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1011TESTONE COULEE PROJECT, WASHINGTON A11600 706863 

HEARING

BEFORE THE

SUBCOMMITTEE ON

IRRIGATION AND RECLAMATION

OF THE

COMMITTEE ON

INTERIOR AND INSULAR AFFAIRS

UNITED STATES SENATE

EIGHTY-EIGHTH CONGRESS

SECOND SESSION

ON

S. 2447

A BILL TO AUTHORIZE THE SECRETARY OF THE INTERIOR

TO CONSTRUCT, OPERATE, AND MAINTAIN THE WHITESTONE COULEE UNIT OF THE OKANOGAN-SIMILKAMEEN

DIVISION, CHIEF JOSEPH DAM PROJECT, WASHINGTON,

AND FOR OTHER PURPOSES

MARCH 3, 1964

Printed for the use of the

Committee on Interior and Insular Affairs

U.S. GOVERNMENT PRINTING OFFICE

30-30 WASHINGTON: 1904
COMMITTEE ON INTERIOR AND INSULAR AFFAIRS

HENRY M. JACKSON, Washington, Chairman

CLINTON P. ANDERSON, New Mexico

ALAN BIBLE, Nevada

FRANK CHURCII, Idaho

ERNEST GRUENING, Alaska

FRANK E. MOSS, Utah

QUENTIN N. BURDICK, North Dakota

CARL HAYDEN, Arizona

GEORGE McGOVERN, South Dakota

GAYLORD NELSON, Wisconsin

HERBERT S. WALTERS, Tennessee

JERRY T. VERNIER, Staff Director

THOMAS S. FOLEY, Special Counsel

THOMAS H. KUCHEL, California

GORDON ALLOTT, Colorado

LEN B. JORDAN, Idaho

MILWARD L. SIMPSON, Wyoming

E. L. MECHEM, New Mexico

PETER H. DOMINICK, Colorado

SUBCOMMITTEE ON IRRIGATION AND RECLAMATION

FRANK E. MOSS, Utah, Chairman

CLINTON P. ANDERSON, New Mexico

HENRY M. JACKSON, Washington

FRANK CHURCH, Idaho

QUENTIN N. BURDICK, North Dakota

CARL HAYDEN, Arizona

II

THOMAS H. KUCHEL, California

GORDON ALLOTT, Colorado

LEN B. JORDAN, Idaho
CONTENTS

Page

S. 2447 1

Departmental report:

Interior 2

STATEMENTS

Gray, Wesley, secretary-manager, Whitestone Reclamation District 12 Hallauer, Hon. Wilbur G., State senator, State of Washington 8

Holmes, Warren J., director, Whitestone Reclamation District 10 Holum, Hon. Kenneth, Assistant Secretary of the Interior 16 Magnuson, Hon. Warren G., for himself and Hon. Henry M. Jackson 5

Palmer, William I., Acting Assistant Commissioner for Reclamation; accompanied by H. T. Nelson, regional director at Boise, Idaho, and

J. Karl Lee, Assistant Chief, Division of Project Development 30 Richardson, John, supervisor, Division of Reclamation, Washington State

Department of Conservation 7

Rosellini, Hon. Albert D., Governor, State of Washington 7

COMMUNICATIONS

Hawkins, Mr. and Mrs. Russell, Tonasket, Wash.: Letter to Hon. Henry

M. Jackson, chairman, Interior and Insular Affairs Committee, dated February 10, 1964 16 Hutchinson, Leonard R., Tonasket, Wash.: Letter to Hon. Henry M. Jackson, chairman, Interior and Insular Affairs Committee, dated February 10, 1964 15 McMillan, Lawrence D., Tonasket, Wash.: Letter to Hon. Henry M. Jackson, chairman, Interior and Insular Affairs Committee, dated February 9, 1964 16 Williams, George E., Tonasket, Wash.: Letter to Hon. Henry M. Jackson, chairman, Interior and Insular Affairs Committee, dated February 12, 1964 15

MISCELLANEOUS INFORMATION

Area redevelopment benefits, Whitestone Coulee unit 23 Determination of area redevelopment benefits from water resource projects_ 24

WHITESTONE COULEE PROJECT, WASHINGTON

TUESDAY, MARCH 3, 1964

U.S. SENATE,

SUBCOMMITTEE ON IRRIGATION AND RECLAMATION

OF THE COMMITTEE ON INTERIOR AND INSULAR AFFAIRS,

TV ashing ton, D.0 .

The subcommittee met, pursuant to notice, at 9:40 a.m., in .room

3110, New Senate Office Building, Senator Frank E. Moss presiding.

Present: Senators Moss, Jackson, Church, Burdick, Allott, and

Jordan.

Also present: Jerry Verkler, staff director; Thomas S. Foley, special

counsel; Stewart French, chief counsel; Roy M. Whitacre, professional

staff member; Richard W. C. Falknor, professional staff member;

Richard Andrews, minority counsel; and Robert Bendt, professional

staff member.

Senator Moss. The Subcommittee on Irrigation and Reclamation

has scheduled several measures for hearings this morning. I trust

that we will be able to finish all of the pending business, but if not,

we will try to complete action tomorrow.

The bill before us first is S. 2447, introduced by the chairman of

the full committee, Senator Jackson, and cosponsored by Senator

Magnuson. The bill would authorize the Secretary of the Interior

to construct, operate, and maintain the Whitestone Coulee unit of

the Okanogan-Similkameen division of the Chief Joseph Dam project.

We will print the bill and reports first and then hear testimony from

the sponsors of the bill and other witnesses.

(The bill and reports follow:)

[ S. 2447, 88th Cong., 2d seas.]

A BILL To authorize the Secretary of the Interior to construct, operate, and maintain the

Whitestone Coulee unit of the Okanogan-Similkameen division, Chief Joseph Dam

project, Washington, and for other purposes

Be it enacted by the Senate and House of Representatives of the United States

of America in Congress assembed, That for the purposes of furnishing a new

and a supplemental water supply for the irrigation of approximately two

thousand five hundred and fifty acres of land in Okanogan County, Washington,

for the purpose of undertaking the rehabilitation and betterment of existing

works serving a major portion of these lands, and for conservation and development of fish and wildlife resources and improvement of public recreation

facilities, the Secretary of the Interior is authorized to construct, operate, and

maintain the Whitestone Coulee unit of the Okanogan-Sirnilkameen division of

the Chief Joseph Dam project, in accordance with the provisions of the Federal

reclamation laws (Act of June 17, 1902, 32 Stat. 388, and Acts amendatory

thereof or supplementary thereto). The principal works of the unit shall

consist of: facilities to permit enlargement and utilization of Spectacle Lake

storage; related canal and conduits, diversion dam, pumping plants, and distribution systems; and necessary works incidental to the rehabilitation and expansion of the existing irrigation system.
2 WHITESTONE COULEE PROJECT, WASHINGTON

SEC. 2. The provisions of section 2 of the Act of July 27, 1954 (68 Stat. 568, 569),

shall be applicable to the Whitestone Coulee unit of the Okanogan-Similkameen

division of the Chief Joseph Dam project. The term "construction costs" used

therein shall include any irrigation operation, maintenance, and replacement

costs during the development period which the Secretary finds it proper to fund

because they are beyond the ability of the water users to pay during that

period.

SEC. 3. The Secretary is authorized, as a part of the Whitestone Coulee unit,

to construct, operate, and maintain basic public recreation facilities including

access roads, to acquire or otherwise to include within the unit area such

adjacent lands or interests therein as are necessary for present or future public

recreation use, and to provide for public use and enjoyment of the same and

of the water areas of the unit in a manner coordinated with the other project

purposes. The Secretary is authorized to enter into agreements with State or

local public agencies or other public entities for the operation, maintenance, or

additional development of unit lands or facilities, or to dispose of unit lands or

facilities to State or local agencies or other pubic entities by lease, transfer,

exchange, or conveyance, upon such terms and conditions as will best promote

their development and operation in the public interest for recreation purposes.

The costs of the undertakings described in this section, including costs of investigation, planning, Federal operation and maintenance, and an appropriate share

of the joint costs of the Whitestone Coulee unit, shall be nonreimbursable.

SEC. 4. There are hereby authorized to be appropriated for construction of the

new works involved in the Whitestone Coulee unit, of the Okanogan Similkameen

division of the Chief Joseph Dam project $5.325,000 (April 1960 prices), plus or

minus such amounts, if any, as may be required by reason of changes in the cost

of construction works of the types involved therein as shown by engineering cost

indices and, in addition thereto, such sums as may be required to operate and

maintain said division.

Hon. HENRY M. JACKSON,

Chairman, Committee on Interior and Insular Affairs,

U.S. Senate, Washington, D.C.

DEAR SENATOR JACKSON: This responds to your request for the views of this

Department on S. 2447, a bill to authorize the Secretary of the Interior to construct, operate, and maintain the Whitestone Coulee unit of the OkanoganSimilkameen division, Chief Joseph Dam project, Washington, and for other

purposes.

We recommend enactment of the bill with certain amendments suggested hereinafter.

The Whitestone Coulee unit is a potential irrigation development to serve 2,660

acres in north-central Washington about 10 miles from the international boundary with Canada. Existing facilities of the Whitestone Reclamation District

now serve 1,830 irrigable acres of the project area. The plan of development of

the unit provides for rehabilitating and enlarging existing works and constructing new facilities to serve an additional 705 acres of lands that are now dry

farmed. Continuation of water service within their entitlement to a further 125

acres of class 6 district lands which have a water right is also proposed. The

125 acres of class 6 lands would not be included within the district for repayment purposes; however, they would pay appropriate operation, maintenance,

and replacement charges.

The lands in the unit area are devoted almost exclusively to apple production.

with cover crops. By climate, topography, and soils the area is particularly well

suited to this crop pattern under sprinkler irrigation. The district lands in question have a long and successful production history, and the new lands included

in the project plan are equally well suited for apple production.

The Whitestone Reclamation District holds adjudicated rights to the flows

of Toats Coulee Creek. The plan of development contemplates replacing an

existing diversion dam on that creek with a new structure, rehabilitating the

main supply canal which runs from the point of diversion on Toats Coulee Creek

to Spectacle Lake some 4 miles away. Active storage capacity of Spectacle

Lake would be expanded from 3,800 to 6,250 acre-feet by construction of a dike

and outlet control works. Three small pumping plants would be built and the

U.S. DEPARTMENT OF THE TNTERTOR.

OFFICE OF THE SECRETARY,

Washington, D.C., March 2, 1964.

Or
WHITESTONE COITLEE PROJECT, WASHINGTON 3

gravity distribution system of canals, siphons, and buried pipe laterals would be

rehabilitated and expanded as necessary. These improvements would provide

an adequate water supply for irrigation of all lands of the unit.

Development of the unit as proposed would produce no Rood control benefits

of significance, nor is there opportunity for the production of hydroelectric

power. Investigations disclosed no need in the area for industrial water supplies or pollution control or other public health measures. Existing facilities

for domestic water service are adequate and will remain in use. Thus, the

Whitestone Coulee unit is proposed principally as an irrigation development.

There are, however, opportunities to provide excellent fishery and general

recreation benefits. These would be realized under the plan of development proposed. The State and private interests have already developed Spectacle Lake

as a recreation facility. By virtue of annual stocking of fingerlings by the State

department of game, it is an excellent rainbow trout fishery. With increased

capacity and project improvements the fishery would be enhanced to produce

average annual benefits estimated by the Fish and Wildlife Service at $4,050.

Lands would be acquired to replace existing public-access areas inundated by

enlargement of the reservoir, and basic recreation facilities would also be

constructed.

The project is engineeringly and economically feasible. Based on a 100-year

period of analysis, the benefit-cost ratio is 5.6 to 1, demonstrating the productivity of irrigated orchard land in the area.

