1088, 43U. S. C. 815m-4.
Similarly, 10% of all moneys received from national forests during eadh
fiscal year is made available at the end thereof, to be expended for the con-
struction or maintenance of roads and trails within national forests in the
states from Which such proceeds are derived. Act of March 4, 1918, 87 Stat.
843, as amended, 16 U S. 0501.
See supra, pp. 199-200.
See, e. g, Act of June 25, 1910, 1, 86 Stat. 835, 43 U. S.. 97; Act of
March 3, 1931, 46 Stat 1507, 43 U. S. O. 891a, 391b. See also Act of
May 9, 1938, 1, 52 Stat. 322, 43 U. KS C. 391a-1.
See, e. g., Act of June 29. 1948, 62 Stat. 1112, 1128, 1129.







pletiigo4* In Lithe aggregate, therefbe; these special funds
do not answer thbe :fiscal problem respecting new projects and
programs.
Necessity for Appropriations.--Fora time, expenditures from
the Reclamation Fupd were permissible without appropriation
action."*9 But Congress in 1914 prohibited expenditures "ex-
cept out of appropriations." ,o The construction of Boulder
Canyon Project was dependent uponi appropriations to the
Colorado River Dam Fund." And for specified purposes,
receipts of the Colorado River Development Fund are "author-
ized to be appropriated." "2 On the jthe hand, without ap-
propriation action, the Tennessee Valley Authority is author-
ized to reserve a portion of the proceeds fromnits Operations for
use for specified purposes, previously set forth."43
Finally, the need for appropriation nation varies with respect
to the other resource funds we have mentioned.'"
FISCAL-YAR FINANCING.-A number of rules of general ap-
plicability should first be noted. Except where modified, they
govern important aspects of the financing of water-resource
projects and reflect the effect of the appropriation process.
For example, no federal agency may "involve the Govern-
ment in any contract or other obligation for the future pay-
ment of money in excess of" appropriations unless authorized
by law.'" Nor may a contract or purchase on behalf of the

SFor example, certain administrative and investigative expenses are
chargeable to the Reclamation Fund but may not "be charged as a part of
the reimbursable construction or operation and maintenance costs." Act of
December 5, 1924, 4, subsection 0, 43 Stat. 672, 704, as amended, 48 U. 8.
377.
See supra, pp. 198-19.
SAct of August 18, 1914, 16, 8 Stat 686, 690, 43 U. S. C. 414.
*Act of December 21, 1928, 1 2(b), 45 Stat. 1057, 48 U. S. C. 617a(b).
"'Act of July 19, 1940, 1 2(d), 54 Stat. 774, 775, 43 U. S. C. 618a(d).
See supra, pp. 575-576.
O Thus, appropriation action is required in the case of the Taylor Grazing
Act fund, but not as to the fund for maintenance of roads and trails within
national forests. See supra, n. 444, p. 577.
R. S. 38679, from Act of July 12, 1870, 7, 16 Stat. 280, 251, as amended,
31 U. S. C. 665.







United States be made "unless the same is authorized by law
or is .under an appropriation adequate to its fulfillment."
Likewise, no contract for a public improvement may be made
"which shall bind the Government to pay a larger sum of
money than the amount in the Treasury appropriated for the
specific purpose" 4"
Furthermore, except as otherwise provided by law, "all bal-
ances of appropriations contained in the annual appropriation
bills and made Specifically for the service of any fiscal year, and
remaining unexpended at the expiration of such fiscal year,
shall only be applied to the payment of expenses properly in-
curred during that year, or to the fulfillment of contracts prop-
erly made' within that year." 4 Sums appropriated for
"expenditure in the public service shall be applied solely to the
objects for which they are respectively made, and for no others,"
except as otherwise provided by law."
V th the same exception, "no advance of public money shall
be made in any case unless authorized by the appropriation
concerned or other law." In all cases of contracts for the
performance of any service, or the delivery of articles of any
description, "payment shall not exceed the value of the service
rendered, or of the articles delivered previously to such pay-
ment." n Nor may any federal department or officer "accept
voluntary service for itheGovernment or employ personal serv-
ice in exc -s of that authorized by law," except in specified
emergercieb.'*
I 2,ifrom Act of March 2, 181, 10, 12 Stat. 214, 220, as
amended, 41 U. S. 11, with an exception not pertinent here.
a" 8. 38, from Act of July 25,186,8, 3,15 Stat. 171,177,41 U. 0.12.
SA S.o 869; from Actor July 1t, 1870, 1 I, le Stat. 230,251, t1 it 8. S.
712. Balances not needed for the specified purposes are carried over to the
surplus und ndad d permanent or indefinit appropriations" are exempted.
4. S. I 8368, from Act of March 8, 1809, 1 1,2 Stat. 5385; Act of Pebruary
12, 1868, 2,A I Stat. 38, s6 81 U. 8. 628.
"R. S. 8648, from Act of January 31, 182, 51, 8 Stat 728, as amended,
31 U. S. 0. 529.
SId.
E"B S. 8 3879, from Act of July 12, 1870, i 7, 16 Stat. 230,251, as amended,
81 U. S. C. 665.







Based on a review of several of the foregoing and other simi-
lar provisions, the Court of Claims in 1880 observed that ;"
A reading of these provisions will show conclusively,
we think, that Congress have restricted in every possible
way the expenditures and expenses and liabilities of the
government, so far as executive officers are concerned,
to the specific appropriations for each fiscal year.
But the fiscal year bears only an artificial relation to the con-
struction process. Construction of dams may extend over a
period of several years, and short-term contracts for less than
a year may cover parts of two fiscal years, since the latter end
on June 30. Moreover, the appropriation process is often
lengthy, and errors may be made in decisions as to the amount
of money required by a proposed project. Congress has enacted
modifications of the foregoing rules variously reconciling fiscal
requirements to the needs of construction, But such modifica-
tions differ from agency to agency.
Construction.-One method employed to relax the restric-
tive effects of the general rules is to broaden the scope of the
appropriation statute.
Thus, instead of an individualized appropriation for each
project, the practice of making a lump-sum appropriation
for a group of projects or activities affords flexibility within
the amount of the total appropriation. Since 1920, this has
been the legislative practice with respect to water-resource
projects prosecuted by the Army Engineers.' In 1950, Con-
gress employed this practice in making appropriations for con-
struction and rehabilitation by the Bureau of Reclamation."
Another possible modification facilitating contract sched-
Wider v. United States, 16 Ct. C.. 52, 543 (1880). Among the pro-
visions previously cited herein, those referred to by the Court included R. S.
I 3678, 3679, 3690. So far as pertinent here, none of these provisions appears
to have been significantly altered since 1880.
See supra, n. 174, p. 105.
*Act of September 6, 1950, ch. VII, 101, 64 Stat. 595, -. Previously,
appropriations were made on an individualized project basis, with an ex-
press prohibition against exceeding construction amounts appropriated from
the Reclamation Fund for any project and a limitation on expenditures from
the Fund to its total amount. Act of October 12, 1949, 1, 63 Stat. 765, -.







uling is to make appropriations available until expended. In
the case of navigation and flood-control projects, this has; been
accomplished by general legislation.'" Or such modification
may be made effective with respect to individual annual ap-
propriation items. Thus, the General Appropriation Act,
1951, so provides in the case of appropriations for construc-
tion of water-resource projects by the Army Engineers, the
Bureau of Reclamation, the Bonneville Power Administra-
tion, the Tennessee Valley Authority, and the International
Boundary and Water Commission." And the same is true in
the case of appropriations for the prosecution of flood-control
activities by the Department of Agriculture."
Another means for relaxing the effect of the general rules
is by an authorization for the execution of contracts extend-
ing beyond the fiscal year. For example, it is expressly pro-
vided that, any public work on canals, rivers, and harbors
adopted by Congress may be prosecuted by "direct appro-
priations, by continuing contracts," or by both.'" Similar
but limited authority may be included in appropriation leg-
islation. Such is the case with respect to appropriations for
the Bureau of Reclamation and the Bonneville Power Admin-
istration in the General Aiipropriation Act, 1951." It should
be noted, however, that the mere existence of contract authority
may not resolve the problem of construction scheduling.: For
the contract authority may be less than the time requirements
of the construction program. i:
SUnder the Tennessee Valley Authority Act, Congress in 1933
removed project construction from the need for appropriations.
It authorized TVA, in the "construction of any future dam,
steam plant, or Other facility,'to be used in whole or in part

"Act of August 24, 1912, 5 7, 37 Stat. 417, 487, as amended, 31 U: S; 0.
718 Act of March 1, 1917, 38, 80:Stat. 948, 950.
a" Act:~ f September 6, 1950, oh III, title I; ch. VII, title I; ch. VIII, title JX
ch. IX, 64 Stat. 506, --, -,-, -.- Such a provision has been regularly il-
cluded since 1987 4p legislation appropriating funds for: navigation projects.
See, e. g.,Act of July 19, 1937, 1, 50 Stat, 515, 516.
SOh. VII, title 1,64 Stat. ,
Act of September 22, 1922, 10, 42 Stat. 1088, 1043, 88 U5. 0. .621.
Act of September 6, 1950, ch. VII, title I, 64 Stat. 595, -, -.







for the genieation or transmission of electric power" to issue
bonds not exceeding $50,000,000 in amount."1 Similar author-
ity was later grantedfor TVA to issuiebonds in a like amount to
enable the extension of credit to specified nonfederal agencies
to assist them in acquiring, improving and operating existing
power facilities."' But the foregoing authorizations were re-
placed in 1939, at which time TVA was authorized to issue
bonds not to exceed $61,500000 to finance acquisition, rehabili-
tation, and connection of property owned by private utilities."T
It should be noted that these bonding provisions unneces-
sarily separate the funding arrangements with respect to
prosecution of water-resource projects from other funding ar-
rangements of the Treasury Department. For equally ef-
fective borrowing authority could be made available by au-
thorizing advances to a federal constructing agency and mak-
ing such advances a "public-debt!' transaction, empowering
the Secretary of the Treasury to issue securities to obtain the
required funds."-' This approach is; not without precedent.475
With respect to :the need for financial flexibility resulting
from varying expenses of operating power-market facilities
and the need to maintain uninterruptedservice, the TVA Act
furnishes another unique :example. Under its authority to
reserve revenues, iTVA may except such: part thereof as it
deems necessary "in conducting its business in generating,
transmitting, and distributing electrieenergy." 76 Such funds
are in addition to the continuing fund of $1,000,000 available
to TVA to defray emergency expenses and to insure c6ntinu-

