B-114868, APR. 14, 1958

B-114868, APR. 14, 1958

TO THE SECRETARY OF THE INTERIOR:

ON JANUARY 13, 1958, THE ADMINISTRATIVE ASSISTANT SECRETARY OF THE INTERIOR REFERRED TO PAGES 63 TO 66 OF OUR AUDIT REPORT ON THE BUREAU OF INDIAN AFFAIRS FOR THE FISCAL YEARS 1952 AND 1953 AND THE RECOMMENDATION THEREIN THAT ACTION BE TAKEN TO OPERATE THE POWER SYSTEM OF THE SAN CARLOS INDIAN IRRIGATION PROJECT, ARIZONA, ON A SOUND FINANCIAL BASIS SO THAT INCREASED NET POWER REVENUES MAY BE AVAILABLE TO REPAY THE GOVERNMENT FOR THE COST OF THE SAN CARLOS INDIAN IRRIGATION PROJECT, AS PROVIDED FOR BY LAW. THE ADMINISTRATIVE ASSISTANT SECRETARY REQUESTS OUR OPINION CONCERNING THE PROPRIETY OF A PRACTICE WHICH HAS EXISTED FOR SEVERAL YEARS OF USING POWER REVENUES OF THE PROJECT TO DEFRAY THE COSTS OF ELECTRIC POWER USED TO OPERATE THE PROJECT IRRIGATION PUMPS TO PROVIDE UNDERGROUND WATER FOR THE IRRIGATION OF THE FARMS ON THE ENTIRE PROJECT WITHOUT FIXING A CHARGE FOR THE POWER SO USED AND COLLECTING THE SAME AS PART OF THE COSTS OF MAINTENANCE AND OPERATION OF THE IRRIGATION PROJECT FROM THE WATER USERS.

IN HIS LETTER OF JANUARY 13, THE ADMINISTRATIVE ASSISTANT SECRETARY SAYS THAT FIFTY THOUSAND ACRES OF THE PROJECT ARE WITHIN THE SAN CARLOS IRRIGATION AND DRAINAGE DISTRICT AND A LIKE AREA ARE IN INDIAN OWNERSHIP, WITHIN THE GILA RIVER RESERVATION, ARIZONA, AND THAT IN MAY 1952 CONSIDERATION WAS GIVEN TO REQUESTING OUR OPINION ON THE ABOVE MATTER. BECAUSE OF THE DISTRICT'S INTEREST AND OF AN INDICATION (THE CIRCUMSTANCES OF WHICH ARE SET FORTH IN A LETTER OF SEPTEMBER 15, 1953, ADDRESSED TO THE SECRETARY BY CHARLES M. REED, ATTORNEY FOR THE DISTRICT) THAT CONSIDERATION WAS BEING GIVEN TO FIX CHARGES AGAINST THE WATER USERS FOR ELECTRIC ENERGY USED IN PUMPING OPERATIONS, REPRESENTATIVES OF THE DISTRICT EXPRESSED AN INTEREST IN HAVING THE QUESTION PRESENTED FOR OUR DECISION. THE ADMINISTRATIVE ASSISTANT SECRETARY SAYS THAT THE ATTITUDE OF DISTRICT REPRESENTATIVES APPEARS TO HAVE BEEN THAT SHOULD OUR OPINION HAVE BEEN ADVERSE TO THE PRACTICE, THE DISTRICT WOULD SEEK LEGISLATION TO PERMIT ITS CONTINUANCE. IT IS REPORTED THAT ON FEBRUARY 10, 1954, THE THEN ASSISTANT SECRETARY OF THE INTERIOR ADVISED MR. REED THAT THE DEPARTMENT WAS WILLING TO CONSIDER APPROPRIATE LEGISLATION DEALING WITH THE SUBJECT IF SUCH A BILL WOULD PROVIDE:

"1. THAT A CERTAIN PORTION OF THE NET POWER REVENUES SHALL BE APPLIED EACH YEAR TO THE REPAYMENT OF PROJECT CONSTRUCTION COST;

"2. THAT THE SHARE OF THE NET POWER REVENUES THUS APPLIED ANNUALLY IN LIQUIDATION OF CONSTRUCTION COSTS SHALL NOT IN ANY WAY CHANGE OR AFFECT PAYMENTS ACCRUING UNDER THE ACT OF JULY 14, 1945, 59 STAT. 449; AND

"3. THAT IF THE BALANCE OF SUCH NET REVENUES REMAINING ARE INSUFFICIENT TO MEET THE PROJECT PUMPING COST DURING ANY YEAR, THE PROJECT LAND OWNERS DURING THE YEAR FOLLOWING ANY SUCH DEFICIENCY WILL MAKE UP SUCH DEFICIENCY THROUGH ASSESSMENTS AGAINST THEIR LANDS.'

ALSO, IT IS REPORTED MR. REED WAS FURTHER ADVISED THAT A STUDY OF THE POWER SYSTEM WAS THEN UNDERWAY, AND THAT PERHAPS IN VIEW OF SUCH STUDY THE DISTRICT MIGHT DESIRE TO WITHHOLD SUGGESTIONS ON THE PROPOSED LEGISLATION. FURTHER ACTION HAS NOT BEEN TAKEN IN THE MATTER OF REMEDIAL LEGISLATION AND THE ADMINISTRATIVE ASSISTANT SECRETARY SAYS THAT HE NOW DESIRES TO OBTAIN OUR OPINION ON THE SUBJECT.

THE COOLIDGE DAM WAS AUTHORIZED TO BE CONSTRUCTED ACROSS THE GILA RIVER WITHIN THE SAN CARLOS INDIAN RESERVATION BY THE ACT OF JUNE 7, 1924, 43 STAT. 475, AS PART OF THE WORKS OF THE SAN CARLOS INDIAN IRRIGATION PROJECT. THE ACT PROVIDES THAT THE TOTAL COST OF THE PROJECT BE DISTRIBUTED EQUALLY PER ACRE AMONG THE LANDS IN INDIAN OWNERSHIP AND THE LANDS IN PRIVATE OWNERSHIP THAT ARE SERVED BY THE PROJECT. OPERATION AND MAINTENANCE CHARGES, ON ACCOUNT OF LAND IN PRIVATE OWNERSHIP OR OF LAND IN INDIAN OWNERSHIP OPERATED UNDER LEASE, UNDER THE PROVISIONS OF SECTION 3, ARE PAYABLE ANNUALLY IN ADVANCE. THE RECORD SHOWS THAT THE PROJECT AS PLANNED CONTEMPLATED THE IRRIGATION OF 80,000 ACRES OF LAND FROM NATURAL FLOW WATER OF THE GILA RIVER AND WATERS IMPOUNDED BY THE COOLIDGE DAM AND THAT IT WAS CONTEMPLATED THAT THE BALANCE OF THE PROJECT ACREAGE, CONSISTING OF 20,000 ACRES,WOULD RECEIVE ITS WATER SUPPLY FROM RETURN FLOW AND UNDERGROUND WATER OBTAINED THROUGH PUMPING OPERATIONS. NO PROVISION WAS MADE IN THE ACT OF JUNE 7, 1924, FOR POWER DEVELOPMENT.