Okanogan County, Wash., in which the unit is located, has been designated

as a rural redevelopment area under criteria in the Area Redevelopment Act of

1961 (75 Stat. 47). Accordingly, the benefits which would accrue to area redevelopment from project construction and operation have been calculated. We

propose that this function he recognized as a project purpose in accordance with

principles for water resource development evaluation adopted by the President

on May 15, 1962 (S. Doc. 97, 87th Cong.), for application within the executive

branch. To accomplish this, the bill should be amended by adding the words

"and for area redevelopment," after the word "facilities," on line 2, page 2.

Also, section 4 should be renumbered section "5" and a new section 4 reading

as follows should be added:

"SEC. 4. The Secretary is authorized, if the Whitestone Coulee unit is located

in whole or in part in a redevelopment area as defined in the Area Redevelopment

Act (75 Stat. 47) to recognize redevelopment as a function of the unit, to evaluate

the benefits of the unit in relieving persistant unemployment or underemployment, and to allocate costs to the redevelopment function as appropriate, which

costs shall be nonreimbursable."

The total project cost is estimated to be $5,312,000. Of this, $813,000 would

be allocated to area redevelopment, $4,336,000 to irrigation, and $163,000 to fish

and wildlife enhancement and recreation. On the basis of budget studies, we

have estimated the repayment capability of the irrigators to be $1,100,200 over

a 50-year period. This is 25 percent of the irrigation allocation. The balance of

the irrigation allocation would be returned from revenues of the Federal Columbia River power system.

Orchards are slow to develop. Consequently, those project farmers whose

lands are not now in orchards will require a 10-year development period, during

which they will experience very low revenues. For that reason it is necessary

to fund a part of the operation and maintenance costs of the unit during that

period. Projections are that approximately $74,000 in operating costs would be

funded as an irrigation cost item.

The first sentence of section 2 makes applicable to the Whitestone Coulee unit

the provisions of section 2 of the act of July 27, 1954, authorizing the Foster

Creek division of the Chief Joseph Dam project (68 Stat. 568). The provisions

of section 2 of the act of July 27, 1954, are not entirely appropriate to the Whit&

stone Coulee unit—those provisions are—

(1) establishment of a 50-year repayment period (this is necessary) ;

(2) adoption of a variable repayment formula (this is not necessary,

general reclamation law now provides this authority, act of August 8,

1958 (72 Stat. 542) ) ;

(3) provision for financial assistance from Chief Joseph Dam (financial

assistance is required, but because of recent changes in accounting practices for the Federal Columbia River power system it is no longer appropriate to tie financial assistance to an individual project or dam) ; and

(4) availability of Chief Joseph project energy for project pumping at

rates not exceeding the costs of generation (similarly, the change in ac-
4 WHITESTONE COULEE PROJECT, WASHINGTON

counting practices makes it no longer appropriate to tie the unit pumping

power reservation and charges to an individual project).

In order to provide for a 50-year repayment period for the irrigators, fund operating costs as necessary during the development period, reserve power for

unit pumping and provide financial assistance to the unit, we recommend that

section 2 be deleted and the following substituted therefor:

"SEc. 2. Irrigation repayment contracts shall provide for repayment of the

obligation assumed thereunder with respect to any contract unit over a period

of not more than fifty years exclusive of any development period authorized

by law. Operation, maintenance and replacement costs during the development

period which the Secretary finds it proper to fund because they are beyond

the ability of the irrigators to repay during that period shall be returned by the

irrigators during the repayment period. Construction costs allocated to irrigation beyond the ability of the irrigators to repay, shall be returned to the Reclamation Fund from revenues derived by the Secretary from the disposition

of power marketed through the Bonneville Power Administration. Power and

energy required for irrigation water pumping for the unit shall be made available by the Secretary from the Federal Columbia River power system at charges

determined by the Secretary."

Finally, to accommodate the bill to the administration's proposed legislation

concerning cost-sharing at water resources projects, a new subsection 3(b)

should be added as follows:

"(b) The costs of means and measures to prevent loss of and damage to fish

and wildlife resources shall be considered as project costs and allocated as may

be appropriate among the project functions."

Authorization to proceed with the Whitestone Coulee unit would be most

timely. The unit has a very high benefit-to-cost ratio and will produce substantial benefits in a community that is undergoing serious economic hardship.

A statement of personnel and other requirements that enactment of this legislation would entail is enclosed in accordance with the provisions of Public

Law 801, 84th Congress.

The Bureau of the Budget has advised that there is no objection to the

presentation of this proposed report from the standpoint of the administration's

program, subject to possible supplementary advice from the Bureau of the

Budget when views of the Department of Commerce on the proposed amendments to the bill dealing with area redevelopment are received.

Sincerely yours,

KEN NLI n HOLUM,

Assistant Secretary of the Interior.

Whitestone Coulee unit, Okanogan-Sfm,ilkameen Division, Chief Joseph Dam

project

Estimated additional man-years of civilian employment and expenditures for

the first 5 years of proposed new or expanded programs, as required by Public

Law 801, 84th Congress.

Estimated additional man-years of civilian

employment:

Administrative services, clerical 

Substantive (program) engineering

aids and technician 

Total estimated additional manyears of civilian employment 

Estimated expenditures:

Personal services 

All other 

Total estimated expenditures 

1st year 2d year 3d year 4th year 5th year

None 1 1 1 None

None 3 3 3 None

None 3.25 4 2.75 None

(1) $154,200 $194, 465 $144,097 $10, 942

(1) 1, 080, 780 2,278, 535 1, 078, 903 3.458

$197, 000 1, 235, 000 2,473, 000 1, 223, 000 14,400

1 General investigation exDenses.
WHITESTONE COULEE PROJECT, WASHINGTON 5

Senator Moss. The first witness on S. 2447 is the Honorable Warren

G. Magnuson, whom I understand has a statement for himself and for

Senator Jackson, the chairman of the full Committee on Interior and

Insular Affairs.

Senator Magnuson.

STATEMENT OF HON. WARREN G. MAGNUSON, FOR HIMSELF AND

HON. HENRY M. JACKSON, U.S. SENATORS FROM THE STATE OF

WASHINGTON

Senator MAGNUSON. Thank you, Senator. I do have a short statement on behalf of myself and Senator Jackson—two short statements, as a matter of fact—one on S. 2447, the Whitestone Coulee unit

project, and the other on the Banks Lake and Pothole Reservoir.

Senator Moss. You may proceed.

Senator MAGNUSON. I will testify to the one on S. 2447 at this

point. Of course, Mr. Chairman, I appreciate the opportunity to

appear before the subcommittee this morning in support of S. 2447,

a bill to authorize the Secretary of the Interior to construct, operate,

and maintain the Whitestone Coulee unit of the Chief Joseph Dam

project. I make this statement on my own behalf and on behalf of

my distinguished colleague, Senator Jackson.

I am glad to see this committee is adopting the same procedure

that I follow in the Commerce Committee. The committee chairman

is a little bit embarrassed when he testifies on his own bill, and so I

am filling in for Senator Jackson. Both of us feel keenly about this

project.

The Whitestone Coulee unit, if authorized by the Congress, would

rehabilitate an existing privately developed irrigation unit within the

Whitestone Irrigation District. This district is located in northcentral Washington in Okanogan County near the town of Tonasket.

The Whitestone district presently provides water for 1,830 acres of

prime orchard land in the Upper Okanogan River Basin. This is

part of the land that you folks on the committee as well as Senator

Jackson and myself know the beautiful apples come from.

Some of the original irrigation facilities are almost 40 years old

and I have many pictures here for the committee which will show

that they are very badly deteriorated. Without laboring this fact,

I will, at this time, hand to the subcommittee a number of recent

Bureau of Reclamation photographs which testify eloquently to the

imminent need for rehabilitation of these facilities.

On January 2, 1964, Assistant ,Secretary of the Interior Kenneth

Holum submitted the Department's final feasibility report to the Congress. The report presents a plan of development, multipurpose in

scope, to provide recreation and fish and wildlife benefits in addition

to irrigation. Secretary Holum noted that the Whitestone Reclamation District serves an area which has been designated as a rural

redevelopment area under the Area Redevelopment Act of 1961.

The proposed plan for development calls for the construction of a

new diversion dam on Toats-Coulee Creek, the construction of a canal

and siphon and three pumping plants to bring water to Spectacle

Lake. In addition to these developments, the construction of a dike

30-350-64 2
6 WHITESTONE COULEE PROJECT, WASHINGTON

on Spectacle Lake will increase the storage capacity of the lake from

3,800 to 6,250 acre-feet. The project will also rehabilitate and improve an existing gravity flow diversion system so that the total irrigated acreage will be increased from 1,830 to 2,660.

This is very consistent, too, because when we authorized and funded

the Chief Joseph Dam we were very careful to include in the authorization the possibility of irrigation in these projects in the Chief Joseph

area. Chief Joseph, of course, is primarily a power dam but there

was the possibility of further development in the area.

The feasibility report from the Secretary estimated the total cost of

this development to be $5,312,000. Of this amount $4,338,000 would

be allocated to irrigation benefits. The water users would repay

$1,100,200 and the balance would be repaid from the power revenues of

the Chief Joseph Dam project. Because of the persistently depressed

character of Okanogan County, the Department has recommended a

nonreimbursable allocation of $806,000 to area redevelopment. Recreation and fish and wildlife improvement has been estimated at $168,-

000, and this amount is, of course, also nonreimbursable.

I wish to emphasize that the feasibility report shows a benefit-tocost ratio of 5.8 to 1 on a basis of 100 years, and a benefit-to-cost ratio

of 4.9 to 1 on a basis of 50 years, which is the normal rule of thumb

we use in these projects. I do not need to point out to the subcommittee that this is an extremely favorable benefit-to-cost ratio.

In accordance with existing law, the Department's feasibility report was submitted to the Governor of the State of Washington and

received his approval. Mr. Richardson is here today to present

a statement on behalf of Governor Rosellini.

To my knowledge, this bill has unanimous local support. The subcommittee will hear today the testimony of one of our most distinguished State senators the Honorable Wilbur Hallauer. In addition, Mr. Holmes and Mr. Gray, the president and secretary of the

Whitestone Reclamation District, are here to give the subcommittee

the benefit of their firsthand knowledge of the need for this legislation.

They, of course, have lived with this and understand and can answer

any technical questions you may have.

That concludes my statement on behalf of Senator Jackson and

myself.

Senator Moss. Thank you, Senator Magnuson. These photographs

that have been passed around are very dramatic demonstrations of the

poor facilities that are now in use on the project. These will all be

placed in the committee file for reference of the committee in considering this project.

Senator MAGNUSON. These were all taken by the Bureau of Reclamation and constitute an objective photographic review, I would say.

Senator Moss. Yes; I can see they are identified as Bureau of Reclamation photographs. We appreciate your statement. Are there

any questions, Senator Church?

Senator CHURCH. I was just going to say, Senator Magnuson that

the cost-to-benefit ratio on this project is one of the highest that has

come before this committee

Senator MAGNUSON. Yes.
WHITESTONE COULEE PROJECT, WASHINGTON 7

Senator CHURCH. In my memory, and considering the modest size

of the project, and the high benefit-to-cost ratio, it certainly commends

itself to our attention.

Senator MAGNUSON. I think that we haven't emphasized too much,

and of course you have to project this, but the recreation and fish and

wildlife features of this project are tremendous assets for the future.

This is beautiful country too. It attracts all kinds of people. We

haven't emphasized that too much because we wanted to get the practical benefit-to-cost ratio.

Senator Moss. Are there any surplus crops involved here that would

be grown on this project, or is it all orchards?

Senator MAGNUSON. Mainly orchards. The surplus crops would

be very little, probably none. Some of it would be the feed for their

own 

Senator Moss. Local consumption?

Senator MAGNUSON. North of the area is cattle country of some repute. There would be no competition that I can see with this at all. I

don't think you can make a case for competition.

Senator Moss. Senator Jordan?

Senator JORDAN. No questions, Mr. Chairman. I just want to thank

our colleague for a clear and concise statement of the project. I must

say it looks very attractive at first inspection.

Senator Moss. Mr. John Richardson has a statement for the G-overnor of the State of Washington. I would call on him now.

I suggest you place the statement in the record and very quickly

summarize it for us if you are able to.