Act of May :18 1983, 515, 48 Stat. 58, 66, 10 U. ., 0. 881n.
i15a, as added by Act of August 81,1985, 9, 49 Stat. 1075, 1079, 16
t. S. 0 881n-1.
5 15b, 15c, as added by Act of July 26, 1989, 53 Stat. 1083, 16 U. S. C.
881n-2 831-8; .
'"Under the Second Liberty Bend Act, as amended, the Sedretaryiof the
,Treasury may toirew oa the credit of the United States and: isuebohnds
tor Siamnecessary to meet authorized expenditures for public ur~toses.
Act of September 24, 1917, 1, 40 Stat. 288, as amended, 31 U. S. C. 752.
"' This was done, for example, in the case of the Defense Production Act
of 1950. Act of September 8, 1950, 304(b), 64 Stat. 798, -.
"'Act of May 18, 193, 126, 48 Stat. 58, 71, as amended, 16 U. S. o. 831y.






ous operation.' No comparable situation exists under other
statutes whereby nearly all other federal power-marketing
responsibilities are vested in the Secretary of the Interior.""
Operation and Maintenance.-It has previously been pointed
out that Congress has generally authorized appropriations
for operation and maintenance in the case of flood-con-
trol and irrigation projects, but not in the case of navigation
projects.4" In both cases, appropriations must be made.
Significant variations exist in the manner in which funds are
appropriated by Congress for operation and maintenance of
water-resource projects and activities. The General Appro-
priation Act, 1951, will serve to illustrate. In the case of navi-
gation projects, provision is made jointly for the "preservation
and maintenance" along with the "prosecution" of authorized
projects.'8 A similar item for flood control lumps "construc-
tion and maintenance." '1 And in the case of TVA, a lump
sum is made available for "carrying out the provisions of the
Tennessee Valley Authority Act."82 The items for construc-
tion are separate from items for operation and maintenance
in the case of the Bureau of Reclamation, the Bonneville
Power AdMinistration, and the Southwestern Power Adminis-
tration.'8 The lesser flexibility afforded under the latter type
appropriation is apparent from the general requirement of law
that sums must be applied "solely to the objects for which
they are respectively made, and for no others." '"
Reference should be made here to the "special fund," derived
from charges collected from Federal Power Commission
licensees, which is available to the Secretary of the Army in the
"maintenance and operation" of federal navigation structures
or in the construction, "maintenance, or operation" of head-


4 See apra, pp. 29-300.
4 See supra, pp. 564-565.
4 Act of September 6, 1950, ch. IX, 64 Stat. 595, -.
4 Ch. IV, 64 Stat -.
O Ch. VIII, title I, 64 Stat. -
SCh. VII, title I, 64 Stat. -,-, -
R. S. 3678, from Act of March 8, 1809, 1, 2 Stat. 535, as amended,
31 U. S. C. 628.






water or other improvements of navigable waters of the United
States.'
Perhaps the most flexible arrangement in the case of opera-
tion and maintenance funds is that prescribed for the Tennessee
Valley Authority. As already pointed out, it may reserve so
much of its revenues as it deems necessary "in the operation
of dams and reservoirs, in conducting its business in generat-
ing, transmitting, and distributing electric energy" and in its
fertilizer business.'" Here, replenishment from revenues
depends upon the administrative discretion of the operating
agency.
We have also outlined the varying legislative provisions for
funds of an emergency character available in the case of flood-
control work of the Army Engineers and the Department of
Agriculture, as to Reclamation projects, and under statutes
relating to the Tennessee Valley Authority, the Bonneville
Project, and the Fort Peck Project."8 At the same time, it was
noted that no such fund is provided with respect to navigation
projects or the Boulder Canyon Project."4
As to these emergency funds, however, variations exist in
the degree to which they are exempted from the appropriation
process. For example, replenishment of the Army Engineer
emergency flood-control fund is dependent upon appropria-
tions.'8 The same is true of the authorization for emergency
flood-control expenditures by the Secretary of Agriculture.90
In the case of the Bureau of Reclamation's emergency fund,
replenishment is accomplished by appropriations from the

SAct of June 10, 1920, 17, 41 Stat. 1063, 1072, as amended, 16 U. S. C.
810.
"aAct of May 18,18833 26, 48 Stat. 58, 71, as amended, 16 U. 0. 881y.
Somewhat similar is the provision of a fund under the Fort Peck Act, "to
defray the operating expenses of generation and transmission of power,"
as well as for emergency expenses. Act of May 18, 1988, 10, 52 Stat. 403,
406, 16 U. S. C. 8331.
See supra, pp. 565-567.
See supra, p. 567.
4 Act of May 17, 1950, 210, 64 Stat. 163, -.
'"Act of December 22, 1944, 15, 58 Stat. 887, 007, as amended by Act
of May 17, 1950, 216, 64 Stat. 163, -.







Reclimation Fund." 'Automatic replenishment from rev-
enues is provided for in the case of the continuing emergency
funds available under the Bonneville Project, Fort Peck Proj-
ect, and Tennessee Valley Authority Aits4 i So also as to the
Southwestern Power Administtation fund."'
CONTRIBUTIONS.--Local contributions constitute another
sible source of funds or other aids to 'development of
water-resource projects. Authorizing statutes vary as to
what may be accepted, specification of the contributor, and the
underlying purpose.
In the case of navigation projects, we earlier noted that every
report on an authorized survey must contain a statement of
"special or local benefit,' and recommendations as to what
"local cooperation" should be required, if any. On the basis
of such reports, Congress may then on a prject-by-project
basis require local contribution in authorizing individual proj-
ects."' The Secretary of the Army has discretion to; receive
from privatet parties" contributed "funds" to be expended
with appropriated funds for any authorized improvement
whenever such work and expenditure may be considered by the
Chief of Engineers as advantageous to the "interests of naviga-
ti6o."' 4 In aid of "immediate prosecution" of an authorized
"work of river and harbor improvement," advance "funds" may

"'Act of June 26 1948, 62 Stat. 1052, 43 U. S. 502 (Supp. III).
Act of Atgast 20, 1987, 11, 50 Stat. 731, 736, 16 U. C. .832j; Act of
May 18, 1938,; 110, 52 Stat40a 408, 4,16U. S. C. 8381; Act of May 18, 193,
5 26,48 Stat. 58,71, as amended, 16 U. S. C. 831y.
"' At of December 28, 1943, 57 Stat. 611, 621, as amended by Act of
October 12, 1949,,68 Stat. 765, -.
_"Act of June 5, 1920, i 2, 41 Stat. 1009, 1010, 33 U. S. C. 547.
See, e. a., Act of March 2,1945, 2, 59 Stat 10, 13, where local interests
were required to contribute 50% of the first cost of improvement of Jones
Inlet, N. Y., and to furnish necessary lands, easements, and rights-of-way.
See ANNUIAL Ruoror OFr OnICH oi EDoiNGO*s, S. S. AM, pp. 232-283
(1949).
""Act of Marih 4,1915, i 4, 88 Stat. 1049,1058, 88 U. S. 560. Whin such
contributions are in excess of the actual cost of the work properly chargeable
to such contributions, such excess may be returned unless its retention is
required by law.






be accepted from "local interests" aqd expended by the Secre-
tary of the Army."'
In the case of flood-control projects, the Secretary of the
Army has discretion to receive and expend advance "funds"
from any "State or political subdivisiothereof" in the "in.ne-
diate prosecution" of such work." Like the preceding statute,
this latter provision directs him to repay such contributions
without interest from appropriations which "may be provided
by Congress," unless such contribution was made to mee~ a
condition imposed by statute.4 Also, with respet to flod-
control projects other than dam and reservoir projects, the law
requires, as a condition precedent to the use of federal funds,
assurances from "States, political subdivisions thereof, or other
responsible local agencies" that they will provide necessary
lands, easements, nid rights-of-way; hold and save the United
States free from damages due to construction; and maintain
and operate the works after completion.'
Furthermore, another provision specially applicable to flood-
control projects permits their modimcation to provide addi-
tional storage capacity for domestic water supply or other
water-conservation storage if the increase in cost is contributed
by "local agencies" and they agree to utilize such capacity con-
sistently with federal uses.u As in the case of navigation
projects the Secretary of the Army is also authorized to receive
contributed "funds" from "States and political subdivisions
thereof" tobeexpended with appropriated funds for authorized
flood-control work." This may be done, on recommendation
of the Chief of Engineers, "as advantageous in the public
interest," whereas the statute applying 4p navigation projects
is operative on his recommendation that the work and expendi-
ture are "advantageous to the interests of navigation."