DEVELOPMENT OF ELECTRICAL POWER AT THE COOLIDGE DAM "AS AN INCIDENT TO THE USE OF THE COOLIDGE RESERVOIR FOR IRRIGATION" WAS AUTHORIZED BY THE ACT OF MARCH 7, 1928, 45 STAT. 200, 210 TO 212. THE ACT VESTS AUTHORITY IN THE SECRETARY OF THE INTERIOR TO SELL SURPLUS POWER DEVELOPED AT THE COOLIDGE DAM, AND PROVIDED THAT THE NET REVENUES DERIVED FROM ALL SALES OF SUCH SURPLUS POWER WERE TO BE DEVOTED FIRST, TO REIMBURSE THE SALES OF SUCH SURPLUS POWER WERE TO BE DEVOTED FIRST, TO REIMBURSE THE UNITED STATES FOR THE COST OF DEVELOPING SUCH ELECTRIC POWER AS THAT COST DETERMINED BY THE SECRETARY OF THE INTERIOR; SECOND, TO REIMBURSING THE UNITED STATES FOR THE COST OF THE SAN CARLOS IRRIGATION PROJECT; AND THIRD, TO THE PAYMENT OF OPERATION AND MAINTENANCE CHARGES, AND THE MAKING OF REPAIRS AND IMPROVEMENTS ON THE PROJECT. IT FURTHER PROVIDES THAT THE REIMBURSEMENT FROM POWER REVENUES SHALL NOT REDUCE THE ANNUAL PAYMENTS MADE BY THE LANDOWNERS ON ACCOUNT OF THE PRINCIPAL SUMS CONSTITUTING THE COST OF CONSTRUCTION OF THE POWER PLANT AND PROJECT WORKS UNTIL SUCH SUMS SHALL HAVE BEEN PAID IN FULL. THERE IS NO SPECIFIC MANDATE IN THAT ACT OR IN THE AMENDMENTS BY THE ACT OF JUNE 22, 1936, 49 STAT. 1822, TO SUPPLY POWER FOR PUMPING WITHOUT COST TO WATER USERS.

THE ADMINISTRATIVE ASSISTANT SECRETARY'S LETTER STATES THAT FOLLOWING THE EXTREME DROUGHT CONDITIONS WHICH STILL CONTINUE, BEGINNING IN 1934, IT BECAME APPARENT THAT HYDRO-ELECTRIC DEVELOPMENT AT THE COOLIDGE DAM COULD NOT BE RELIED UPON FOR A STEADY SOURCE OF POWER AND ENERGY. IN ORDER TO ASSURE AN ADEQUATE ELECTRIC SERVICE FOR THE POWER SYSTEM CUSTOMERS AND THE IRRIGATION PUMPING OPERATIONS, A DIESEL POWER PLANT WAS INSTALLED NEAR COOLIDGE, ARIZONA, AND IN 1942 A DIESEL GENERATING PLANT LOCATED AT CHRISTMAS, ARIZONA, WAS PURCHASED. IN ADDITION POWER HAS BEEN MADE AVAILABLE THROUGH THE PURCHASE OF DAVIS DAM POWER FROM THE RECLAMATION SERVICE. THE LETTER FURTHER STATES THAT BECAUSE OF THE EXTENDED DROUGHT A CONSIDERABLE PART OF THE REVENUE DERIVED FROM THE SALE OF ELECTRIC POWER AFTER PAYING THE COST OF OPERATING AND MAINTAINING THE SAN CARLOS POWER SYSTEM, HAS BEEN USED FOR THE PURCHASE OF MORE POWER NEEDED IN THE EXTENDED OPERATION OF THE PUMPING EQUIPMENT TO PUMP UNDERGROUND WATER ON AN EQUAL BASIS TO ALL THE PROJECT LANDS--- THE PROJECT AS PLANNED BEING BASED UPON IRRIGATION OF 80,000 ACRES BY NATURAL FLOW AND 20,000 ACRES BY RETURN FLOW AND UNDERGROUND WATER OBTAINED THROUGH PUMPING OPERATIONS.