STATEMENT OF JOHN RICHARDSON, SUPERVISOR, DIVISION OF

RECLAMATION, WASHINGTON STATE DEPARTMENT OF CONSERVATION

Mr. RICH.ARDSON. My name is John Richardson, supervisor of reclamation, and I serve as secretary of the Columbia Basin Commission.

The statement I am presenting is in behalf of Gov. Albert D. Rosellini, whose administration fully endorses the Whitestone Coulee

project.

As Senator Magnuson mentioned, the State has been interested in

this project for more than 40 years. Initially the State raised bonds

to construct it and has continued to finance it over the years.

I believe Senator Church made a fine point. All of these projects

connected with the Chief Joseph Dam project have excellent cost-tobenefit ratios and they are the highest that have come to the Congress

in recent decades.

Thank you very much.

(The statement of Hon. Albert D. Rosellini, Governor of the State

of Washington, follows:)

STATEMENT OF HON. ALBERT D. ROSELLINI, GOVERNOR OF WASHINGTON

Mr. Chairman, this project initially was constructed with State funds some

40 years ago with the purchase of bonds of the Whitestone Reclamation District

by the State reclamation fund. The State has worked closely with the directors

of the district and the Bureau of Reclamation for the past several years in advancing the project which is before you to rehabilitate the district system.
8 WHITESTONE COULEE PROJECT, WASHINGTON

This area of Washington State, the Okanogan Valley, is one of the most productive apple-growing areas in the world. The irrigated economy of this project

is based almost entirely on the apply industry.

The stability of this economy and its expansion depends largely on the availability of a dependable water supply for existing orchards and the continuing of

these lands in production under today's improved irrigation systems and methods.

As with the other divisions of the Chief Joseph Dam project, the benefit-to-cost

ratio for this proposal, 6.66 to 1 on a 100-year basis and 5.8 to 1 on a 50-year

basis, ranks among the highest this committee has conisdered in recent years.

We would appreciate your favorable consideration of S. 2447.

Thank you very much.

Senator Moss. Thank you, Mr. Richardson, for presenting the Governor's statement in approval of S. 2447. We will now call on the Honorable Wilbur G. Hallauer, who is a Washington State senator from

Okanogan and Douglas Counties. We are very glad to have you,

Senator Hallauer.

STATEMENT OF HON. WILBUR G. HALLAUER, A STATE SENATOR

FROM THE STATE OF WASHINGTON

Mr. HALLAITER. I am State Senator Wilbur Hallauer of Okanogan

and Douglas Counties, the first legislative district of the State of

Washington.

The project that is before you today is in my district, in fact about

15 miles away from my home. I am personally very familiar with the

problems of the landowners of the Whitestone Coulee project. Since

1945 I have been one of those landowners myself, and I have engaged

personally in orcharding in the Whitestone Coulee unit, and particularly in the development of a new apple orchard in that area. In

addition to about 20 years of actual farming in the project, I have

been the legislator for these people in the district and they have

brought many of their State problems to me, so I have had an opportunity to have had contact with their rather difficult problems in that

way also.

Prior to World War II the Whitestone Irrigation District was on an

entirely different basis than it is today. At that time it was primarily

land with some dairying, and after World War II rather rapidly

there came about a conversion of the district from that type of farming

operation to an orchard economy, and the district now is in large degree in apple orchards with some small percentage of pear orcharding.

It raises some of the finest apples in the State of Washington and I

might add, of course, in the whole United States.

Senator Moss. We won't tell Senator Byrd.

Mr. HALLAIIER. Thank you. But the irrigation system of the Whitestone district is an ancient and dilapidated affair. It takes an annual

miracle to hold the thing together. It is composed of long lines of

wooden flumes on the edges of very difficult terrain, and these structures are very old and on occasion some parts of them have fallen

down, and of course for orcharding practices one must have certain

water supplies or orchards will be lost.

This is why the rehabilitation scheme that has been outlined here

by the Bureau of Reclamation is so necessary for our survival. And

of course we are contending against the possibility of short water

supplies because of inadequate storage in the district.

The Bureau of Reclamation's suggested plan would solve both of

these difficulties by rehabilitating the long flume lines making those
WHITE STONE COULEE PROJECT, WASHINGTON 9

more certain and by adding to the storage of the district at Spectacle

Lake. Therefore I wish to add my testimony on behalf of the proposal of the Bureau of Reclamation. I have only a single copy of my

testimony and I will give that to the secretary.

(The statement of State Senator Hallauer follows:)

PREPARED STATEMENT OF WILBUR G. HALLAUER, A STATE SENATOR FROM THE

STATE OF WASHINGTON

Mr. Chairman, I am personally familiar with the problems of the landowners of the Whitestone Coulee project. Since 1945 I have been one of them

and have engaged personally in the operation and particularly in the development of fruit orchards within the Whitestone Irrigation District.

In addition to my nearly 20 years of personal contact with the problems of

the Whitestone Coulee unit I have also served the people of the area for 16

years in the Washington State Legislature. The Whitestone district has had

State level problems and I have naturally been involved in these. This contact

plus the neighborly contact of being a fellow landowner and fruitgrower has

given me an extremely close working acquaintance with the Whitestone district.

Add to this the fact that one of the tracts of orchard that I developed was "at

the end of the line" and you can readily understand by awareness of the critical

water problems in the Whitestone area.

Prior to World War II the major part of the Whitestone Irrigation District

was devoted to supplying winter forage for beef cattle that pastured in the

surrounding mountain areas. Minor acreages were devoted to orchards and

dairying. The orchards did establish the fact that this district produced some

of the finest apples and winter pears in the State of Washington and the United

States. Beginning right ofter the war the economy of the Whitestone district

switched to fruit—and the major acreage is now in orchard and must have

certain water supplies if loss of trees and the heavy investment so represented

is to be avoided.

The irrigation system of the Whitestone district is rickety and dilapidated;

the supply of stored water is far too small for proper water insurance. We are

all to vulnerable to the possibility of a short water supply year and to the

expectation of an annual miracle whereby our ancient flumes will last out another

water season.

The rehabilitation plan suggested under S. 2447 is necessary to the survival

of the Whitestone Irrigation District and the landowner-orchardists in that

district.

Senator Moss. Thank you, Senator Hanauer. Is the product of the

district primarily apples now?

Mr. HALLAUER. I would say it is probably 70 percent in terms of

acreage in apples. This is my personal guess. The rest of it is hay

land primarily devoted to servicing the needs of the stockmen of the

area. The surrounding country is pastured to hay in the summertime.

Senator Moss. You have summer range and they grow mostly hay

to winter over the animals?

Mr. HALLAUER. Yes.

Senator Moss. So that they can be grazed again in the summer?

Mr. HALLAUER. These are the two items of our farming economy.

Senator Moss. Is there any appreciable amount of wheat, for instance?

Mr. HALLAUER. No wheat whatsover.

Senator Moss. No wheat whatsoever.

Mr. HALLAUER. I think there is one dairy farm. I understand the

man has left to go elsewhere.

Senator Moss. I see. Any questions by the panel?

Senator Jackson?
10 WHITESTONE COULEE PROJECT, WASHINGTON

Senator JACKSON. Senator Hallauer has been long an advocate of

this project and he has been very effective in his leadership in pushing

the ,,program and I want to commend him for his fine statement.

Mr. HALLAUER. Thank you, Senator Jackson.

Senator Moss. These photographs are worth 10,000 words of course

in illustrating some of the conditions that you are contending with

there.

Senator Jordan?

Senator JORDAN. No questions.

Senator CHURCH. Senator, may I just ask this one question?

Mr. HALLAUER. Yes, Senator Church.

Senator CHURCH. Will this result in enlarging the area brought

under water from the old project area?

Mr. HALLAUER. I believe there are about 500 additional acres to be

serviced.

Senator CHURCH. About 500 additional acres?

Mr. HALLAUER. Yes.

Senator CHURCH. And how large was the original area served by

the project that will be rehabilitated under this bill?

Mr. HALLUER. The present amount of acreage being served is just

under 2,000 acres, as I recall.

Senator JACKSON. It is 1,830. It goes to 2,660 acres.

Senator CHURCH. Senator Jackson calls my attention to the fact

that it would increase the acreage to 2,660.

Senator Moss. Thank you very much, Senator Hallauer.

Would Mr. Holmes, who is president of the Whitestone Reclamation

District, and Mr. Gray, who is the secretary—I think you gentleman

could come up together and sit here at the table with us if you would.

We will have Mr. Holmes proceed first and then Mr. Gray, and then

we might question you, either one or both as the committee may wish.

You may proceed, sir.

STATEMENT OF WARREN S. HOLMES, DIRECTOR, WHITESTONE

RECLAMATION DISTRICT

Mr. HOLMES. My name is Warren Holmes. I am an applegrower

and also run a few head of beef cattle. I am president of the board of

directors of the Whitestone Reclamation District.

I do appreciate this opportunity to testify in support of S. 2447. the

measure authorizing construction of the Whitestone Coulee unit, Okanogan-Similkameen division, Chief Joseph Dam project.

I have lived in this district since 1920 and I think I am well

acquainted with its problems.

The prinicpal crop in our district is apples, and there are none

finer grown in the State of Washington. Most of our orchards are

quite young and so the principal varieties grown are Red Delicious

and Golden Delicious. I began working with apples in 1921 and

have been associated with them ever since. I did State and Federal

inspection in the apples for several seasons, and in so doing I learned
WHITESTONE COULEE PROJECT, WASHINGTON 11

something about what makes quality apples. Our apples are grown

at a little higher elevation than many of the Washington apples and

that seems to be one of the main factors in producing quality fruit

Some livestock is raised in the district, with the district water being

used for pasture and hay. The project does not produce any crops

which are purchased by the Commodity Credit Corporation under

Federal price support programs.

Survival and expansion of our economy depends almost entirely,

on providing a full water supply for the existing lands and the bringing in of some new acreage.

Most of the land under the Whitestone project has the right climate,

soil, and drainage to produce some of the finest apples in the Northwest. The apples from the Wenatchee-Okanogan district are shipped

to every State in the Union and to many foreign countries.

The amount of local business supported by orchards is indicated

by the fact that the average returns from 1,000 acres of good appleproducing lands amounts to $1 million. Another $2,225,000 is invested in orchard property and operating equipment to run this same

1,000 acres.

It takes about another one-half million dollars for the railroads

and trucking service to deliver these apples to the markets.

These factors are shown by the benefit-to-cost ratio of the project:

5.8 to 1 on the basis of 100 years and 4.9 to 1 on the basis of 50 years.

The project has unanimous local support. It has to have, as the

job is too big for the district to handle by itself. It has been fully

endorsed by the department of conservation and development and the

Columbia Basin Commission. It is also supported by the OkanoganSimilkameen Flood Control and Reclamation League, the Okanogan

County Public Utility District, Okanogan County Commissioners, and

other civic groups of the area.

Again, Mr. Chairman, I do appreciate this opportunity to appear

before this committee. If you have any questions on the project, I

would be very glad to try to answer them for you.

Thank you very much.

Senator Moss. Thank you, Mr. Holmes. If you would remain there

wo may have a question or two later. I was particularly glad to

notice specifically in your testimony that there are no crops that are

purchased by the Commodity Credit Corporation under the Federal

price support programs.

Now that question is often raised by our colleagues when we go

to the Senate. If we can be positive, can tell them there are none at

all, it helps us along when we have a matter like this.

I would like to call next on Mr. Gray, and then if we have questions

of either of you gentlemen we will ask them here at the table.

Senator JACKSON. Mr. Chairman, I wonder if Mr. Gray's statment

could go into the record at this point. It is a little longer. Then

he could make some supplemental comments to that made by Mr.

Holmes.

Senator Moss. He may proceed with his statement at this time.
12 WHITESTONE COULEE PROJECT, WASHINGTON

STATEMENT OF WESLEY GRAY, SECRETARY-MANAGER,

WHITESTONE RECLAMATION DISTRICT

Mr. GRAY. Mr. Chairman, my name is Wesley Gray. I am secretary-manager and a landowner of the Whitestone Reclamation District

at Loomis, Wash.