"Act of March 3, 19, 1, s48 StatL, 116, 1197, 33 U. S. C. 561.
Act of October 15, 1940, 54 Stat. 1176, 33 U. 5. C. 701h-1.
*Id. With respect to the general statutory requirements concerning local
contributions, see stpra, pp. 144-146.
See supra, pp. 144-145, and especially notes 103-104.
-mAct of June 22, 1986, 5, 49 Stat. 1570, 1572, as added by Act of July
19,1937, 1, 50 Stat. 515, 518,33 U. S. C. 701h.
! "*Id.2







Still different is the law applicable to-flood-control work of
the Department of Agriculture. The Secretary has discre-
tionary authority to require, as a condition to extending bene-
fita in proseauting authorized works, "contributions in money,
services,, materials, or otherwise." 0, -'
The General Appropriation Act, 1951, provides that the ex-
penditure of any sums from the appropriation to the Bureau
of Reclamation for "General Investigations" for investigations
of any nature requested by states, municipalities, or other
interests shall be upon the basis of the state, municipality, or
other interest advancing at least 50 per centum of the esti-
mated cost of such investigations.'
Elsewhere we have discussed provisions applicable to fed-
eral activity concerning beach and shore erosion." It will
suffice here to note that the Secretary of the Army may require
contributios from the state for investigations and studies."
Federal -asistance to construction of protection works for
shores by states or political subdivisions is limited to one-third
of the totalcost. 7 :
A reclamation statute stipulates that moneys received from
any fState, municipality, corporation, association, firm, dis-
triet, or individual for investigations, surveys, constuction
work, r any other development work incident thereto" which
involve operations similar to those provided for by Reclana-

Ac.ot, Tne.32, 1986, 8, 49 Stat 157 150,1571, as amended, 33 U. .
701e. The Secretary may also require: "The enactment and reasonable
safeguards'for the enforcement of State and local laws tmbodi* suitable
permanent restrictions on the use of such lands and otherwise proviing
foir imi#gati *atterb-ow r6tardation, andi oile-rosion preveatltp," and
agreementss or covenants as to the permanent use of such lands." Id., as
added by Act of August 28, 1937, S 4, 50 Stat. 88, 87i.
Somewhat similar authority is available to the Secretary of- Agricltut e
under 1ttle 1M i saol.cohervation legislation. Act. o April 27;, 1605; 8,
48 Stat. 163, 16 U. S. C. 500. So also as to the extension of benefits under
the Water Facilities Act. Act of August 28, 1987, I 4, 50 Stat. 869, 870, 16
U. S. C. 590u.
Act of September 6, 1950, ch. VII, title I, 64 Stat. 595, -.
See supra, pp. 334-846.
LAct of July 3, 1930, 1 2, 46 Stat. 918, 945, 3 S. 428.
Act of August 16, 1946, 1, 60 Stat. 1056, 33 U. S. C. 426e.






tion Law, shall be covered into the Reclamation Fund and shall
be available for expenditures fof the purposes for which con-
tributed.'8
RmLEF AND OTF0 E FUNDS.-From time to time, we have
mentioned instances where water-resource projects were de,
veloped with relief funds." In this connection, reference
should be made to the provisions of the Water Conservation
and Utilization Act which permitted the use of relief and other
funds available to federal agencies, along with contributions
from states, to defray a portion of the costs of projects covered
by that Act.61
Excepting lands withdrawn from the/ public domain, the
Secretary of the Army is authorized to use lands or other
property under his control and jurisdiction for the prosecu-
tion of any authorized civil work or function administered by
the Department of the Army without charge, except usual
handling charges, against appropriations for such civil works
or functions.' :
RETU1N OF PROJECT CosTs.-In the absence of statutory
provisions to the contrary, reimbursement is not'required from
beneficiaries of federal expenditures. Varying provisions to
the contrary, however, are included in laws providing for fed-
eral development of water-resource projects. These are not
uniform for all benefits; nor are provisions uniform under dif-
ferent statutes with respect to the same type of benefits.
Before turning to an examination of these statutes as they
relate to specific benefits, a few general observations will be
helpful,
As just indicated) return of project costs by beneficiaries is
necessary only when required by statute. If a project pur-
pose has been recogiiized by statute, expenditure therefore may
be authorized, as in the case of fishways where river and har-
bor improvements are found to obstruct fish passage."2 But

"Act of March 4, 1921, 1, 41 Stat. 1367, 1404, 43 U. S. C. 395.
SSee tpra, pp. 243-245, 410-413.
reAct of October 14, 1940, 2, 54 Stat. 1119, 1120, as amended, 16
U. S. C. 590z.
Act of July 24,1946, 8,60 Stat. 641, 643,5 U. S. G. 229.
m Act of August 11, 1888, 1 11, 25 Stat. 400, 425, 83 U. S. 0. 608.







unless a statute so provides, such costs are not required to be
returned.
On the -ther hand, various statutes authorize the sale of
vendible project products and thus provide to some extent for
the return of project costs. By implication, such provisions
may be said to require return of project costs. Similarly,
varying requirements for "local contribution" are stipulated
which provide for, and in some cases require, payment of por-
tions of project costs. Such requirements establish the pat-
tern for the return of costs of navigation and flood-control
projects of the Army Engineers. Somewhat similar is the sit-
uation respecting flood-control work by the Department of
Agriculture. Here, return of costs is provided for to the extent
that the Secretary, in his discretion, invokes the statutory pro-
vision for "local contribution."
In order to assess the law's requirements as to return of
project costs, we shall here review the various relevant pro-
visions, notwithstanding the fact that many of them are to be
separately reviewed later as "pricing' provisions. Such sep-
arate treatment of 'the provisions relating to return of project
costs appears desirable since in one area, the area of Reelama-
tion Law, there is express statutory recognition of the con-
cept, as such, in the prerequisite to project authorization.".
Recamatioi Law currently requires findings by the Secre-
tary of the Interior that repayable and returnable allocations
to reimbursable project .purposes, together with authorized
allocations to designated nonreimbursable project purposes,
equal the total estimated cost of construction."3 In effect,

Act of August 4, 1989, 19(a), 58 Stat. 1187,1198, 43 U. S. C. 485p,(a).
The situation Is dierent in the case of projects under the Water Conserva-
tion and Utilization Act. Act of October 14, 1940, 54Stat. 1119, as amended,
16 V. S. 0. 5G0y-590-l. The term "'reimbursable construction costs" is
expressly confined to costs allocated to irrigation plus such amounts as
the President may.,determine to be reimburpable.- 4(b),,,54 S:at. 1121,
as amended, 16 U. S. 590-2(b). Costs allocated to purposes other
than irrigation are not expressly classed as reimbursable or nonreimburs-
able. But provision is made for contracts for surplus power or municipal
or miscellaneous water-supply purposes. 9, 54 Stat. 1124, 16 U. S. 0.
590z-7. To this extent, the Act contemplates at least partial return of
costs allocated to these purposes.







this reverses the procedure applicable to other projects, sine
costs are here termed nonreimbursable only as specifically so
authorized. .uch .is the ease with respect to allocations to
navigation, flood control, and to the preservation and propa-
gation of fish and wildlife.1 The provisions of Reola nation
Law expressly contemplating the return of project costs are
separate, it may be noted, from those governing repayment
by irrigation water users, or the fixing of rates in contracts for
power or for the furnishing of water for municipal water supply
or miscellaneous piWposes "
While these two approaches to return of project costs need
not differ, there are differences in fact, as we shall shortly see."6
One such difference may be noted at the outset. The Alloca-
tion provisions of Reclamation Law .do not refer to interest.
And it has been administratively:eteruined that repayment
with interest is not required and that, when interest is collected
in the form of power rates, the: statute permits any interest
component of sachtiv enues to be applied to the repayment of
the construction investment.; 1 JU the ease of power, ,from
reservoir projects uder Army control, ol;the other hand, the
cost of interest is ope of the costs included in the setting of
power rates, dspite;the lack of express statutory requirement

1 49(b), 53 Stat d4 AS U. S. 485h(b); Act of August 14, 1940, 1 2,
0 Stfat. 1080, 16 U. S. C 8e2,
r!So far as the term, "return of oject i~sts'e suggests itttur of m6neys
for the generaluse of the Government, there are other differences net de-
veloped here... I, ak in the case of the Reclamation Fund, parts of such
tdss are'returned to a special fund fa spclflc purposes, such moneys are
not returned for general use by the Government. In this connection, see
the ateussion of speeaij bonds ,ipr, ifp.ra 67 78 :
"With respectto tohetiteretkitio ofn-,thi' Act as permitting the appli-
cation Of interest, ;coldetei a a ad cob6mi nt 6f powet rates, to tbh et4rn
to the United Staters 6 iigittifon costs 1o be boiirne by power, see sih,
pp.295-296.
-It ashoM be noted, hoiwver,' hat oine of the two pritcig standards ap-
plidable to bntfcts tot furnish water f( r ifunictpal water supply or mis-
cellaneous purposes riiqiefrs the retiii: of interest "It the Secretary
determined an Intherest haige to be propor." I 9(c), 58 Stat. 1194, 48
U.S. 485h(c).;






therefore, interest on the power investment thus being one of
the costs returned to the United States."
In addition to the foregoing general provisions, statutes such
as the Boulder Canyoni Project Act have expressly provided
for return of costs in the caseof particular projects."' On the
other hand, the special act authorizing the Hungry Horse Dam
is silent with respect to return of nonirrigation costs of the Dam
and power facilities.80
Preliminarily it may also be noted that there is a variation
among the statutes with respect to the necessity for the pro-
cedure of allocating costs to various project purposes. As
to navigation and flood-control projects, there is no general
express requirement. But when irrigation works are con-
structed in connection with Army dam and reservoir projects
under the authority of the 1944 Flood Control Act, certain
costs allocations are made expressly necessary.' Detailed
requirements necessitating allocation of costs are specified for
irrigation projects under the 1939 Reclamation Project Act.'
The same is true when the "preservation and propagation of
fish and wildlife" is made a purpose of an irrigation project
authorized under the foregoing 1939 Act."
Specific recognition of the cost-allocation procedure appears
also in the Bonneville Project Act, the Fort Peck Project Act,
and the Tennessee Valley Authority Act.' For projects gov-