THE POSITION OF OUR OFFICE IS, AS STATED IN THE MENTIONED AUDIT REPORT, THAT REVENUES FROM THE SALE OF SURPLUS POWER SHOULD NOT BE REQUIRED TO ABSORB THE COSTS OF POWER USED IN PUMPING OPERATIONS TO THE BENEFIT AND WITHOUT COST TO THE WATER USERS. THE REASON FOR SUCH POSITION IS THAT THIS PRACTICE RESULTS IN THE REDUCTION OF NET REVENUES WHICH WOULD OTHERWISE BE AVAILABLE FOR REPAYMENT TO THE GOVERNMENT OF THE COST OF THE SAN CARLOS IRRIGATION PROJECT PURSUANT TO THE PROVISIONS OF THE ACTS OF MARCH 7, 1928, 45 STAT. 210, AND AUGUST 7, 1946, 60 STAT. 895, (31 U.S.C. 725S-3), AND WE THEREFORE RECOMMENDED IN OUR AUDIT REPORT THAT STEPS BE TAKEN TO OPERATE THE SAN CARLOS POWER SYSTEM ON A SOUND FINANCIAL BASIS. THE ADMINISTRATIVE ASSISTANT SECRETARY'S LETTER INDICATES THAT THIS VIEWPOINT IS SHARED BY YOUR DEPARTMENT. WE ALSO COMMENTED ON THIS MATTER IN OUR REPORT ON AUDIT OF THE PHOENIX, ARIZONA, AREA OFFICE, BUREAU OF INDIAN AFFAIRS. FOR THE FISCAL YEAR JUNE 30, 1954 (B-118601, DATED JANUARY 20, 1955). THAT REPORT STATED THAT DURING CALENDAR YEAR 1953, 43 PERCENT OF THE TOTAL POWER AVAILABLE WAS USED TO OPERATE IRRIGATION PUMPS AND THAT, BASED ON THE AMOUNTS OF ENERGY DELIVERED, THE PRORATED COST OF POWER USED TO OPERATE THESE PUMPS FOR THE PERIOD 1929 THROUGH 1953 AMOUNTED TO $2,495,144. WE RECOMMENDED THAT THE COMMISSIONER OF INDIAN AFFAIRS TAKE ACTION TO CHARGE WATER USERS FOR ALL COSTS OF DELIVERING WATER, INCLUDING THE COST OF ENERGY DELIVERED FOR PUMPING PURPOSES.

WE RECOGNIZE THAT POWER USED IN PUMPING OPERATIONS HAS NOT IN THE PAST BEEN TREATED AS A COST OF DELIVERING WATER SO AS TO BE INCLUDED IN OPERATION AND MAINTENANCE CHARGES AND THAT SUCH PRACTICE IS EMBODIED IN THE APPLICABLE REGULATIONS (25 C.F.R. 130.69D). ALSO, THAT THE CONGRESS THROUGH INFORMATION FURNISHED IN CONNECTION WITH CONSIDERATION OF APPROPRIATION REQUESTS HAS BEEN APPRISED OF THE FACT THAT REVENUES FROM THE SALE OF POWER WOULD BE USED TO PAY SUCH COSTS. HOWEVER, AND AS POINTED OUT IN THE ADMINISTRATIVE ASSISTANT SECRETARY'S LETTER, WHILE ACTION ON AN APPROPRIATION FOR A PARTICULAR YEAR MAY BE VIEWED AS AUTHORIZING THE USE OF FUNDS FOR THAT YEAR, SUCH ACTION WOULD NOT MODIFY THE SUBSTANTIVE LAW OF CONGRESS. THE ACTS OF JUNE 7, 1924 AND MARCH 7, 1928, DO NOT SPECIFICALLY AUTHORIZE THE USE OF POWER REVENUES TO DEFRAY COSTS OF IRRIGATION PUMPING OPERATIONS. THEREFORE, AND SINCE IRRIGATION PUMPING OPERATIONS DO NOT APPEAR SEPARABLE FROM OTHER IRRIGATION PROJECT OPERATIONS, OUR VIEW IS THAT THE COSTS THEREOF PROPERLY SHOULD BE CONSIDERED FOR INCLUSION IN THE IRRIGATION OPERATION AND MAINTENANCE ASSESSMENTS TO BE PAID BY THE WATER USERS.