I wish to thank you for this opportunity to testify in support of

Senate bill 2447, the measure authorizing construction of the proposed

rehabilitation program of the Whitestone Coulee unit of the Okanogan-Similkameen division of the Chief Joseph Dam project. I

have been manager of the district for 13 years and have lived in the

district since 1927, and have personally worked on every part of the

system.

The proposed rehabilitation program of the Whitestone Reclamation District as set forth by the Bureau of Reclamation is urgently

needed if water service is to be continued for the lands presently

irrigated within the district. These lands comprise 1,300 acres of

choice fruit land which is planted to Red and Golden Delicious apples

just entering the age of high production. The remainder of the lands,

consisting of some 675 acres, is devoted to raising hay and pasture for

livestock, mainly beef cattle, which are pastured during the summer

months on the surrounding hills.

The rehabilitation plans call for the inclusion of 705 acres of new

lands within the district to be irrigated which are not presently

served because of inadequate supply of water, due mainly to lack of

storage facilities in Spectacle Lake.

The Whitestone Reclamation District was organized in 1920 and

construction was completed in 1924. Financing and construction were

supervised by the State of Washington Department of Conservation

and Development. The original plans were to irrigate 10,000 acres

and called for the use of both Sinlahekin and Toats Coulee Creeks.

Two earth dams were constructed but neither held any appreciable

amount of water, therefore these phases of the project were never

completed and the size of the project was reduced to 2,000 acres.

.Toats Coulee Creek is the direct source of water available in the

district, a portion of the floodwaters of which are caught and stored in

Spectacle Lake. This storage, which supplies the major portion of

the presently irrigated land, is limited to approximately 3,800 acrefeet, which is about 50 percent of the amount that the proposed plan

of the Bureau of Reclamation calls for. The plan would store twice

the amount now available and allow the district to make full use of its

storage rights which it has never been able to do because of lack of

proper financing. This additional storage is an absolute necessity if

the district is to have a dependable water supply. When the leaves

start dropping on apple trees, the loss of one irrigation in hot weather

in July can cause a 25-percent loss on size of fruit.

The floodwaters of Toats Coulee Creek would be ample for the lands

presently irrigated and the new lands to be irrigated if the district

had the facilities to take advantage of it during the heavy runoff period and also through the winter months. The proposed plan of the

Bureau of Reclamation is so designed to do this.

The condition of the 61/2 miles of wooden flume and siphons which

are used to supply water for Spectacle Lake Reservoir and also 700
WHITESTONE COULEE PROJECT, WASHINGTON 13

acres of lands dependent directly on Toats Coulee diversion are in

extremely poor condition and crops dependent on it are in constant

jeopardy.

The maintenance and operation of this main-line system is very

costly because of the nature of the terrain on which it lies. This flume

is accessible only at points which are in some cases as much as 2 miles

apart and then only by Jeep pickup. This calls for most of the labor

to be done by band and supplies are moved by dollies pushed by hand

for thousands of feet. These things, combined with an ever-increasing

cost of materials such as nails, steel lining, lumber, and asphalt, and

increases in labor costs, have made it impossible to properly maintain

the flumes, thus they are in very poor condition and their life expectancy is very short. Another drawback is the fact that the maintenance must be done in late fall and early spring. At such time water

is not being run, and the weather conditions in the winter months limit

the amount of maintenance which can be done. In other words, approximately 60 days of badly needed water for storage is lost while

repairs are being made.

The 4,000 feet of 51-inch steel siphon which crosses the Sinlahekin

Valley at Loomis is a constant threat, as it has been in use for 40 years

and is in bad condition from lack of proper maintenance. This pipe

has a pressure of 240 pounds per square inch and is a vital link in the

water supply of the district. To replace this pipe at present-day

prices would be a financial impossibility for the district. The Bureau proposes a closed cement pipe from the diversion on Toats Coulee

and across the Sinlahekin Valley which would eliminate these flumes

and still siphon and practically eliminate maintenance costs on this

portion of the project.

The district is not able to assess enough at one time to take care

of these things which have passed the age of reliability. They are

gradually approaching the age of deterioration to the point where we

cannot use them.

The distribution system of the district is of wooden flumes and

earth canals. These unlined earth ditches are responsible for a great

loss of vitally needed water; very little cement lining has been done

due to lack of money.

The discharge outlet from Spectacle Lake to lands for a major

part of the district is by means of a tunnel approximately 1,000 feet,

long. This tunnel is lined with 33-inch cement tile made from materials at hand, which was very poor. The tile are in a very bad condition. The district is not financially able to replace this tunnel and

will never be able to with regular assessments. Breaks in the system

have caused the water to be off for as much as 10 days in hot weather

and has caused losses in tree growth and fruit sizing.

A major break in the steel siphon across the valley during a period

when the water was being put into Spectacle Lake would cause the

entire district to be without water. A failure in the Spectacle Lake

tunnel would cause a major portion of the district to lose its entire

crop.

The district presently has three pumps which have been in use for 11

years. The larger one, which was installed to supply water for 300

acres, replaces a flume which was abandoned; it operates throughout

the entire season. The two smaller pumps are used for supplemental

water during the hot dry weather when the demand is the greatest.

30-350- 64--3
14 WHITESTONE COULEE PROJECT, WASHINGTON

The board of directors and the landowners of the district feel that

repairing and replacing of the out-dated system has reached the point

where the assessments will become beyond the ability of the water

users to pay and they will never have a dependable water supply for

the orchards and farms.

The support of the proposed rehabilitation plan by the Bureau is

unanimous as the water users feel their investments in homes and

farms are constantly threatened.

The financial condition of the district from the beginning has been

beset with difficulties. The district, has financed its repairs and operation by regular assessments and through the sale of bonds to the

State of Washington, the last being in 1948. These bonds bear 2 percent interest and $1.50 per acre of each assessment is placed in a bond

retirement and interest fund which is paid to the State of -Washington revolving fund through the county treasurer's office. At present

the district is current in its bond payments and its bonded indebtedness

is $49,000.

The condition of the district is of grave concern to the board of directors and management as they feel that they are doing their utmost

to keep the district operating but are losing ground and the future

of the project is questionable.

The present costs of operation and maintenance are using the entire yearly assessments exclusive of bond and interest payments;

therefore, the district is unable to properly maintain the project and

also unable to make any permanent improvements.

The landowners are ready and willing to accept the plan for repayment as set forth by the Bureau of Reclamation, of a contract, which

it believes to be within their ability to repay, which is $1,100,000 over

a 50-year period.

The plan set forth by the Bureau of Reclamation has been fully

endorsed by Gov. Albert D. Rosellini ; the department of parks and

game; Earl Coe, director of department of conservation and -development; Similkameen Flood Control League; Columbia Basin Commission; Okanogan County commissioners, Okanogan County Public Titility District; and other civic groups of the area. I wish to urge

favorable consideration of these measures by the committee.

Thank you very much.

Senator Moss. Do either you, Mr. Gray, or Mr. Holmes know of

any local opposition to the project that is now proposed?

Mr. GRAY. It is in my statement. We have none that we know

of.

Senator Moss. As far as you know locally it is unanimous?

Mr. GRAY. We circulated a petition when the plan was presented.

We had 98 signers out of a possible 100 landowners and users.

Senator Moss. Thank you both. I thank you both for coming this

long distance to testify. I am sorry we are hurrying so but we are

just trying to get through within the time that is allotted for us. Are

there any questions by the Senators?

Senator Church?

Senator CHURCH. I noticed in the pictures here the works that are

deteriorating so badly are wooden works.

Mr. GRAY. Yes.
WHITESTONE COULEE PROJECT, WASHINGTON 15

Senator CHURCH. Under the bill will this be replaced by concrete

construction?

Mr. GRAY. Closed-pipe construction and it will be laid out, I might

add, in a different kind of terrain than that in which it is presently

laid out. You might allow this expression: It is built backward. That

is my version of it. I have worked on all of it and I know something

about it. These flumes are lined with steel you probably know what

the price is as compared with 1923 when it was built.

Senator CHURCH. Yes.

Senator JACKSON. Mr. Chairman, I want to express my appreciation to Mr. Holmes and Mr. Gray for coming this great distance and

making such helpful statements.

Senator Moss. Senator Jordan.

Senator JORDAN. No I wish to express my appreciation too, Mr.

Chairman, to these gentlemen who have given us direct testimony.

I appreciate it.

Senator Moss. I am sure we all come from reclamation States and

appreciate the problems you have and what is necessary in order to

produce, and we do appreciate it, gentlemen.

Thank you.

These letters you have submitted will be included at this point.

( The letters referred to follow:)

TONASKET, WASH., February 10, 1964.

Hon. HENRY M. JACKSON,

Senate Office Building,

Washington, D.C.

DEAR MR. JACKSON: I am writing you in support of the program to rehabilitate

our Whitestone Reclamation District, so I may have a reliable supply of irrigation water. The present condition of the ditch facilities justifies calling

this program an emergency program. A serious break in the ditch in the

summer months could cause me to realize a very serious and sizable loss.

My desire and suggestion to you is that this legislation be taken care of as

soon as possible.

I appreciate you taking your time to read my letter, and give consideration

to the problems the property owners of the Whitestone Reclamation District

have.

Yours truly,

LEONARD R. HUTCHINSON.

TONASKET, WASH., February 12, 1964.

Senator HENRY M. JACKSON,

Senate Office Building,

Washington, D.C.

DEAR Sin: As a landowner under the Whitestone Coulee project, I would like

to express my thanks to you for your effort and support of the Whitestone

Coulee project.

I am sure you are aware of the possibilities for the area with a firm water

supply. Having lived on the "tail end" of the ditch and the water coming

directly from the creek, with no reservoir between, I can vouch for the need

for additional storage.

The present system is so antiquated that we dare not miss getting the bill

passed this year.

I hope you will continue to give this measure your full support.

Sincerely, GEORGE E. WILLIAMS.
16 WHITESTONE COULEE PROJECT, WASHINGTON

TONASKET, WASH., February 9, 1964. Hon. HENRY M. JACKSON,

Senate Office Building,

Washington, D.C.

DEAR SIR: As a landholder under

for the last 24 years I believe that it

done to assure an adequate supply of w

The present irrigation system is

insufficient revenue. The present

only.

Any failure during the summer growing season could be fatal to our apple crop for that year. The trees in all the orchards could be damaged. This land without water will not produce anything but very poor spring and fall pasture. With adequate water it produces some of the best apples

grown.

Anything you can do for us in the forthcoming hearing March 4 will be greatly appreciated.

Very truly yours,

the Whitestone Coulee Irrigation project

is very imperative that we have something

ater.

in a state of disrepair due to age and

revenue will take care of maintenance

LAWRENCE D. MCMILLAN.

TONASKET, WASII., February 10, 1964.

Senator HENRY JACKSON,

Washington, D.C.

DEAR MR. JACKSON: We are pioneer landowners under the Whitestone Coulee unit, that is asking to be rehabilitated. The passage of this legislation is of great importance to the future of this farming district. The condition of the present facilities of the irrigation district and its great need for reconstruction is personally known.

We know you will do your best to see that this legislation is approved.

Thank you.

Mr. and Mrs. RUSSELL HAWKINS.

Senator Moss. Mr. Kenneth Holum, Assistant Secretary, is here and has a statement on this project and perhaps on one of our other bills.

I see Mr. Palmer is here too. We will call on him next if he has

an additional statement.

Mr. Holum, we are glad to have you, sir.

STATEMENT OF HON. KENNETH HOLUM, ASSISTANT SECRETARY

OF THE INTERIOR

Mr. HoLum. Thank you, Mr. Chairman. It is a pleasure for me to be here this morning. Certainly I appreciate the press of time under which the committee is operating this morning.

I have with me a prepared statement which contains the Depart- ment's endorsement of both the Whitestone Coulee project which you

are presently considering and the lower Teton project in Idaho which

you will be considering later this morning. With your permission I

should like to speak to both projects simultaneously.