"See, e. g., e Bomnewle Project, Coowmnba R er, Oregon-Wa'Mntom,
Allocation of Costs, Project No. IT 5955, 4F. P. 0. 960, 955 (1945).
SAct of December 21, 1928, 5,45 Stat. 1067, 1060, as amended, 43U. 8. C.
617d.
Act of June 5, 1944, 58 Stat. 270, 43 U. 8. 0. 593a-598b. Reclamation
Law is made expressly applicable to "such additional works" as the Secre-
tary of the Iqterlor deems ecqesary for irrigation purposes. 2 8, 58 Stat.
371, 4 3U.. S3b. See also supra, p. 305.
Act of December 22, 1944, i 8 58 Stat. 887, 81, 43 U. S. C. 390.
"Act of August 4, 19893,9, 53 Stat. 1187, 193, 48 U. S. C. 485h.
"Act of August 14,1946, 12, 60 Stat. 1080, i6 C.62.
'Act of August 20, 1937, 7, 50 8tat. 71, 785, 16 U. 8. C. 882f; Act of
May 18, 198, 8 6, 52 Stat. 40o, 40, 16 U. S. 0. 583e; Act of May 18, 1938,
114, 48 Stat. 58 ,, as amended, 16 U. 8. C. 831m.
911611--1---89






earned by the first two Acts, the Federal Power Commissionis
required to make.an allocation of costs upon which power-rate
schedules must be based, while the latter Act requires certain
cost allocations by the TVA Board.25' Moreover, while cost-
allocation procedures are not expressly required under a number
of other statutes, they are employed in administrative'practice
in connection with benefit-cost determinations and in rate
making.26
SThe subject of return of project costs, to which we now turn,
we shall treat separately from the matter of pricing of project
products." The.two matters nevertheless bear a iose rela-
tionship, for the pricing provisions alone often determine the
degree to which project costs are returned to ite United States.
Navigation and Flood Control.-Statutes applicable to
Army Engineer projects contain no provision requiring return
of costs allocable to navigation and flood control, except so far
as local contribution is required pursuant to statute."2 Nor are
any costs required to be returned in the case of flood-control
work by the Department of Agriculture, unless the Secretary
in his discretion requires local contribution.52 Costs allocated
to navigation and flood control 'are expressly made nonreim-
bursable in connection with projects authorized under the 1939
Reclamation Project Act."0
Irrigation.--Under that 1939 Act, provision is made for an
allocation of that part of the estimated project cost which can
"'properly be alio aed to irrigation ~id-probably be repaid by
the water users." "1 Payment;of interest is not expressly re-
quired. Costs allocable to irrigation but beyond the water-

See, e. g., H. Doc. N9o. 61, 71stCong., 2d ses., ch. III, Main COntrol Plan
and Related Programs: JustiBcation pp. --(1950). Federal Power Com-
mission Order, Re Department of the Interior, relative to the Alatoona
Project, Docket No. E- 157, J'anuary 25, 1940.
As to the pricing of project products; aee intra, pp. 600-615.
"*ee supra, pp. 165-100, 144-146; see infra, pp. 601-60~ .
SAct of Augast 28; 1980, 4, 50 Stat. s 6, 877, see 33 U. S. 0. 701c.
"Act of August 4, 1986, 9(a), 9(i), 58 Stat. 1187, '1193, 48 U. S. C.
485h(a),485h(b).
m 9(a), 53 Stat. 1193, 43 U. S. C. 485h(a).







users' repayment ability are in practice assigned for return by
revenues from other reimbursable purposes."
Somewhat different is the situation with respect to irrigation
works at Army dam and reservoir projects, authorized pursuant
to Section of the Flood Control Act of 1944.5'* While this
Section provides for the construction, operation, and mainte
nanceof such works under Reclamation Law, it adds a provision
affecting return of project costs. Here, the project feasibility
report of t.e Secretary of the Interior may, "within the limits
of the water users' repayment ability," be predicated on the
allocation to irrigation of an appropriate portion of the cost
of structures and facilities used for irrigation and other pur-
poses. The feasibility report may therefore not be predicated
upon an location to irrigation beyond the "limits of the
water users' repayment ability." No corresponding limi-
tation exists with repectto projects authorized under Reclama-
tion Law;. rather costs beyond the water-users' ,repayment

See supr, n. 307, p. 2.
A more flexible situation eabsts with respect to those reclamation projects
under the Water Conservation and VUtlUsaito' Act. It includes a provision
for coast ;aUoqtU patterned; matter section 9(a) of the. 1989 exclamation
Project Act. Act of October 14, 1940, 18, 54 Stat. 1119, 1120, as amended, 16
U S. 59001. In addition it authorizes use of relief fands and contfill-
tins from federal dad notnfefieal agencies, reducing the need for direct
appropriations. 2, 4(Stat 1120, 16U 8. 5900 Cost allocations to irri-
gation are made reimbursable so far as met by expenditures from appropri-
ated funds plus such amounts of other funds as the President may determine
to be reimbursable. 4 (b),54 Stat. 1121,a as mended, 16 U. S. C. 590z-2(b).
The contributions by federal agencies are to be reimbursed in such amounts
as the President may fix "within the limits of the water users' ability to
repay." 2, 54 Stat. 1120,16 U.S. 590s. Furthermore, a 1943 amendment
permitted nse of direct appopopriations in lieu of relief labor and contributions
from federal agencies and provided that expenditures may be excluded from
returnable project costs to the extent necessary "for the successful prose-
cution of the project." Act of July 16, 1943, 5,57 Jtat. 566 567,16 U.8. C.
5980-2(d).
SAct of December 22,1944, 8,58 Stat. 887, 891, 48.U. C. 90.
m In connection with the authorization for the Secretary gf the Interior to
construct additional irrigation works at the Hungry Horse Dam, the same
limitation, "within the limits of the water users' repayment ability," is
included in substantially the same manner as in the 1944 Flood Control Act.
Act of June 1944, 8,58 Stat. 270,48 U. S. C. 593b.







ability are here assigned for return.to another purpose, such
asppower,. "
Moreover, it should be noted that the foregoing provision of
the1944 Flood Control Act is made expressly inapplicable to
any existing Army danror reservoir, "which provides conserve
tion storage of water for irrigation purposes." m In this con-
nection, it may be reiterated that 1937 legislation permits the
modification of project plans for any reservoir to provide for
"conservation storage," if the "cost" of such increased capacity
is contributed by local agencies and they agree to utilize such
capacity in a manner consistent with federal uses and
purposes."
Power.-As previously noted, statutes covering$ Army En-
gineer projects do not expressly require return of project costs."
But legislation respecting the disposal of power from Army
reservoir projects does contemplate return of power costs within
"a reasonable period of years." Moreover, this provision is
construed to include repayment with interest."0 A like situa-
tion obtains in the ase of power costs under the Bonneville
Project and Fort Peck Project Acts.1
On the other hand, if the project is a Reclamation project,
there is provisionfor location of that part of the estimated
cost "which can be properly allocated to power and probably
be returned to the United States in net power revenues." "2
Again no specification is made here respecting interest. And
the separate minimum power-rate standard has been adminis-

SH. Doe. No. 172, 79th Oong., 1st seae., p. 6 (1945). See Act of August
4, 199, 9(c), 53 Stat. 1187, 1194, 4 .1. B C.'45h(c).
'Act of December 22, 944, I 8, 58 Stat 8iR7, 81,:48 U.S. 890.: 9 .
Act of June 22, 1980, f 5, 49 Stat. 1870, 1572, s added by Act of July
19 ,1 937 1, 50 Stat. 515, 518,; SU. S. T01h.
"Seeupra, pp. 5-68SiB52.
Act of December 22, 1944, 5,58 Stat. 887, 890, 16 U. 0. 825s. For the
text of the applicable standard, see infra, p. 60.
"See supa, n. 18,;, p: $.
SAct of August 20, ;17, 3 1, 50 Stat. 781, 785, 16 U. S. 882f; Act of May
18, 1988, 1 6,52 Stat. 4083,405,16 U. S. C. 838e. For discussion of the interest
requirement see statement of Senator McNary, floor leader of the Bonneville
Project Bill, during debate on that Bill. 81 CoNG. Rao. 8524 (1987).
Act of August 4,1989, 9(a), 53 Stat. 1187,1193,43 U. S. C. 485h(a).




595

tratively construed as permitting the application of interest,
collected as a component of power rates, to the return to the
United States of irrigation costs to be borne by power."1
The Tennessee Valley Authority contains an authori-
zation for the sale of power subject to the policies of the Act,
which includes this statement: "
It is declared to be the policy of this Act that, in order,
as soon as practicable, to make the power projects self-
supporting and self-liquidating, the surplus power shall
.be sold at rates which, in the opinion of the Board, when
applied tothe normal capacity of the Authority's power
facilities, will produce gross revenues in excess of the
cost bfproduction of said power .
Similarly, in the Boulder Canyon Project Act, the statute
refers to the generation of electric energy as a means for making
the project "a self-supporting and financially solvent under-
taking." 5 Moreover, the appropriation and expenditure of
moneys were here made dependent upon execution of power
contracts to meet expenses of operation and maintenance, and
the repayment, within 50 years from the date of completion of
the dam and power plant, of all advances made for eonstruc-
tion including an allocation to flood control, with a provision
for interest at 4%. Modification of this arrangement was pro-
vided for by the Boulder Canyon Project Adjustment Act, but it
neverthelem proceeds on a theory of return of costs, excluding
the allocation for flood control."
Drainage.-Just as in the case of Army Engineer flood-eon-
trol projects, provision is made for return of costs of major
drainage operations by the Army Engineers only to the extent
that local contribution may be required."

W See U~pr, n. 220, p. 296.
SAct of May 18, 198, 10, 48 Stat. 58, 64, as amended, 16 U. S. 0. 811;
Act of AegpAt 81, 135, 1 8, 4 Stat. 1075, 1077, see 16 U. S. C. 881m.
SAct of December 21, 1928, 1, 45 Stat. 1057, 48 U. S. C. 617.
"Act of July 19, 1940, 1, 54 Stat. 774, 16 U. S. 0. 618. See also supra,
pp. 301-M02.
*"Act of December 22, 1944, 2, 58 Stat. 887, 889, 88 U. S. C. 701a-1.
See supro, p. 592.







