B-156046, APR. 5, 1965

B-156046, APR. 5, 1965

TO THE HONORABLE SECRETARY OF THE INTERIOR:

REFERENCE IS MADE TO LETTERS OF MARCH 25 AND JANUARY 29, 1965, FROM THE DEPUTY ASSISTANT SECRETARY AND ASSISTANT SECRETARY, RESPECTIVELY, REGARDING THE PROPOSED SETTLEMENT OF CERTAIN CLAIMS BY THE BUREAU OF RECLAMATION AGAINST THE TULARE LAKE BASIN WATER STORAGE DISTRICT AND LAST CHANCE WATER DITCH COMPANY FOR THE UNAUTHORIZED SALE OF WATER STORED IN THE PINE FLAT DAM AND RESERVOIR.

IN 1958 THE BUREAU OF RECLAMATION, ACTING FOR THE UNITED STATES, ENTERED INTO AN INTERIM CONTRACT WITH THE KINGS RIVER CONSERVATION DISTRICT, ACTING ON BEHALF OF CERTAIN WATER USERS, WHEREIN THE DISTRICT AGREED TO PAY TO THE UNITED STATES $1.50 PER ACRE-FOOT FOR WATER RELEASED FROM THE PINE FLAT DAM AND RESERVOIR. THE DISTRICT, IN TURN, CONTRACTED WITH TULARE AND LAST CHANCE, THE LATTER PARTIES AGREEING TO PAYMENT TO THE DISTRICT PURSUANT TO THE TERMS OF THE CONTRACT BETWEEN THE BUREAU AND THE DISTRICT.

UPON RECEIPT OF ADVICE THAT TULARE AND LAST CHANCE UTILIZED 40,000 AND 17,000 ACRE-FEET OF WATER, RESPECTIVELY, THE DISTRICT WAS BILLED $60,000 AND $25,500, RESPECTIVELY, AT THE RATE OF $1.50 PER ACRE FOOT. THE DISTRICT PAID THE BILLS. UPON DISCLOSURE THAT THE WATER WAS NOT RELEASED TO TULARE AND LAST CHANCE, BUT WAS SOLD BY THEM TO THE PACIFIC GAS AND ELECTRIC COMPANY FOR $3.50 PER ACRE-FOOT TO BE HELD IN THE RESERVOIR TO THE CREDIT OF THE ELECTRIC COMPANY, THE UNITED STATES BILLED TULARE AND LAST CHANCE $80,000 AND $34,000, RESPECTIVELY, REPRESENTING THE $2 DIFFERENCE PER ACRE-FOOT BETWEEN THE $1.50 CONTRACT RATE AND THE $3.50 RATE THE PARTIES WERE PAID BY THE ELECTRIC COMPANY. THE BASIS FOR THE ADDITIONAL BILL WAS THAT THE SALES TO THE ELECTRIC COMPANY WERE UNAUTHORIZED BECAUSE THE CONTRACTS OF TULARE AND LAST CHANCE WERE SUBJECT TO THE TERMS OF THE CONTRACT BETWEEN THE BUREAU AND THE DISTRICT AND THE LATTER CONTRACT PROVIDED FOR UTILIZATION OF THE WATER ONLY FOR AGRICULTURAL PURPOSES.

TULARE AND LAST CHANCE DENY ANY LIABILITY FOR THE ADDITIONAL $2 PER ACRE- FOOT SINCE THEY SECURED THE 57,000 ACRE-FEET OF WATER FROM ANOTHER SOURCE WHICH WAS PAID $3.50 PER ACRE-FOOT BY THEM. ADDITIONALLY, THEY CONTEND THAT THE $60,000 AND $25,500 BILLS WERE ERRONEOUS INASMUCH AS PAYMENT WAS TO BE MADE FOR WATER RELEASED AND THE 57,000 ACRE-FEET WERE NOT IN FACT RELEASED.

HOWEVER, TULARE AND LAST CHANCE ARE WILLING TO RELINQUISH THEIR CLAIM FOR A REFUND OF $85,500 IF THE GOVERNMENT WILL ABANDON ITS CLAIM FOR$114,000. YOUR DEPARTMENT RECOMMENDS FAVORABLE CONSIDERATION OF THE PROPOSAL. THAT CONNECTION, IT IS POINTED OUT THAT ALL PAYMENTS RECEIVED DURING THE INTERIM CONTRACT PERIOD ARE USED TO REDUCE THE PAYMENTS WHICH ARE REQUIRED TO BE MADE ON THE NOW EXECUTED PERMANENT CONTRACT. THUS, THE PAYMENTS MADE UNDER THE INTERIM CONTRACT ARE IN ANY EVENT NO MORE THAN AN ADVANCE PAYMENT ON THE PERMANENT CONTRACT.

SINCE TULARE AND LAST CHANCE ARE AGREEABLE TO THE GOVERNMENT'S RETENTION OF THE $85,500 PAYMENT AND SINCE WITH REGARD TO THE $114,000 CHARGE IT DOES NOT APPEAR THAT EITHER PARTY RECEIVED ANY MONETARY BENEFIT SINCE THEY OBTAINED THE WATER SOLD AT $3.50 PER ACRE-FOOT FROM ANOTHER SOURCE FOR THE SAME PRICE, OUR OFFICE WOULD HAVE NO OBJECTION IF THE TENDERED PROPOSAL WAS ACCEPTED AND THE BILL FOR $114,000 CANCELED.