I think the things that I have to say to the committee might be helpful.

Senator Moss. This statement will be placed in the record in full on each of the bills that we are hearing, the Teton as well as the Whitestone, and you may proceed as you care to do, Mr. Holum.
WIIITESTONE COULEE PROJECT, WASHINGTON

(The statement of Assistant Secretary Holum follows:)

STATEMENT OF ASSISTANT SECRETARY OF THE INTERIOR KENNETH HOLUM

17

Mr. Chairman, we are here this morning to recommend the enactment of the two bills under consideration to authorize the construction of the Lower Teton Division of the Teton Basin project in Idaho and the Whitestone Coulee unit of the Chief Joseph Dam project in Washington. From economic and engineer- ing standpoints, both are very good projects and we urge favorable action. Representatives of the Bureau of Reclamation and other appropriate agencies of the Deaprtment of the Interior have accompanied me. They will present the plan of development, the economic and financial analyses, and other infor- mation regarding the specifics of the two proposals. I would like to confine

my statement to an explanation of several policy aspects which are being pre- sented for the first time to this committee in regard to specific reclamation Proposals.

Since the feasibility reports on these projects were completed, the administra- tion has completed its studies and presented to the Congress a plan for estab- lishing uniform criteria to be applied to all Federal multiple-purpose water

resource projects, with regard to allocation of costs to recreation and to fish and wildlife and the reimbursability of such costs. The administration's proposal is set forth in H.R. 9032. Our presentations will be consistent with the policies expressed in H.R. 9032, as introduced. The amendments suggested in the De- partment's legislative report are designed to bring the authorizing acts into conformity with H.R. 9032.

So that the committee may have this information, we have conducted studies to determine specifically the effect of applying the cost allocations and costsharing principles of H.R. 9032 to the Whitestone Coulee and Lower Teton de- velopments. Results of this analysis are shown on the attached tabulations.

In either case, the allocations to recreation and fish and wildlife enhancement

are comparatively small, and there will be no need to invoke the reimbursa- bility provisions of H.R. 9032. Nor would allocations to recreation and fish and wildlife enhancement be reimbursable under H.R. 9032 as amended by the House committee.

In both of these projects, benefits exceed the cost by a considerable margin. However, the water users will be unable to repay the entire cost allocated to irri- gation within a reasonable period of years. We propose therefore that those portions of such costs as are beyond the ability of the water users to repay be returned to the Treasury from revenues received from the sale of power from the Columbia River Federal power system. The basic feasibility reports on the Lower Teton division and the Whitestone Coulee unit contemplated that such financial assistance would be derived from the southern Idaho Federal

power system and from the Chief Joseph Dam project, respectively. Since those project reports were prepared, however, two changes have taken place in the administration of the Federal power program in the Pacific Northwest.

In April 1963, the Secretary of the Interior adopted a procedure for present- ing Bonneville Power Administration rate and repayment data based upon re- payment of the consolidated system, including other financial obligations falling due, within a period of 50 years from the date the last major hydroelectric plan is completed.

The Bonneville Power Administration now is about $20 million ahead of sched- ule in meeting its repayment obligations. In recent years, however, power revenues have not been up to the forecast amounts and our surplus has been de- clining. New schedules of rates and repayment studies are now being prepared

to reflect the changed conditions and to assure our ability to meet all our obliga- tions, including financial assistance to irrigation, when they fall due. These studies, you may well imagine, have been considerably complicated by lack of definite data on the proposed intertie transmission line to California and by de- lays in ratifying the Canadian treaty. Present indications are that some slight increases in commercial power rate schedules may be required.

At the hearings on the Nebraska midstate project tomorrow morning, we will provide this committee information on our restudy of the Missouri River Basin
18 WHITESTONE COULEE PROJECT, WASHINGTON

project financial analysis. We were faced with a somewhat similar but more

critical situation in the Missouri River Basin, and we have arrived at a solution

which should be satisfactory to all concerned. Our studies on the Federal Columbla River Power System have not yet been completed, but interim results

are very promising. In both cases, we are facing up to the practical situation

and providing new schedules which assure our ability to meet all obligations.

In May 1963, the Secretary announced the extension of the Bonneville Power

Administration marketing area to southern Idaho and the absorption of the

existing Federal hydroelectric plants in that area into the Federal Columbia

River Power System. This had the immediate effect of adding the output of the

Bureau of Reclamation's Palisades, Anderson Ranch, and other powerplants to

the system. More important to the people a that area, it resulted in immediate

savings of about 2 mills per kilowatt-hour to the irrigators and preference customers of the Bureau. This is important to the development of the resources of

the State of Idaho, not only because it created a favorable climate for industrial

expansion, but also because it represented a significant saving in cost of production for Idaho's farmers within that area. The new Bonneville Power Administration rate and repayment schedules which I mentioned earlier will reflect

this situation also.

The impact of the financial assistance requirements of the Whitestone Coulee

unit and the Lower Teton Division on the Bonneville Power Administration

financial studies is minor. The payout period for the Federal Columbia River

Power System projects presently existing and under construction extends to

fiscal year 2022, which is 50 years after the scheduled completion of the last

such project.

The repayment period for irrigated lands now in full production on these developments starts as soon as water is delivered. A 10-year development period

is permitted for dry land farmers to make the transition and bring their lands

into irrgiated production before their repayment period begins. The financial

assistance required by farmers now irrigating lands on the Whitestone Coulee

unit, which falls due prior to fiscal year 2022, is $1,456,000, and for Lower Teton

Division, $5,820,000, or a total of $7,276,100. This would be approximately equivalent to $273,000 per year of system revenues over the 50-year repayment period,

or less than one-half of 1 percent of the gross power revenues in 1963. This

obligation obviously will have no effect upon the forthcoming power rate schedule adjustments. The remainder of the financial assistance requirements, from

the presently dry lands to be irrigated, which will be due after fiscal year 2022,

are $1,799.700 and $14,967,000, respectively. Net power revenues after that date

will be in the order of magnitude of $100 million annually, and the required

assistance can be provided by less than 2 months' system net revenues.

The Whitestone Coulee unit is in Okanogan County, Wash., which has been

designated as a "rural redevelopment area" under criteria set forth in the Area

Redevelopment Act of 1961. The labor required for construction, operation, and

maintenance of this project, to the extent it can be supplied from the local labor

market is estimated to have a benefit equivalent of $38,500 annually. We propose

that this function be recognized as a project purpose in accordance with the

principles for water resource development evaluation approved by the President

on May 15, 1962 (S. Doc. 97, 87th Cong.) for application within the executive

branch.

We proposed in our reports on S. 1123 and S. 2447 the adoption of certain

amendments to the bills which would accomplish the purposes I have outlined

briefly here this morning. We strongly recommend the enactment of those bills

with the amendments we have proposed.

My colleagues from the Bureau of Reclamation and other agencies of the

Department are prepared to discuss the specific features of these projects. We

will be pleased to respond to any questions the members of the conimittee may

wish to ask.
WHITE STONE COULEE PROJECT, WASHINGTON 19

Effect of application of H.R. 9032

Without

H.R. 9032 1

With

H.R. 9032

(current

analysis) 2

Cost allocation:

Irrigation $4, 339, 000 $4, 336,000

Fish and wildlife enhancement and recreation 159, 000 163,000

Fish and wildlife mitigation 0

Area redevelopment 814, 000 813,000

Total 5, 312, 000 5, 312, 000

Cost-sharing computation:

Specific costs 159, 000

Remaining joint costs 4,000

Separable joint costs 0

Total, joint land use and facilities 1, 068, 000

Nonreimbursable limit of formula 267,000

Amount reimbursable 

Amount nonreimbursable 163,000

Reimbursement:

Irrigation allocation 4, 339, 000 4, 336, 000

Paid by water users 1, 100, 200 1, 100, 200

Paid by power revenues 3, 238,800 3,235, 800

I Analysis based on 100 years at 3 percent interest. AU fish and wildlife costs nonreimbursable. No

joint costs to recreation.

2 Analysis based on 100 years at 3 percent interest. No fish and wildlife mitigation cost involved. Joint

costs allocated to recreation.

Mr. HoLum. Thank you, Mr. Chairman. Certainly I have been as

impressed as the committee with the testimony of the witnesses who

preceded me to the table this morning supporting the Whitestone

Coulee project.

This is an excellent project, one that we in the Department hope will

be authorized and constructed in a short period of time. We feel

equally strong that the lower Teton project, which you are going to

be considering in a few minutes, is a meritorious project, and we think

that it too ought to be authorized and constructed that both projects

will make a valuable contribution to the economy of the affected

areas and the economy of the whole country.

The Bureau of Reclamation people are here and they will be prepared to supply the committee with information that applies to the

specific works of the two projects, the cost-benefit ratio, and other

information that the committee might desire. It seemed appropriate

to me, however, Mr. Chairman, because these two projects are both

in the area served by the Bonneville Power Administration, and the

administration has proposed amendments to both of the bills that will

be considered for authorization of these two projects, that I make

myself available this morning to explain to you why the administration is recommending these two amendments.

The Whitestone Coulee project was originally considered as a very

important and valuable unit to follow on the heels of the authorization and construction of the Chief Joseph Dam on the Columbia

River. The lower Teton project is a project that has been developed
•

20 WHITESTONE COULEE PROJECT, WASHINGTON

in eastern Idaho as a direct result of the very disastrous flood in early

1962 in that area. Both of these projects are highly meritorious.

As Senator Magnuson already noted, the Whitestone Coulee project

has a benefit-to-cost ratio in excess of 5 to 1. The benefit-to-cost

ratio in the lower Teton project is in excess of 2 to 1.

They are both good projects from a financial point of view. However, like most reclamation projects, the irrigation features require

financial assistance. Traditionally that financial assistance has come

from the power feature of the multipurpose water resource development projects which support them. The legislation as introduced

in the case of the lower Teton project calls for that assistance to come

from the Bureau of Reclamation projects in southern Idaho. In

the case of Whitestone Coulee it is from the Chief Joseph Dam. The

amendments to the two pieces of legislation which the administration

has proposed suggest that this financial assistance come from the

Bonneville Power Administration system of the entire Columbia River

system of the four States in the Pacific Northwest.

We are making that recommendation this morning because of

changes that have occurred in the management of the power resources

of the Pacific Northwest. Since this committee last considered irrigation projects in the Pacific Northwest, the Department of Interior

has adopted and approved a consolidated payout formula for the

Bonneville power system.

This in effect puts all of the projects together, the hydroelectric

project, the irrigation projects, and from the financial point of view

gives us the opportunity to look at the entire Pacific Northwest system

as one system. For that reason we are recommending toilay that both

of these acts be amended to provide that the necessary financial assistance that must come from power revenues come from the entire system

of the Pacific Northwest.

This of course raises the question whether or not the Bonneville

system is able to provide that assistance.

We are happy to be able to inform the committee .that despite the

concerns that have been raised at the present time the Bonneville

power system is still ahead of schedule in its repayment obligations.

It is true the surpluses have been reduced. They are now slightly

over $20 million. The Department has this matter under intensive and

current review, complicated at the moment by the fact that the Congress has very wisely and very appropriately 'granted to the Department an appropriation of $8/12million to work out interconnection

arrangements between the Pacific Northwest and Pacific Southwest.

This is going to substantially improve the financial position of the

Bonneville power system.

Most of our financial difficulties result from the fact that we have

been unable to market all of the capacity and all of the energy that

this fine hydroelectric power.system produces.

But we are prepared and we will as appropriate deal with the financial problems of the Bonneville power system. The committee can

authorize these two projects with their financial support coming from

the Bonneville power system with an assurance that the Department

will do what has to be done to make certain that these revenues are

available.
WHITESTONE COULEE PROJECT, WASHINGTON 21

I might call to your attention that in the case of both of these

projects, most of the lands are currently developed lands; which do

not require a development period. Some of the financial obligations

will fall due prior to 2022 when we consider that all of the power

facilities of the Bonneville system will be completed. These are very

modest amounts, however, and they will not noticeably or appreciably

effect the current financial situation as far as the Bonneville power

system is concerned. Most of the obligations will fall due after power

pays out. When that is achieved, the Bonneville system will produce

in excess of $100 million a year available to the Treasury and available

for the assistance of irrigation development in the area.