Similarly, the statutory provisions covering the farmland
drainage operations of the Departmnit of Agriculture contem-
plate such return only to the extent that the Secretary, in his
discretion, requires local contribution."'
Reclamation Law makes no separate provision for drainage,
and the Bureau of Reclamation performs drainage work as a
part of irrigation project development. Hence, return of costs
incident to drainage operations is part of the return of irrigation
costs, already discussed."
Water Supply Other than for Irrigation.-Legislation in 1944
authorizes the Secretary of the Army to make contracts for
domestic and industrial uses for surplus water that may be
available at Army reservoirs.` : But it includes no provision
expressly requiring return of costs allocable to'that purpose.
Such return is contemplated; however, by the contract provi-
sion itself, but to an unascertainable daree, since the Secretary
of the Army is authorized to make such contracts "at such prices
and on such terms as he may deem reasonable." On the
other hand, 1937 legislation aiuthrized modification of any
reservoir project plans to provide additional storage capacity
for "domestic water supply or other conservation storage." "2
Here, return of cost is required sinde such modification may
be made only upon contribution by local agencies of the cost
of such increased capacity."
The Reclamation Project Act of 1939 includes provision for
allocation of the part of the estimated project cost which can
"properly be allocated to municipal water supply or other
miseellaieous purposes and probably returned to the United
States." :
"Act of August 28, 1937, 4, 50 Stat. 876, 877, see 33.U. S. C. 701c; Act
of April 27, 1985, 8 49 Stat. 16;, 16 U. S. C'90..'
See supra, pp. 592-594.
"'Act of December 22, 1944, 6, 58 Stat. 887,'890, 83 U. S O. 708
Act of June 22, 196, i549 Stat. 1570, 1572, as added by Act of July 19,
1937, 1, 50 Stat 515,- K1, 38 U. S. C. 701b-
"Act of August 4, 1939, 9(a), 53 Stat. 1187, 1193, 43 U. S. C. 485(a).
While this allocation provision makes no mention of interest, one of the
two companion pricing standards in Section 9(c) includes discretionary
authority for imposition of an interest charge. See infra, p. 614.







Fish and Wildlife.-The various pertinent statutory provi-
sions have been previously grouped and reviewed. Espe-
cially relevant here is the Act of August 14, 1946, which ex-
pressly provides for including, as "an integral part of the
costs" of federal projects, the cost of planning for, and con-
struction and maintenance of facilities for the prevention of
loss of and damage to wildlife resources."'
In the case of navigation and flood-control projects, no pro-
vision of the foregoing statute or of other relevant legislation
requires or contemplates return of the cost of such facilities.
And in the case of Reclamation projects, the 1946 Act expressly
provides for allocations to both the "preservation and propa-
gation" of fish and wildlife, and further that such costs shall
"not be reimbursable.""
Recreation.-The diversity in applicable law is apparent
from an earlier review of relevant statutes." In the case of
an Army reservoir project, express authorization exists for
providing recreational facilities."' Return of the costs of recre-
ational facilities is not required. As we shall later see, how-
ever, the differing provisions for leases contemplate return of
an indeterminate portion of such costs.'"
There is no corresponding general authorization under Recla-
mation Law. If recreational facilities be included as parts of
individual projects, the costs apparently must be included as
part of one of the purposes for which the law affirmatively pro-
vides an allocation.t M
s"ee supro, pp. 827-830.
SAct of August 14,1946, 2, 60 Stat. 1080,16 U. S. 662.
.Id. But of. the President's message vetoing the Vermejo Project, H. B.
788, 81st Cong., 1st sess. (1949), printed in H. Doc. No. 316, 81st Cong.,
1st sess., pp. 13- (1949), and in 95 CoNG. RBc. 12093 (1949). The President
said that allocations for fish and wildlife "are usually restricted in scope to
the prevention of loss of and damage to wildlife." Here, the proposal was
to allocate for the benefits resulting from the creation of a wildlife manage-
ment and development area not required for the protection of existing wild-
life resources.
See supra, pp. 331-334.
w Act of December 22, 1944, 4, 58 Stat. 887, 889, as amended, 16 U. S. C.
460d.
See ifra, p. 615.
SSee supra, pp. 194-196.







In the case of projects of the Tennessee Valley Authority,
authority exists for conveyance of real property by deed, lease,
or otherwise for recreational purposes."I But this provision
includes no requirement as to return of costs or as to pricing.
Other Project Purposes.-With respect to certain additional
purposes which may be served by a project, such as salinity
control, general recognition as a project purpose has not been
accorded by statute. To the extent that projects serve such
purposes, therefore, this is apparently accomplished as an inci-
dent of recognized statutory purposes, costs being treated
accordingly.
Components of Costs.-The preceding discussion has re-
ferred to costs without detailing the components thereof.
With some exceptions, this is true of the more important statu-
tory provisions referring to costs. In such cases, therefore, the
term must apparently be given its ordinary meaning. But the
way is open for variations such as exist in the costs considered
in benefit-cost studies.1"
Noteworthy here is the fact that alllfederal agencies engaged
in the generation and sale of electric energy for ultimate distri-
bution to the public, as to facilities used and energy sold, are
required to comply with the accounting provisions of the Fed-
eral Power Act and the regulations issued thereunder, includ-
ing the uniform system."' But the road is open to variations,
for this obligation applies only "so far as may be practi-
cable.""' In connection with this authorization for varia-
tions in administrative practices among the various federal
agencies, it should be noted that they are also subject to the
accounting requirements of the Budget and Accounting Act
of 1921, although it has been indicated that commercial-type

"Act of May 18, 1938, 1 4(k) (a), 48 Stat. 58, 60, as amended, 16 U. S. C.
831c(k) (a).
"PROPosBE PAOTcOEB roB EcoNomoI ANAIrsxL S o RIVm BASIN PRoCTS,
Report of the Subcommittee on Benefits and Costs, Federal Inter-Agency
River Basin Committee, pp. 79-81 (May 1950).
S" 308, as added by Act of August 26, 1935, 213, 49 Stat. 838, 855, 16
U. S. C. 825(b).
SId.






procedures might be preferable for business-type activities."
To fulfill both statutory objectives may result in duplicate
accounts.
In addition to compliance with the foregoing requirement of
the Federal Power Act, the power accounts of the Bonneville
Power Administration are subject to the express provisions
of the Bonneville Project Act for an "independent commercial-
type audit." W This provision does not, however, include an
exemption from government-type accounting requirements.
In the case of the Fort Peck Project Act, the Bureau of Recla-
mation is required merely to keep "complete and accurate
accounts." In the case of the Tennessee Valley Authority,
an audit is made by the Comptroller General, and TVA is per-
mitted to determine its own system of administrative
accounts.&
Another variation respecting the components of project costs
occurs in connection with the costs of investigations and sur-
veys. In the case of navigation and flood-control projects,
examinations and surveys are authorized and financed inde-
pendently of the projects.~" Such costs are not treated as com-
ponents of project costs in administrative practice .' But the
costs of preparing definite planning reports, called Definite
Project Reports, incurred after project authorization are in-
eluded as a part of project costs." A different requirement
obtains in the ease of irrigation projects. In the first place,
costs associated vith particular purposes are accounted for in
accordance with the allocation procedure already described."
Correspondingly, it is required that the cost and expense of
"Act of June 10, 1921, 42 Stat. 20, 81 U. S. C. 1 et seq.; H. Doc. No. 208,
81st Cong., 1st sees, pp. 5-6 (1949).
"Aet of August 2O, 1987, 9(a), 50 Stat. 731, 736, as added by Act of
October 28, 19, J 4, 59 Stat. 546,647, see 16 U. 8. C. 882h(a).
"Act of May 18, 1938, 8(a), 52 Stat. 403,406, 16 U. S. C. 833g(a).
"Act of May 18, 1963, 9, 48 Stat. 58, 63, as amended, 16 U. S. C. 831h.
See also H. Doc. No. 172, 80th Cong., 1st sess. (1947).
See spray, pp. 91-92, 100-101, 134, 136.
m PROPOSED PeACTsI FOn ECONOMIC ANALYSIS Wo RnIVE BASIN PaoJBas,
Report of the Subcommittee on Benefits and Costs, Federal Inter-Agency
River Basin Committee, pp. 79-81 (May 1950).
Id. p. 79 and see supr, pp. 293-24.
m See supra, pp. 194-196.






general investigations, "except for such cost and expense as
are incurred on bealf of specific projects," shall be charged
to the Reclamation Fund and not as a part of the reimbursable
construction or operation and maintenance costs.'"
PRICE OF POECT PRODUCTS.-After costs allocable to a par-
ticular purpose have been determined, and the requirements
as to their reimbursement ascertained, there remains the im-
portant problem of actually effecting that reimbursement.
With few exceptions, assessment of charges is the device em-
ployed by statutes. Moreover, the return of project costs, al-
ready discussed, is frequently measured solely by the revenues
produced pursuant to rate and pricing requirements of statute.
In this connection, note should be made of a difference be-
tween provisions contemplating return of project costs and
the corresponding provisions designed to effect repayment or
return of those costs. Specifically, the cost-allocation pro-
cedures specified in the 1939 Reclamation Project Act purport
to identify a particular group of project beneficiaries with costs
producing particular benefits.' But shifts of the cost burden
may occur in the administrative application of the pricing pro-
visions of that Act, under which a portion of irrigation costs are
."assigned" to be borne by other project beneficiaries.1" In
short, the provisions as to return of project costs bear only a
qualified relationship to the pricing provisions.
As we shall shortly see, a variety of considerations in-addition
to the return of costs are reflected, however, in provisions gov-
erning the price or charge for project products or benefits.
Ability to repay is one. Still another is the value of the
benefit, particularly where requirements of "local contribution"
are specified. And in the case of power, statutes often seek low
rates employing qualifications of the "utility-rate" concept.
" Act of December 5, 1924, 4, subsection 0, 43 Stat. 672, 704, as amended,
43 U. S. C. 377.
SAct of August 4, 1939, 9(a), 5 Stat. 1187, 1198, 43 U. S. C. 485h(a).
9(a), 9(c), 53 Stat. 1187, 1196, 1194, 43 U. S. C. 485h(a), 485h(c).
See AVERAGE RATE AND REPAYMENT STUDIES FOR POWER SYSTEMS ON BUREAU
OF RECLAMATION PBOJEOTS, Department of the Interior, Bureau of Reclama-
tion, pp. 1-5 (January 1950); H. Doc. No. 172, 79th Cong., 1st sess., p. 6
(1945).