The other amendments that the administration is proposing to the

two pieces of legislation which you are considering this morning have

to do with cost allocations and the uniform policies with respect to the

treatment of recreation and fish and wildlife benefits from these

projects.

I have noted since preparing our legislative report on the Whitestone Coulee bill that the language regarding recreation facilities

contained in the bill is not identical to that which we have been using

in other bills recently. I submit for the consideration of the committee alternative language for section 3(a) which would make this bill

consistent in regard to recreation with other recent submittals. It is

our belief that this language will accomplish exactly the same purpose

as would section 3 ( a) of the bill as presented.

If the committee sees fit to maintain identical language in all bills

in this respect the following should be used. Rather than read the

language, Mr. Chairman, I would like to submit it and I will get a

clean copy and make it available for the committee.

(The document referred to, copy of section 3 ( a) , follows:)

SEC. 3(a) The Secretary is authorized to construct, operate, and maintain or

otherwise provide for basic public outdoor recreation facilities, to acquire or

otherwise to include within the unit area such adjacent lands or interests therein

as are necesary for present or future public recreation use, to allocate water and

reservoir capacity to recreation, and to provide for the public use and enjoyment

of unit lands, facilities, and water areas in a manner coordinated with the

other unit functions. The Secretary is authorized to enter into agreements with

Federal agencies or State or local public bodies for the operation, maintenance,

or additional development of unit lands or facilities, or to dispose of unit lands or

facilities to Federal agencies or State or local public bodies by lease, transfer,

conveyance, or exchange upon such terms and conditions as will best promote the

development and operation of such lands and facilities in the public interest for

recreation purposes. The costs of the aforesaid undertakings, including costs

of investigation, planning, Federal operation and maintenance, and an appropriate share of joint costs of the unit, shall be nonreimbursable. Nothing herein

shall limit the authority of the Secretary granted by existing provisions of law

relating to recreation development of water resource projects or to disposition

of public lands for recreation purposes.

Mr. HOLUM. The administration has had under consideration for a

rather lengthy period of time legislation to provide for these uniform

standards. The legislation has been prepared and submitted to the

Congress by the administration. It has been introduced in the House

by Chairman Wayne Aspinall of the House Interior Committee, identified as H.R. 9032. For the information of the committee I have prepared and attached to my statement the effect of the application of H.R.
•

22 WHITESTONE COULEE PROJECT, WASHINGTON

9032 on these two projects, in tabulated form. The effect will be

insignificant in the case of both of these projects because the amount

of dollars effected is minimal.

I think, Mr. Chairman, this is a brief summary of the amendments

that the administration is recommending to these two bills. We are

here hoping, of course, that the committee will see fit to accept these

amendments, and that we will go ahead and authorize and construct at

an early time these two very important additions to the reclamation

system in Idaho and Washington.

Thank you, Mr. Chairman.

Senator Moss. Thank you, Mr. Holum. We will consider carefully

these proposed amendments that the committee has not had time to

study yet. I understand from your testimony that there are adequate

revenues in the Bonneville system now, even if you didn't get improvement, is that right, if we didn't get any marketing change?

Mr. HoLtrx. The Bonneville system at the present time has surpluses in excess of $20 million. These surpluses have been declining.

We expect the arrangement that we will work out on the interconnection will substantially improve those revenues. If it is not sufficient, we will take other steps in the Department to make certain that

the Bonneville system is on the financial basis that the Department

and the Congress want it to achieve.

Senator Moss. Thank you. Senator Jackson, any questions?

Senator JACKSON. I think I will defer any questions at this time.

Senator Moss. Senator Church?

Senator CHURCH. No questions at this time, Mr. Chairman.

Senator Moss. Senator Jordan.

Senator JORDAN. One question, Mr. Chairman. Perhaps the Secretary could explain one item. On the Whitestone Coulee unit here I

notice a nonreimbursable item of $806,000 classified as area redevelopment. This is the first I have seen of such an item in a reclamation

project. Could you explain that to us?

Mr. HoLum. Yes I would be happy to. The area where this project

will be constructed is a distressed area, and under the formula established by the President for evaluating projects we have taken credit in

cost allocation for the contribution that this Whitestone Coulee unit

will make in increased employment opportunities and better economic

welfare for the county.

Those benefits are evaluated on that basis.

Senator JORDAN. Will you supply for the record how you do that?

This is new to me and I would like to see how you ascertain the precise figure of $806,000 in this instance.

Mr. HOLUM. We will be very happy to do that, Senator.

Senator Moss. That will be placed in the record.
4

WHITI4]STONE COULEE PROJECT, WASHINGTON 23

(The document referred to follows:)

AREA REDEVELOPMENT BENEFITS, WHITESTONE COULEE UNIT

Current economic evaluation procedures permit the measurement of benefits

attributable to the value of labor and other resources required for the construction and operation of a project, when in its absence these resources would

not be fully utilized. Such benefits are to be identified as area redevelopment

benefits, and their significance taken into consideration for project justification.

Based on the criteria set forth in the Area Redevelopment Act of 1961 (75

Stat. 47), Okanogan County, Wash., has been designated as a "redevelopment

area." Whitestone Coulee unit, Chief Joseph Dam project, is located in this

area.

In evaluating the benefits which would accrue from area redevelopment, wages

paid to operators, skilled and unskilled workers, and wages for project operation

and maintenance were considered.

Labor inputs necessary for the construction of the unit were estimated through

use of information obtained from two recently constructed projects in region 1.

The biweekly payroll records of contractors for comparable features of the

Crooked River and Rogue River, Talent division, projects, Oregon, were analyzed

In obtaining the basic data for projecting the construction labor inputs for the

Whitestone Coulee unit.

Information. obtained from the Employment Security Department, State of

Washington, for Chelan County is considered to be comparable for unemployment conditions in adjacent Okanogan County. The unemployment rolls include large numbers of construction workers in the skilled and semi-skilled

classifications as well as many workers in the unskilled classifications. Inasmuch as the Whitestone Coulee unit is located fairly close to the Chelan County

line it appears reasonable to assume that a high percentage of the required

construction workers in all three classifications would be recruited from Chelan

and Okanogan Counties for the Whitestone unit. Area redevelopment benefits

attributed to project construction are presented in the table which follows.

Personnel required for operation and maintenance of the Whitestone Coulee

unit will be recruited from the local labor market and will receive salaries estimated at $13,090 annually. It is anticipated that local people will be available

to fill these jobs and the full value of the wages that would be paid the operating

personnel has been included as a redevelopment benefit. However, these wages

were claimed only for a period of 20 years.

Benefits resulting from the construction and operation of the Whitestone

Coulee unit are estimated to be $38,500 annually.

Computation of benefits

Item Amount Capitalized Benefits,

100 years

Project 0. dz M. wages $13,990 $208, 140 $6,590

Construction labor wages 1,007,720 31,890

Total 

Rounded 

38,

38,

480

500

The area redevelopment benefits derived in the table above were used in the

standard separable costs-remaining benefits method of cost allocation to determine the proper allooation of Whitestone Coulee unit costs to this purpose, as

demonstrated in the following table.
24 WHITESTONE COULEE PROJECT, WASHINGTON

Cost allocation-Separable cost-remaining benefit method (100 years, 3 percent)

Item Irrigation

Recreation

and fish and

wildlife enhancement

Area redevelopment

Total

Total costs to be allocated:

Construction 

Interest during construction 

Operation, maintenance, and power 

Annual equivalent values:

Construction costs 

Interest during construction 

Operation, maintenance, and power 

TotaL 

Benefits 

Alternate costs 

Justifiable expenditure 

Separable costs, specific:

Construction 

Interest during construction 

Operation, maintenance, and power

Total 

Separable joint

Construction 

Interest during construction 

Operation, maintenance, and power. 

Total 

Total separable:

Construction 

Interest during construction 

Operations, maintenance, and

power 

Total 

Remaining justifiable expenditure 

Percent distribution 

Remaining joint costs:

Construction 

Interest during construction 

Operation, maintenance, and power_ __ _

TotaL 

Total allocated costs:

Construction 

Interest during construction 

Operation, maintenance, and power_ __ _

Total 

rotal allocated costs: 2

Construction 

Interest during construction 

Operation, maintenance, and power 

$5, 238,000

243, 000

34,085

165, 780

7, 690

34,085

$1, 108,300

201, 795

201, 795

$5, 985

(1)

5, 985

$38, 500

(9

38, 500

207,555

1, 152, 785

246, 280

5, 030 

230 

500

5, 030

230

500

5,760 5,760

5,030

230

500

5,030 

230 

500 

201, 795

5, 760 

225 38, 500

5, 760

240, 520

83.90 0. 09 16. 01 ' 100

$134, 870

6, 260

28,200

$140

10

10

$25, 740

1, 190

5,375

$160, 750

7, 460

33,585

169. 330 160 32,305 201,795

25, 740

1, 190

5,375

' 165,780

7,690

34,085

134,870

6, 260

28,200

5, 170

240

510

169, 330

3 4, 262, 000

198, 000

28,200

5,920

163, 000

7,000

510

32,305

813,000

38,000

5,375

207,555

35, 238, 000

243,000

34,085

I Not estimated, but exceeds benefits.

2 Capitalized construction and interest during construction.

Does not include $74,000 in funded irrigation operating costs.

DETERMINATION OF AREA REDEVELOPMENT BENEFITS FROM WATER RESOURCE

PROJECTS '

A paper prepared by the Area Redevelopment Administration, Department of

Commerce, with the cooperation and assistance of other Federal agencies involved in water resources development.

PREFACE

The President on May 15, 1962, issued a policy providing for the application

of standards to water resource plans which would take into account appropriately conditions of chronically idle human and other resources. Reference was

specifically made to areas designated under the Area Redevelopment Act of 1961

as areas of persistent and substantial unemployment and underemployment.
4

WHITESTONE COULEE PROJECT, WASHINGTON 25

The Area Redevelopment Administration has given considerable thought to

the preparation of general guidelines to facilitate the President's policy in the

formulation and evaluation of water resource plans. In these deliberations, the

Area Redevelopment Administration has benefited from the expert and informed

advice of technicians from the Departments of Agriculture, Army (Corps of

Engineers), Interior, and Health, Education, and Welfare.

This statement is issued to provide an initial and general guide for quantifying

redevelopment benefits from water-resource projects located in, or affecting,

officially designated redevelopment areas.

It is recognized that the guidelines set forth here are not sufficiently detailed

or precise to remove all technical problems of identification and measurement

of redevelopment benefits. They are believed to provide a reasonably cohesive

• body of principles for evaluation of projects by the various agencies having an

interest in water resource development, although such agencies may need to

develop certain parts in more precise terms for their particular operations.

While not an interim report, this statement may be altered in the course

of time as the result of further experience.

The purpose of this statement is to provide an initial basis for quantifying

redevelopment benefits from water-resource projects in areas designated by the

Area Redevelopment Administration as redevelopment areas. Such benefits may

be added to the direct project benefits that are normally considered by waterresource development agencies.

The policy approved by the President on May 15, 1962, and issued as Senate

Document No. 97, 87th Congress, 2d session, provides that—

"Formulation and evaluation of plans or alternative plans shall be accomplished in such a way as to permit timely application of standards appropriate

to conditions of: (a) less than full employment nationally, and (b) chronic and

persistent unemployment or underemployment in designated areas. Standards

appropriate to (a) shall be those adopted at the time of existence of such condition and authorized by the President. Standards appropriate to condition (b)

shall be used where an area has been so designated under the Area Redevelopment

Act of 1961 (75 Stat. 47) or other authorized procedures relating to resource

underemployment. In condition (b) project benefits shall be considered as increased by the value of the labor and other resources required for project construction, and expected to be used in project operation, project maintenance, and

added area employment during the life of the project, to the extent that such

labor and other resources would—in the absence of the project—be unutilized or

underutilized. Such benefits should be clearly identified as redevelopment benefits for the purposes of cost allocation, cost-sharing procedures, and to indicate

their significance for project justification."

National, regional, State, and local settings

Although redevelopment benefits are applicable only to areas designated under

the Area Redevelopment Act, they are to be determined with due consideration

of other areas and the Nation as a whole. The policy in Document No. 97 provides in this respect as follows:

"Well-being of all the people shall be the overriding determinant in considering

the best use of water and related land resources. Hardship and basic needs of

particular groups within the general public shall be of concern, but care shall

be taken to avoid resource use and development for the benefit of a few or the

disadvantage of many.

"All viewpoints—National, regional, State, and local—shall be fully considered and taken into account in planning resource use and develepoment.

"Significant departures from a national viewpoint required to accomplish

regional, State, or local objectives shall be set forth in planning reports by those

charged with their preparation."

The requirement for a broad geographic perspective for evaluation of waterresource projects rules out an approach which would aggregate the area redevelopment benefits, regardless of repercussions on other areas, and establish

a project priority on the basis of such a computation. Furthermore, such

approach would be incompatible with the method utilized by water-resource

agencies for determining direct project benefits by their traditional procedures.

This statement suggests a procedure that is responsive to the policy for considering water-resource projects in the broad geographic setting and that at

the same time maintains comparability among all types of benefits attributable

to a project.
26 WHITE STONE COULEE PROJECT, WASHrNGTON

Assumption of national and regional growth

Senate Document No. 97 specifies that water-resource projects shall be reviewed in the context of national growth. It states:

"Formulation an devaluation shall normally be based on the expectation

of an expanding national economy in which increasing amounts of goods and

services are likely to be required to meet the needs of a growing population,

higher levels of living, international commitments, and continuing economic

growth. Such an environment will necessitate relatively high and efficient

levels of resource employment and a pattern of production in balance with the

anticipated demand for goods and services."

In accordance with this provision, the benefits of a project should be based

not upon economic conditions as of a fixed date but upon a reasonable expectation of trends. We believe that an allowance should be made for whether the

growth rate in the major sector of the country in which the project is located

is high or low in relation to the national average. The growth rate for the

gross national product might be assumed to range as high as 41b to 5 percent

annually in a high-growth sector and as low as 3 to 3/12percent in a low-growth

sector with an average growth for the country falling within these ranges.

Projections of population growth in various States will provide a valuable clue

to economic growth.

These rates may be used in computations in the absence of evidence that a

different rate of growth may prevail for the period that is pertinent to the

project. Although any growth rate must be based on assumptions that are

somewhat arbitrary, the use of a trend that is within a reasonable range is far

better than assuming a static condition in which growth is ignored.

Assumption of long-term readjustment

We believe experience has shown that most redevelopment areas do not usually

remain permanently distressed. In a growing national and regional economy,

these areas will, as a rule, make a slow adjustment to relieve their distress either

through better use of their resources or through outmigration. The time required for the readjustment will depend on a number of factors, including the

latent resources that may be developed or utilized in the near future. A most

significant point is that areas which suffer primarily from unemployment tend

to adjust in a shorter time than areas, such as many rural areas of the South,

characterized by underemployment and low income. In recognitibn of this

important difference, we propose using a period of 15 to 20 years for areas that

are classified as 5(a) areas under the Area Redevelopment Act and 20 to 25 y ears

for areas that as classified as 5(b) areas. In practical application, these periods

may date from the beginning of construction activity.

Alternatives available for the redevelopment of an area

Water is such a universally used resource and demands for its use are so large

and continuing to expand that its availability is becoming a widespread problem.

The redevelopment of an area may depend heavily on what is done with this

resource to enhance its utility. Consideration of a water-resource project should

therefore recognize that a distressed area is usually faced with three choices:

1. To utilize its water resources as a vehicle for its redevelopment.

2. To depend on other types of projects for accomplishing the redevelopment.

3. To reduce unemployment and underemployment by outmigration of

employable persons and partial abandonment of the usable facilities (with

accompanying loss of investment) of the area.

The redevelopment program of the Federal Government emphasizes the need

for efforts to find economic employment of the underutilized resources of a redevelopment area, and hence primary efforts are centered on redevelopment,

although outmigration is not deliberately hindered. Indeed, retraining might

facilitate the process.

Water is a major developmental resource in the areas of deficient utilization

of labor. It is a key resource in the development of manufacturing and tourisni,

and until it is harnessed to provide water supply, flood-free industrial sites, and

lakes for recreation, private investment and development are stymied. Unless

the limited resources of these areas are aggressively developed, the alternatives

available are likely to be continued idleness or partial idleness of the employable

population or withdrawal of labor from the area accompanied by the further

serious losses and other problems that arise when an area is partially abandoned.

Consequently, the need to include water-resource projects as a part of the re-
WHITESTONE COULEE PROJECT, WASHINGTON 27

development program should be thoroughly explored in any area where water

may play an important role.

Equating benefits and costs on a uniform basis

Benefits from a water-resource project arise during two major stages, the construction stage and the project-use stage. The benefits are not distributed evenly

over the period from the time that the project is started until its useful life is

ended, and the distribution does not coincide with the distribution of the costs

that are used in calculating the benefit-cost ratio. This uneven distribution

should be taken into account in the computations.

We believe that the best procedure developed thus far is first to calculate all

benefits and costs as of the completion date for construction of the project, or

usable portions of the project. Second, these estimates should be apportioned

on an annual basis over the life of the project to show annual average benefits

and costs. The rate of interest prescribed for water-resource projects should

be taken into account in adjusting the benefits and costs to the construction

completion date and apportioning them over the project life.

Benefits from project construction, operation, and maintenance

As noted earlier, Senate Document 97 provides for adding to the project benefits

the value of labor and other resources required for project construction and for

expected project operation and maintenance to the extent that such labor or

other resources would be otherwise unutilized or underutilized. This policy is

assumed to refer to the portion of the project expenditures that go to the redevelopment area rather than to the total expenditures. When there is reason to

believe that substantially all the benefits to the local redevelopment area will be

represented by labor, the wages paid may be taken as a measure of the redevelopment benefits from this source. Allowance should be made for labor imported

from outside the redevelopment area. Labor from within the redevelopment

area need not be unemployed to be assigned the wage benefit, since presumably

the job they vacate will be available to someone else who is unemployed.

Although the wages may be properly regarded as a contribution to the area that

reduces the real cost of the project, Senate Document 97 specifies their usage on

the benefits side of the benefit-cost ratio. As described earlier in this statement,

these benefits are estimated as of the completion date of the project, or usable

project feature, and then apportioned over the life of the project.

The redevelopment benefits from project operation and maintenance may be

properly included on a descending scale for the limited period of 15 to 20 years

for 5(a) areas and 20 to 25 years for 5(b) areas.

Benefits from a water-resource project resulting from its stimulation of economic

activity

The net benefits that may arise from a water-resource project through its

stimulation of economic activity in an area are difficult of precise determination.

In view of the complexities involved, it is necesary to rely heavily on probability

analysis and empirical judgment. Although various bases for computation are

possible, we believe that the requirements of Senate Document 97 can best be

met by calculating the various impacts of the project primarily in terms of the

portion of the wages that benefit the redevelopment areas while contributing to

national growth.

By enabling a redevelopment area to achieve an economically competitive

footing with other areas, the area may employ gainful workers locally instead

of following the route of losing its manpower and underutilizing its facilities and

basic resources. Although the total wages from project-induced employment

might appear to be a net increase in the national income for as long as the area

may otherwise be expected to have conditions of abnormal unemployment, the

estimate needs to be adjusted downward substantially unless an entirely new

industry is introduced. The gains in one redevelopment area may be counterbalanced in part by losses in competitive areas, and because when workers find

full-time employment, they and their families are likely to rely less on odd jobs

and other subsistence efforts which do represent a degree of useful production.

The economic effect of competitive losses will be less telling in prosperous

areas (nonredevelopment areas) than in affected redevelopment areas because

of the high capability and resilience of the prosperous areas to adjust their

economies in a variety of ways to overcome the effect of the losses. Prosperous

areas are usually diversified and have more opportunities. As a rule, they are

likely to be more responsive than redevelopment areas to general measures of
28 WHITESTONE COULEE PROJECT, WASHINGTON

economic growth despite their smaller reserve of manpower for achieving the

response. This is becoming increasingly apparent as automation gains impetus.

When areas have a sufficient resource base or access to resources combined with

sufficient diversification and adaptability, economic dislocation is not likely to

occur or are minor and temporary. An ideal condition of economic resiliency, of

course, does not exist, but some areas approach it more nearly than others.

Distress areas are characterized generally by1. Dependence on specialized resources that have been depleted or whose

utilization has failed to keep pace with national growth potentials or has

declined;

2. A failure to find uses for old resources or to develop and utilize new resources with latent possibilities; and

3. A general lack of adaptability of their economies.

If deliberate economic stimulation is not provided, a redevelopment area will

usually make only a slow adjustment to reduce the idleness that it experiences.

A water-resource project may be the means to touch off utilization of other resources and provide a base for economic activity which is far preferable to

the alternative of maintaining persons in idleness on a subsistence basis by

accelerating the recovery of the area. This view assumes ( what appears to

be almost universally true of redevelopment areas) that there is an insufficiency

of promising economic measures on which to base redevelopment, and, accordingly, any project which will accelerate redevelopment should have high economic

justification unless the direct benefits of the project are exceptionally low

in relationship to project costs. Lack of alternatives tend to make opportunity

costs of water projects negligible.

Because water is one of the most universal resources, water-resource development becomes a usual consideration and a key feature in redevelopment programs. The principal problem to be faced is the relative emphasis and rating

of projects for this type of development.

Although it is not possible at this time to present a precise method of evaluation,

it is possible to consider the projects on a systematic basis and to assign ratings

that give a substantially accurate comparison of redevelopment benefits for

projects that will at the same time help or accelerate national growth.

The system for rating the project-induced redevelopment benefits of waterresource projects proposed for accomplishing this objective is based on the following three classes of benefits:

1. Gains in wage payments in industries that are directly induced to locate

in a redevelopment area as a result of the water-resource project.

2. Gains in wage payments in secondary industries that are created or

expanded as a result of the directly induced industry.

3. Benefits from the improved utilization of idle resources other than

labor which results from the strengthening of industrial activity in the area.

Directly induced wage benefits

When a water-resource project will induce an industry to locate in a redevelopment area on an economic basis, a redevelopment benefit should be credited

to the project. It should be noted that the water project in such an instance

deserves to be credited with such benefits, since it is one of the rare instruments

of public policy that can be effective, and without it the other factors of production under private control would not be brought into play to utilize underemployed resources. The justifiable amount of redevelopment benefit will be

small if the industry induced by the water project will compete mainly with

industries in other redevelopment areas which have economic problems of a

severity similar to those in the area directly affected by the water-resource project. Even in such instances, if the particular products of the industry in question have an elastic demand, the offsetting effects in other redevelopment areas

would be minor, since it can be assumed that such industries could locate in

several areas, and establishment in one area would not necessarily preclude

others. However, even projects which result in minor gains may reasonably

be assumed to contribute a benefit in the range of 5 to 10 percent. We suggest that, pending further study, a minimum of 7 percent of the wage benefits

in the directly induced industry be credited as an area redevelopment benefit

even when the product has nonelastic demand characteristics and competes with

similar products in other redevelopment areas. This benefit will be in the

range of 1 to 3 percent of the value of the industrial product for most industries.
WHITESTONE COULEE PROJECT, WASHINGTON 29

( An important consideration in the choice of the percentage of wage payments

to be attributed to a project is that when labor costs are a high proportion of

the value of the project, labor surplus areas tend to have a magnified advantage

over other areas.)