Infrequently expressed, but nevertheless implicit in pricing
provisions is another consideration. A determination under a
specific pricing provision must of necessity be in harmony with
the statute construed as a whole. In other words, the fixing of
a price must be in keeping with the objectives of the statute
consistently with the pricing provision itself.
All of the foregoing considerations have been accorded vary-
ing weight in respect of various project benefits under different
statutes. Pricing standards thus differ for different types of
benefits. In addition, these different standards have been
developed in the evolution of different bodies of law serving
different primary project purposes, and there results a further
variation even for identical benefits depending on the type of
project involved.
Navigation.--Since 1884, there has been a general statutory
prohibition against the levying of tolls upon watercraft passing
through any federal lock, canal, analyzedd river, or other work
for the use andbenefit of navigation." Similarly, when Con-
gress later authorized nonfederal river and harbor improve-
ments, it specifically declared that "no tolls shall be imposed
on account thereof." 68
On the other hand, the law does provide for certain partial
payments., Thus, survey reports must show benefits which will
accrue to localities affected by a proposed improvement and a
statement of special or local benefits, with recommendations as
to any "local cooperation" which should be required on account
of such special or local benefits."" On the basis of such reports,
Congress may require individualized local contribution for
specific projects.680 Although navigation is an expressly recog-
SAct of July 5, 1884, i 4,28 Stat. 188, 147, as amended, 38 U. S. C. 5. See
also n. ii, p. 76.
m Act of Juid 18, 1902, 1, 32 Stat. 331, 87.
mAct of June 1920, 2, 41 Stat. 109, 1010, 88 U. C. 547.
See atUpr, n. 17- p. 106. Pertinent also Is the authority of the Secre-
tary of the Army to receive from "private interests" contributions to be
expended with appropriated funds for any authorized improvement, when-
ever such work and expenditure may be considered by the Chief of Engi-
neers as advantageous in the interests of navigation; when such contribu-
tions are in excess of the actual cost of the work chargeable to such con-
tributions, such excess may be returned unless its retention is required by
law. Act of March 4, 1915, 4, 88 Stat. 1049, 1058, 88 U. S. C. 560.







nized purpose of irrigation projects under the 1939 legislation,
as we have seen, Reclamation Law includes none of the fore-
going provisions for local contribution. Indeed, such is the
framework of the 1939 Act that allocations to navigation are
nonreimbursable."8
Flood Control.-The situation here is much the same as in
the case of navigation. Except to the extent that the law makes
provision for "local contribution," flood-control benefits are
nonreimbursable.
Express provision is made for local contribution in the case
of Army Engineer flood-control projects other than dam and
reservoir projects."a Here, as a condition precedent to the
use of federal funds, the law requires assurances from "States,
political subdivisions thereof, or other responsible local agen-
cies" that they will: (a) provide without cost to the United
States all necessary lands, easements, and rights-of-way; (b)
hold and save the United States free from damages due to the
construction work; and (c) maintain and operate all the works
after completion." To this extent, local contribution is thus
required for such flood-control work as levees, channel improve-
ments, and channel rectification.
In the case of flood-control work performed by the Depart-
ment of Agriculture, its Secretary has discretionary authority to
require, as a condition of extending benefits in prosecuting au-
thorized works, "contributions in money, services, materials, or
otherwise." 6
In the case of Reclamation projects, nonreimbursable allo-

S" ee 8spra, p. 195.
SSee supra, pp. 144-146, and especially notes l10-104.
Id. Pertinent also is the authority of the Secretary of the Army to
receive contributed funds from "States and political subdivisions thereof'
to be expended with'appropuiated tends for authorized flood-control work,
whenever such work and expenditure are recommended by the Chief of
Engineers as advantageous in the public interest. When such contributions
are in excess of the actual cost properly chargeable to such contributions,
such excess may be returned to the proper representatives of the contributing
interests. Act of June 22, 1936, 5, 49 Stat. 1570, 1572, as added by Act of
July 19,1987, 1, 50 Stat. 515,518, 33 U. S. C. 701h.
Act of June 22, 1936, 3, 49 Stat. 1570, 1571, as added by Act of August
28, 17, i 4, 50 Stat. 876, 87, 33 U. S. 0. 701c.





608
cations to flood control are authorized under the 1939 legisla-
tion, just as in the case of navigation. But Reclamation Law
includes no provisions for local contributions like those set out
above.
Irrigation.-The evolution of the law respecting repayment
for benefits received by irrigation water users is marked by
consideration of ability to repay.
The 1902 Act required that they repay the "estimated cost
of construction," without distinction as to the project purposes
served." Correspondingly, revenues derived from project
operations were covered into the Reclamation Fund.* Note-
worthy, too, is the fact that the original 10-year repayment
period was extended from time to time until today, the law now
providing for a period not to exceed 40 years, exclusive of a
maxmnum 10-year development period."
Another shift in the law respecting the irrigation repayment
obligation should be noted. Originally, that obligation rested
with the individual water user.1 This was replaced in 1926
by a mandatory requirement for repayment contracts with
irrigation districts." Under the 1939 Reclamation Project Act,
repayment contracts must be made with an organization "satis-
factory in form and powers to the Secretary." wo
The 1930 Act includes a number of provisions important
with respect to the irrigation water-users' repayment obliga-
tion. In the first place, its allocation provisions and pricing
provisions are so constructed that allocations to irrigation but
beyond the water-users' ability to repay are assigned for return
from revenues from power, or from the furnishing of water for
municipal water supply or miscellaneous purposes." Under
these provisions, the irrigation water-users' obligation is then

Act of June 17, 1902, 4, 82 Stat. 388, 389, 48 U. S. 0. 419, 461.
m See supra, p. 208.
SAct of June 17,1902, $ 4, 32 Stat. 388, 389; Act of August 4, 1939, 1 9(d),
53 Stat. 1187, 1195, 43 U. S. 0. 485h(d). See also supra, pp. 207-208.
SAct of June 17, 1902, 5, 32 Stat. 88, 389, 43 U. S. C. 381, 392, 431.
*Act of May 25, 1926, 1 46, 44 Stat. 636, 649, 43 U. S. C. 423e.
"Act of August 4, 1989, 9(d), 58 Stat. 1187, 1195, 48 U. S. C. 485h(d).
5" 9, 53 Stat. 1194, 43 U. S. C. 485h. See H. Doe. No. 172, 79th Cong.,
1st sess., p. 6 (1945).





804
limited to that part of the construction costs allocated to irriga-
tion and assigned for repayment by them.
Except as to distribution-system cost, the 1939 Act also pro-
vides an alternative method for return to the United States
of the construction cost connected with water supply and allo-
cated to irrigation.9 Under this alternative, a short-term or
long-term contract may be made to furnish water for irriga-
tion purposes for periods not to exceed 40 years. Such a water-
service contract must provide such rates as will produce reve-
nues at least sufficient to cover:
an appropriate share of the annual operation and main-
tenance cost and an appiopiiate share of such fixed
charges as the Secretary deem~ proper, due consideration
being given to that part, of the cost of construction of
works connected with water supply and allocated to
irrigation *
Payment must be made yearly in advance of delivery of water.
With respect to existing projects on which construction
charges are payable, to the United States, the 1939 Act also
provides an optional basis for calculating the annual install-
ments on the repayment obligation. It is the "normal and
percentages plan," which permits variable payments based on
the percentage of normal crop returns by which annual returns
exceed or are less than normal returns.'
Significant here is the fact that the 1939 Act directs the Sec-
retary of the Interior to investigate the repayment problems of
existing projects where he deems a contract under the Act would
not provide an economically sound adjustment." In such
cases, he may negotiate a contract providing "fair and equitable
treatment of the repayment problems" in keeping with the pur-
poses of the Acti Such contracts become effective only after
approval by Congress.95

9(e), 58 Stat. 1196, 43 U S. .485h(e).
-8 4, 53 Stat. 1l89, as amended, 43 U. S. C. 485c. For further details
concerning this plan, see supra, pp. 205-206.
7(a), 53 tat. 1192,43 U. S. 0. 485f(a).
S 7(a), 7(c), 53 Stat. i192, as amended, 43 U. S. C. 485f(a), 485f(c).







In the case of projects under the Water Conservation and
Utilization Act, the irrigation water-users' cost obligation is
even more directly tied to ability to pay." Moreover, a
1943 amendment of that statute provided, that expenditures
might be excluded from returnable project costs to the extent
necessary "for the successful prosecution of the project." "
Water-users' repayment ability finds further express recogni-
tion where irrigation works are constructed at Army dam and
reservoir projects pursuant to Section 8 of the 1944 Flood
Control Act."8 For in such a case, the project feasibility re-
port may, "within the limits of the water users' repayment
ability," be predicated on the allocation to irrigation of an
appropriate portion of the cost of structures and facilities used
for irrigation and other purposes."" Pertinent here is the fact
that 1937 flood-control legislation permits the modification of
project plans for any reservoir to provide for "conservation
storage," if th c~it of the inc~ased capacity is contributed by
local agencies and they agree to utilize such capacity in a man-
ner consistent with federal uses and purposes."
Water-users' repayment obligation is left entirely to admin-
istrative discretion in the case of debris storage reservoirs of
the California D6bris Commission.6- The Secretary of the
Army ha authority here to make contracts to supply storage
for water and use of outlet facilities from such reservoirs for
"irrigation purposes," among others, "upon such conditions of
delivery, use, and payment as he may approve." a

SSee supra, n. 582, p. 598.
"Act Of Deember 22, 1944, 8, 58 Stat. 887, 891, 48 U. S. 3. 90.
SSee supra, p. 58. As previously noted, substantially this same language
appar in the authorization for addition of irrigation works at the Hungry
Hdrse Diam. See supra, n. 534, p. 598.
Act of Jame 22, 1988 5, 49 Stat. 1570,1572, as added by Act of July 19,
198,7 1, 50 Stat.'515, 518, 38 U.,S. C. 70h Section 8 of the 1944 Flood
Control Act, discussed above, is made expressly Inapplicable to any existing
Army dam or reservoir which provides "conservation storage" of water for
irrigation purposes. 8,58 Stat. 891,43 U. S. C. 390.
SAct of June 25,1938, 52 Stat. 1040, see 83 U. S. C. 688.
0Id.







Power.-Remarkable variation exists among the statutory
prescriptions of rate standards under which federal power is
marketed. One standard is fixed for reservoirs under control
of the Army; another for Reclamation projects; several other
differing ones for groups of projects and individual projects;
and none in another case.
(Army Projects)-By the 1944 Flood Control Act, it is re-
quired that surplus power and energy from dam and reservoir
projects under Army control be delivered to the Secretary of
the Interior, and that he transmit and dispose power and
energy: *
in such manner as to encourage the most widespread use
thereof at the lowest possible rates to consumers con-
sistent with sound business principles *
While this requirement must be considered in fixing rates, the
statute does not define "sound business principles," or any of
the other terms.
It is further required that: "6
Rate schedules shall be drawn having regard to the re-
covery (upon the basis of the application of such rate
schedules to_ the capacity of the electric facilities of the
projects) of the cost of producing and transmitting such
electric energy, including te amortization of the capital
investment allocated to power over a reasonable period
of years.
The amortization requirement has been construed in prac-
tice to require that interest be one of the costs which must be
returned to the United States.'" The interest component on
power revenues is, therefore, not available to aid in the return
of other costs, as is possible by administrative interpretation
of minimum-rate standard of the 1939 Reclamation Project
Aet of December 22, 1944, S 5, 58 Stat. 887, 80, 16 U. 8. C. 825s.
See, e. g., Re Bonneville Project, Oolumbia River, Oregon-Washington,
Allocation of Costs, Docket No. IT-5955, 4 F. P. C. 950, 955 (1945).







Act." In the absence of a statutory specification of an inter-
est rate, 2y2%y has been adopted in practice, a rate sufficient
to cover the actual cost of money to the United States." Fifty
years has been selected as the "reasonable period" specified in
the above statute.
SOnly a few months after enactment of the foregoing general
provision, Congress directed that surplus energy generated at
the new hydroelectric plant, St. Mary's River, Michigan, shall
be sold by the Secretary of the Army upon such "terms and
conditions as he shall determine."
(Reclamation Projects)-The 1939 Reclamation Project Act
authorizes the Secretary of the Interior to enter into contracts
for the "salb of electric power or lease of power privileges," for
such periods, "hot to exceed 40 years," aad at such rates as in
his judgment will produce: 4
power revenues at least sufficient to cover an appropri-
ate share of the annual operation and maintenance cost,
interest on an appropriate share of the construction in-
vestment at not less than 3 per centum per annum, and
such other fixed charges as the Secretary deems
proper *
In the first place, it should be noted that the provision re-
specting interest has been administratively construed to pro-
vide a perpetual 3% rate of the "appropriate share of the con-
struction investment," regardless of the portion of that invest-
ment previously returned." The interest element in the rate
standard for reservoir projects under control of the Army, on

See awpr, pp. 295-296.
See, e. g., Re Bonauvile Project, Columbia River, Oregon-WMagiwtoP,
Allocation of costs, Docket No. I-5955, 4 F. P. 950, 955 (1945).
WIMd.
Act of March 2, 1945, 2, 59 Stat. 10, 20.
m Act of August 4, 1938, 1 9(e), 53 Stat. 1187, 1198, 48 U. S. C. 485h(c).
SUnpublished opinion of the Solicitor of the Department of the Interior
concerning power-rate schedules and minimum-rate requirements for Grand
Coulee, Opinion M-83473, January 29, 1944, and its Supplement, September
10, 195 In this connection, see also Act of May 9, 1988, 1, 52 Stat. 291,
322,43 U. S. C. 392a.
911111-61----40







the other hand, produces 2%o of only the unamortized portion
of the-construction investment."2
We have previously pointed out that the 1939 Act's provi-
sion for allocation.of repayable and returnable costs makes no
mention of interest.* And the Act has been administratively
construed to permit the application of interest, collected as a
component of power rates, to the return to the United States of
irrigation costs to be borne by power.61' While such interest
component may thus he applied toward repayment of the irriga-
tion investment, the fact remains that interest is collected in
power rates.
Another aspect of Reclamation rate practice should be noted.
Rates are fixed so as to return annual operation, maintenance,
and replacement costs, plus amortization of the power invest-
ment in not to exceed 50 years, with interest at the rate of 3%
per annum A the unamortized balance of the power invest-
ment-if this formula resultsin a rate equal to or higher than
the minimum required by the statutory formula."
(Tennessee Valley Authority Projects)-It is a declared
policy of the TVA Act that: 6 :
in order, as soon as practicable, to make the power proj-
ects self-supporting and self-liquidating, the surplus
power shall be sold at rates which, in the opinion of the
Board, when applied to the normal capacity of the Au-
thority's power facilities, will produce gross revenues in
excess of the cost of production of said power *
(Boulder Canyon Project)-The Boulder Canyon Project
Act directed the Secretary of the Interior to make provision
for revenues by contract adequate to insure payment of "all
See, e. g., Re BowsPlWe Project, Columbia River, Oregon-Woashington,
Allocation of Costs, Docket No. IT-5955, 4 F. P. C. 950, 977 (1945).
See supra, p. 590.
41 See supra, n. 220, p. 296. See also AVERAGE RAr E &ND REPaYMENT STUDES
sFO POWER SYSTEMs ON BU EAU OF RECLAMATION PBoJFics, Department of
Interior, Bureau of Reclamation, pp. 1-5 (January 1950).
See, e. g., AVERAGE RATE AND REPAYMENT STUDImS FOB POWaE SYSTEMS
ON BUmBAU OF RECLAMATION PROJEirs, Department of Interior, Bureau of
Reclamation, pp. 1-5 (January 1950).
Act of August 31, 1935, 8, 49 Stat. 1075, 1077, see 16 U. S. C. 881m.







expenses of operation and maintenance" and "repayment
within 50 years from the date of completion of said work" of
all advances made for construction, including an allocation to
flood control, with a qualified provision for interest at 4% per
annum on amounts advanced but unpaid."
Significantly, the Act required that power contracts be made
with a view to obtaining "reasonable returns," and contain
provisions whereby, at the end of 15 years from the date of
execution and every ten years thereafter, there shall be read-
justment, upon the demand of either party:s
either upward or downward as to price, as the Secretaiy
of the Interior may find to be justified by competitive
conditions at distributing points or competitive cen-
ters *
The Boulder Canyon Project Adjustment AotJffected sev-
eral changes pertinent here. In lieu of periodic rate adjust-
ments upon a basis of competitive conditions, rates are sta-
bilized for a period from June 1, 1937 to May 1, 1987; the in-
terest rate is reduced from 4%o to 3% and applied to all of the
Government's investment except the allocation to flood control;
and contract payments are required to be sufficient to cover
costs of operation and maintenance and replacements, an
amount equal to 100% of the principal of the Government's
investment plus 3% interest on all but the allocation to flood
control, plus an amount in lieu of taxes to the states wherein
the project is located, as well as sums for annual transfer to
the Colorado River Development Fund.".

SAct of December 21, 1928, 4(b), 45 Stat. 1057,1059, 48 U. S. 617c(b).
m* g (a), 45 Stat. 1060, 48 U. 8 C. 617d(a).
-Act 6f July 19, 1940, 54 Stat. 774, 43 U. S. C. 618-618o. See also Sen.
Bep. No. 1784,76th .Cong., 8d sess., p. 9, (1940). This report also points
out that: ~In authorizing all later projects Congress has preferred a defi-
nite standard of rates, related to the amount required to retire the Govern-
ment's investment. It seems fair to extend that principle to Boulder Dam;
every interest involved, including the Interior Department, the States and
the power contractors, prefer such a definite standard, each being willing
to forego the speculative advantage to it of certain possibilities under the
old law in consideration of the removal of its equally speculative hazards."
Ibd..


LW-*'I'-XI-- -LI1






(Bonneville Project and Fort Peck Project)-As to each
of these projects it is required that power-rate schedules be
determined with due regard to and predicated upon the fact
that power is developed from water power created as an inci-
dent to the construction of the project for the specified statu-
tory purposes. In addition, both Acts further stipulate sub-
stantially the same requirement respecting the manner of
drawing rate schedules as that previously set forth for power
from reservoir projects under Army control.0
(Indian Projects)-In the case of the Flathead Indian Irri-
gation Project, power is sold at the lowest rates which, in the
judgment of the Secretary of the Ipterior, will repay power costs
and certain irrigation costs.& In the case of the Coolidge Dam,
power revenues are used to repay power and irrigation costs and
to make improvements on the irrigation project." Such power
revenues ma also be used to liquidate the cost of transmission
lines."
(California Dbris Commission Projects)-The special stat-
ute applicable to debris reservoirs of the California Debris
Commission merely authorizes the Secretary of the Army to
enter into contracts for, among other purposes, "power devel-
opment upon such conditions of delivery, use, and payment as
he may approve." a
(Hungry Horse Dam)-Although the statute authorizing
this dam makes express provision for power generation, it
includes no standard for fixing rates."
(Review of Rates)-Rate schedules for surplus power at res-
ervoir projects under Army control become effective upon "con-
firmation and approval" by the Federal Power Commission."
- Similar approval is required in the case of power generated
at projects covered by the Bonneville Project and Fort Peck
SAct of August 20, 1987, 50 Stat. 731, 785, 16 U. S. 0. 832f; Act of
May 18, 1938, 6, 52 Stat. 43, 405,16 U. S. C. 833e.
"Act of May 25,1948, 8 2(g), 2(h), 62 Stat. 269, 270-271.
Act of March 7, 1928, 1, 45 Stat. 200, 211, see 25 U. S. C. 387 note.
"Act of June 22, 1936, 49 Stat. 1822.
Act of June 25,1938, 52 Stat. 1040, see 33 U. S. C. 683.
Act of June 5,1944, 8 1, 58 Stat. 270, 43 U. S. C. 593a.
*Act of December 22, 1944, 1 5, 58 Stat. 887, 890, 16 U. S. 0. 825s.







Project Acts." Under these two Acts, but not in the case of
rate schedules for power generated at Army reservoir projects
other than Bonneville, the allocation of costs pon which rate
schedules are based must also be made by the Federal Power
Commission." In none of these cases is the Commission given
continuing rate supervision or authority to require changes.
On the other hand, rates for power sold under Reclamation
Law or under the Tennessee Valley Authority Act are not
subject to Commission review.
(Pooling of Power Costs and Revenues for Rate Purposes)-
In the main, the foregoing provisions contemplate individual
rates for each project, variously geared to repayment of costs.,
Variations among power rates within a given area thus result
except where the individualized process happens to produce
the same rate.
On the other hand, there are provisions of statute tending
to mitigate such differences and to move in the direction of
rate uniformity within prescribed areas. A suggestion ap-
pears in the requirement that surplus power from reservoir
projects under Army control be transmitted and disposed of
in such a manner "as to encourage the most widespread use
thereof." m
Similarly, Congress has declared that projects of the Tennes-
see Valley Authority shall be considered:
primarily as for the benefit of the people of the section
as a whole and particularly the domestic and rural con-
sumers to whom the power can economically be made
available, and accordingly that sale to and use by indus-
try shall be a secondary purpose, to be utilized princi-
pally to secure a sufficiently high load factor and revenue
returns which will permit domestic and rural use at
the lowest possible rates and in such manner as to
S encourage increased domestic and rural use of electricity.
SAct of August 20, 1987, 6% 50 Stat. 731, 785, 16 U. S. C.832e; Act of May
18, 1938, 1 5, 52 Stat. 403, 405, 16 U. S. C. 833d.
7, 50 Stat. 785, 16 U. S. C. 8382; 6, 52 Stat. 405, 16 U. S. C, 833e.
*In this connection see Sen. Rep. No. 1351, 81st Cong., 2d sess., p. 7 (1950).
SAct of December 22, 1944, 1 5, 58 Stat. 887, 890, 16 U. S. C. 825s.
SAct of May 18, 1988, 1 11, 48 Stat. 58, 64, 16 U. 8. 0. 831J.






Power must be sold at rates which, in the opinion of the Board,
"when applied to the normal capacity of the Authority's power
facilities, will produce gross revenues in excess of the cost of
production of said power."8
Both the Bonneville and Fort Peck Project Acts expressly
stipulate that rate schedules may provide for: S
uniform rates or rates uniform throughout prescribed
transmission areas in order to extend the benefits of an
integrated transmission system and to encourage
the equitable distribution of the electric energy
developed *
It should be pointed out here that the Bonneville Power
Administration has marketing responsibility for a number of
projects in addition to the Bonneville Project, power from
which is marketed over an integrated transmission system."
The power-rate and marketing requirements are varied among
these projects. As to one, Reclamation. Law applies; two
others are govrened by the law applicable to power produced
at reservoir projects under Army control; three more come
under the provisions of the Bonneville Project Act; and in one
case there is a lack of statutory certainty.65
Such variations are important where, as here, they involve
different dams in the same river system, for the source of
power cannot be identified after it enters an integrated trans-
mission network and is comn singled with power from other
sources. Fulfillment of the varying statutory requirements
then becomes physically impossible or difficult, depending on
the nature and degree of the differences.
Drainage.-As already indicated, the return of costs for fed-
eral drainage activities varies as to the agency performing the
work.' For snih activities conducted by the Army Engineers,
Act of August 31, 1935, 8, 49 Stat. 1075, 1077, 16 U. S. C. 831m.
reAct of August 20, 1937, 5 6, 50 Stat. 731, 735, as amended, 16 U. S. C.
832e; Act of May 18, 1938, 5, 52 Stat. 43, 405, 16 U. S. C. 838d.
U See spra, pp. 305-306.
SSee supra, pp. 305-306.
See supra, pp. 595-596.






the pricing standard is the same as in the case of flood con-
trol. In other words, the extent of required local contribu-
tion is the measure. The situation is substantially the same
in the case of drainage activities of the Department of Agri-
culture, where the price depends upon whether the Secretary
exercises his discretionary authority to require local contribu-
tion. But where such activities are performed by the Bureau
of Reclamation, the pricing standard is that applicable to
irrigation.
Water Supply Other Than for Irrigation.-Here again, price
standards vary with the agency performing the function.
Where the Secretary of the Army makes contracts for "domestic
and industrial uses for surplus water" at any reservoir under
Army control, he is authorized to do so "at such prices and
on such terms as he may deem reasonable."'1 If plans for
a reservoir project are modified to provide additional storage
capacity for domestic6 water supply or other conservation
storage," the price standard prescribed is that the "cost of such
increased storage capacity" be contributed by local agencies."
Ini cnpsction with the latter provision, a recent restrictive
provision merits notice here. The statute authorizing con-
struction ofthe Coyote Valley Reservoir of the Russian River
Project by, the Army Engineers requires that, prior to con-
struction, local interests shall contribute $5,598,000 in full pay-
mentof cost allocable to water-conservation benefits.& The
plan thus adopted provides that the project be turned over to
and operated by local interests. A unique feature is the re-
quirement that Section 8 of the 1944 Flood Control Act be made
applicable."
As to projects under the 1939 Reclamation Project Act, al-
ternative price standards are provided with respect tp contracts
to furnish water for "municipal water supply or miscellaneous
Act of December 22,1944, 6, 58 Stat. 887, 890, 33 U. S. C. 708.
"Act of June 22, 1986, J 5, 49 Stat. 1570, 1572, as added by Act of July
19,1987, s 1, 0 S tat. ~1i 518, as amended, 83 U. S. c. 70oh.
SAct of May 17, 1950,64 Stat. 163, -.
SSen. Rep. No. 1143, 81st Cong., 1st sess., p. 65 (1949).
For discussion of Section 8, see supra, p. 533.






purposes Such a contract may be for a period not exceed-
ing40 years: :
at such rates as in the Secretary's judgment will produce
revenues at least sufficient to cover an appropriate share
of the annual operation and maintenance cost and an
appropriate share of such fixed charges as the Secretary
deems proper, and shall require the payment of said
rates each year in advance of delivery of water for said
year.
Or such a contract shall require repayment to the United States
over a period not to exceed 40 years: "
with interest not exceeding the rate of 31/2 per centum
per annum if the Secretary determines an interest charge
to be proper, of an appropriate share as determined by
the Secretary of that part of the, construction costs al-
located by him to municipal water supply or other mis-
cellaneous purposes.
The foregoing standards point up an unusual feature. The
procedure for allocation of costs, discussed earlier, includes
provision for an allocation to "municipal water supply or other
miscellaneous purposes." But the above pricing standards
are restricted to contracts to "furnish water" for municipal
water supply or miscellaneous purposes. If the allocation pro-
vision be thus broader in scope than authorization for con-
tracts, one apparent result would be the lack of a correlative
pricing standard. In this connection, it should also be noted
that the allocation provision specifies municipal water supply
or "other" miscellaneous purposes, but that word does not
appear in the corresponding contract authorization to which
the above pricing standards are related.
Fish and Wildlife.-As already noted, project costs for these
purposes are nonreimbursable."
-Act of August 4; 1939, 9(c), 58 Stat. 1187, 1194, 43 U. S. 0. 485h(c).
Id.
S 9(a), 53 Stat. 1193, 43 U. S. C. 485h(a).
SSee supra, p. 597.







Recreation.-As previously indicated, recreational facilities
at certain Reclamation projects are operated by the National
Park Service pursuant to interagency agreements."! These
agreements contain no provision regarding price. The au-
thorization for recreational use of reservoir projects under
Army control permits the Secretary of the Army to grant leases
"upon such terms as he may deem reasonable." Leases to
nonprofit organizations may be granted at "reduced or nominal
rentals." ", Licenses to federal, state, or local governmental
agencies may be granted "without monetary consideration,"
when determined to be in the public interest and for "such pe-
riods of time and upon such conditions" as the Secretary of
the Army finds advisable." And when he determines it not to
be contrary to the public interest, the water areas of such reser-
voirs shall be open to public use generally "without charge"
for recreational purposes."'
No price standard is fixed to cover conveyances for recrea-
tional purposes by the Tennessee Valley Authority."
Substantially the same situation exists with respect to au-
thorizations for recreational uses of national parks." So also
as to certain relevant authorizations permitting recreational
uses of national forests, of the so-called "0 and C lands," and
of retired submarginal lands.'"
See supra, p. 388.
Act of December 22, 1944, 4, 58 Stat. 887, 889, as amended, 16 U. S. 3.
460d.
*Id,
S4.

'Act of May 18, 1933, 4(k)(a), 48 Stat. 58, 60, as added by Act of
July 18,1941,55 Stat. 599,16 U. S. C. 881c(k) (a).
i Act of August 25, 1916, I 1, 39 Stat. 585, as amended, 16 U. S. C. 1, 8.
Act of February 28, 1899, 1, 30 Stat. 908, as amended, 16 U. S. 0.
495; Act of Mhrch 4, 1915, 88 Stat. 1086, 1101, 16 U. S. 0. 497; Act of Au-
gUst 28, 1937, 1, 50 Stat. 874; Act of July 22, 1987, 1 81, 82, 50 Stat.
522, 525, as amended, 7 U. S. C. 1010, 1011; 7 C. F. R. 800.8.




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