If a project-induced industry, on the contrary, is competitive only with

industries in other areas that have a low unemployment and a high capability

of readjusting their economies to new conditions, the net redevelopment benefits

may show a strong probability of going as high as 20 percent of the wage payments in the project-induced industry. This level, which is suggested as a general maximum for project evaluation, would range from 3 to 9 percent of the

value of the project for most industries. A higher percentage may be justified

in exceptional cases, but we believe that an increased percentage should be

credited only in those cases in which the project-induced industry is largely

new or otherwise noncompetitive, or it is competitive only with industries in

areas that experience labor stringencies.

In determining the percentage to be applied to a project, interindustry competition should be taken into consideration. For example, allowance should

be made for the fact that a building material may compete with other materials,

a metal may compete with other metals or materials, and a fuel with other fuels.

The benefits should be assumed to decrease over a period of 15 to 25 years

in accordance with the procedure outlined previously.

Secondary wage benefits

Economic benefits of a water-resource project are generated in secondary

industries, such as trade and services industries, as well as in industries that

are directly affected by the project. All the redevelopment benefits of the

project should be included, whether they are directly induced or secondary.

Secondary benefits will tend to be proportionate to the directly induced redevelopment benefits both regionally and nationally. The percentage will be

larger and more uniform in terms of wages than in terms of the number of persons employed because the stimulation of the industries will tend to increase

the average earnings per worker when there is underutilization of the labor

force. Our analyses indicate that, in terms of wage payments, 60 percent is a

reasonable share to add as a multiplier factor to the directly induced benefits to

allow for the benefits in secondary activities. The allowance should be made

for the usual readjustment period of 15 to 25 years.

Senate Document No. 97 provides for including in the benefit computation the

value of labor and "other resources" required for a project. These other resources are subject to much the same kind of considerations as wage benefits

in determining the net national benefits of a project. In effect, these resources

represent "sunk investments" and no charge as a cost other than the increased

maintenance that may be required for their use.

In order to relate the benefits from increased returns to such sunk investments

to the specific water resource project and to provide a consistent basis for computation, an allowance is suggested in terms of a percentage of the wage payments in the directly induced industrial activity. It is suggested that a rounded

figure of 5 percent be used for benefits of this type. All these benefits should be

computed on the descending scale applied to the transition period of 15 to 25 years

assumed for redevelopment areas.

Relationship of redevelopment benefits to direct project benefits and costs

Redevelopment benefits estimated for a water-resource project are in addition

to the direct project benefits now computed by water-resource development

agencies. They should be clearly identified as redevelopment benefits in accordance with the provision in Senate Document No. 97.

The approach presented in this statement for the computation of area redevelopment benefits does not require any change in the method of computing

either the direct project benefits or costs, except where necessary to achieve the

coverage required in Document No. 97. The area redevelopment benefits are on a

comparable basis. The estimated project cost is suitable as a common denominator for both types of benefits in computing the benefit-cost ratio.

Although benefit-cost ratios are useful in evaluating a project, we believe they

should not be used exclusively. The detailed economics of a project should be

examined, especially in borderline cases, in arriving at a decision on whether the

project should be undertaken.
30 WHITESTONE COULEE PROJECT, WASHINGTON

Summary

The method of computing area redevelopment benefits recommended to conform to the provisions of Senate Document No. 97 may be summarized as follows:

1. Include all wage payments to local redevelopment area labor for project

construction.

2. Include all wage payments also to local redevelopment area labor for project

operation and maintenance for a limited period, as noted below.

3. Calculate all other benefits also for a limited period as a proportion of

the wage payments in project-induced industries as follows:

(a) Credit the project with 7 to 20 percent of the wage payments in the

directly induced industrial activity, the range depending on the economic

adjustment capability of the areas with which the industry would compete.

( b ) Credit the project with benefits arising from increased employment in

secondary industries equal to 60 percent of the wage benefits calculated for

the directly induced industrial activity.

( c) Credit the project with benefits from utilization of idle resources other

than labor equal to 5 percent of wage benefits calculated for the directly

induced industrial actiVity.

4. Calculate the benefits from operation and maintenance and "all other benefits" on a descending scale over a period of 15 to 20 years for 5 ( a ) redevelopment

areas and 20 to 25 years for 5 (b ) redevelopment areas beginning with the date

that the project construction is started.

5. Allow for differences in the time of occurrence of benefits by distributing

them on an annual basis over the life of the project, taking into account the rate

of interest prescribed for the project.

Senator Moss. Thank you, Mr. Holum. I appreciate very much

your coming to testify.

Mr. Palmer, who is the Assistant Commissioner for Reclamation,

will be the next witness. You have with you Mr. Nelson and Mr. Karl

Lee. We welcome all of you gentlemen.

The statements that are prepared in advance by these officials of

the Department will be placed in the record.

STATEMENT OF WILLIAM I. PALMER, ACTING ASSISTANT COMMISSIONER FOR RECLAMATION; ACCOMPANIED BY H. T. NELSON,

REGIONAL DIRECTOR AT BOISE, IDAHO; AND J. KARL LEE, ASSISTANT CHIEF, DIVISION OF PROJECT DEVELOPMENT

Mr. PALMER. Mr. Chairman, the Whitestone Coulee unit is designed

to rehabilitate and enlarge an existing irrigation system which provides water to apple orchards in an area which is particularly well

suited to this crop in northern Washington. This system has been

in operation for many years, and the existing works, which were

built by the water users, are deteriorated and not of sufficient capacity

to permit expansion of the irrigated area.

Investigations of the Whitestone Coulee unit were conducted pursuant to the Chief Joseph Dam Project Act of July 17, 1952. Previous

authorizations under this general legislation covered the Foster Creek

and Greater Wenatchee divisions, which are now built or under construction, and the Oroville-Tonasket unit, Okanogan-Similkameen.

division, for which construction funds are requested this year. A

feasibility report on the Chelan division is now before the Congress

for consideration. However, in view of the policy change whereby the

Federal Columbia River power system is now being operated and

accounted for as a single coordinated system, we now propose that

the pumping power and the financial assistance to irrigation required

for the Whitestone Coulee unit be derived from the pooled power
4

WHITESTONE COTJLEE PROJECT, WASHINGTON 31

source and revenues from the Federal power system rather than from

the Chief Joseph Dam and powerplant.

The plan of development is described in our feasibility report, which

was transmitted to the Congress on January 2, 1964, and which has

been ordered printed as House Document 201, 88th Congress. Features

of the unit which would be built or enlarged under this proposal are

the diversion dam on Toats Coulee Creek, a long siphon, the main canal,

works to increase the active capacity of Spectacle Lake, and various

canals and pumping plants. Water would be delivered to 1,955 acres

of presently irrigated land and 705 acres of new land.

Whitestone Coulee is a glaciated valley which was left high and dry

when the glaciers retreated and the streamflows returned to the Similkameen Raver. Early settlers constructed works to bring water from

Toats Coulee Creek, by gravity across the Sinlahekin Creek Valley,

to recharge Spectacle Lake. From this source, several small canals

have been built to water the lands. Parts of this system are now over

40 years old, increasingly costly to operate and maintain, and in danger

of failure. The existing Whitestone Reclamation District does not

have the financial resources to make the necessary repairs.

The existing Spectacle Lake is now stocked with fish and supports a

limited recreation development. Our proposal would raise the normal

water surface and increase the fishery value and the recreation opportunities. Basic facilities for recreation are included in the plan as well

as acquisition of certain lands to assure public access and enjoyment.

Construction and operation of fish protective facilities is also proposed.

Okanogan County, Wash., has been declared a "rural redevelopment

area" under provisions of the Area Redevelopment Act of 1961.

Construction and operation of the Whitestone Coulee unit would result

in new jobs for qualified personnel in that area. A benefit is computed

on the basis of the wages paid these new workers in the area.

As Mr. Holum has explained, it has been necessary to adjust the financial and economic analyses for this proposal to conform with the

most recent laws, policies, and procedures affecting reclamation projects. The financial and economic data contained in the Department's

report on the bill, and that which we present today, therefore, will differ slightly from the figures in the feasibility report.

The total estimated cost of the Whitestone Coulee unit is $5,312,000,

at April 1960 price levels, including funded operating costs during the

development period and a portion of the cost of Bonneville Power

Administration substation. This is tentatively allocated among project functions by the separable costs-remaining benefits method of

allocation as follows: irrigation, $4,336,000; fish and wildlife enhancement and recreation, $163,000; area redevelopment, $813,000.

The irrigation water users will be able to repay about $1,100,000 of

the irrigation allocation, which includes $74,000 of funded operation

and maintenance costs, over the repayment period of 50 years. The

remainder of the cost allocated to irrigation, $3,236,000, will be returned to the Treasury from revenues derived by the Secretary from

power marketed by the Bonneville Power Administration. Costs allocated to other functions would be nonreimbursable.

The irrigated lands of the Whitestone Coulee unit were originally

devoted primarily to forage for livestock. In more recent years, the

raising of apples has become the principal crop, and new orchards are
32 WHITESTONE COULEE PROJECT, WASHINGTON

constantly being started. The existing district is serving irrigation

water to 1,955 acres of land, of which 1,135 acres are in bearing

orchards. Under future conditions, with the project, the entire productive acreage plus 705 acres of presently dry lands are expected to

be in apple orchards. Since such orchards are costly to develop and

take years to reach full production, we propose that a 10-year development period be allowed those farmers whose lands are not already in

orchards. Operation and maintenance charges assignable to those

lands during the development period which are beyond the ability

of the farmers to pay would be funded and considered a part of the

irrigation cost. The existing landownership pattern is primarily

small farms, and conforming to the acreage limitations of reclamation

law is not expected to cause any difficulty.

Our report on this project has been reviewed by all the interested

Federal agencies and by the States of the Columbia River Basin. All

comments received have been favorable to or have offered no objection

to the Whitestone Coulee unit. It has been considered by the Bureau

of the Budget and we have been advised that there is no objection to

the report being transmitted to the Congress.

The development is economically justified, as demonstrated by the

extremely favorable ratio of benefits to costs, 5.6 to 1. It is urgently

needed to avert a financial disaster to the district if a major break in

the system should occur. Local interests and representatives of the

State of Washington have expressed their strong support for the plan

of development. We have been advised of no opposition locally to

our plan. We recommend your favorable consideration of the Whitestone Coulee unit and early action toward enactment of the authorizing legislation.

I would like to emphasize two ore three further points. In the first

place I would like to stress that the merits of this project have already

been debated many times in this committee and in the Senate in con-,

nection with the Chief Joseph project in July 1952 and in other hearings on the Greater Wenatchee unit which is about 70 percent complete, and now the Whitestone Coulee. Hearings are scheduled on

the Chelan division which would be actually the fifth division of the

same project. These projects that I call to your attention provide the

conservation benefits, irrigation benefits of the Chief Joseph Dam

project.

There is litle point of laboring the kinds and types of agriculture

that have already been testified to, and the fact that this doesn't contribute to the crop surplus area. This has already been heard by this

committee.

Now, on the base of April 1960 prices the project is estimated to cost

$5,312,000. It is allocated 84,336,000 for irrigation and $163,000 to

fish and wildlife, and recreation and area redevelopment of $813,000.

Mr. Holum discussed this in part. May I simply remind the committee that the formula we use in determining this benefit is stated in S. 97,

a Senate document, which enunciated the formula for evaluating projects.

Senator CHURCH. Mr. Palmer, out of which fund will the $813,000•

come!
1VHITESTONE COULEE PROJECT, WASHINGTON 33

Mr. PALMER. It would be regular appropriation money and would

be handled exactly the same way that flood control is handled.

Senator CHURCH. It would not come from money appropriated to

the ARA program?

Mr. PALMER. No, sir. The other point I would like to make is this

project calls for the funding of operation and maintenance cost during

the development period. During the time new orchards are being

established and reach their productive capacity we would propose to

fund operation and maintenance costs that were in excess of the water

users' ability to pay.

These are now estimated at $74,000. Now the project will be operated and maintained by the local people. Accordingly money would

be sought in the annual appropriation to the Bureau of Reclamation

and transferred to the water users to operate and maintain. That

money is returnable and repayable and will be paid back and is included in the amount that is to be repaid by the water users. That is

all I have to add to the testimony that has already been given.

We consider this to be an excellent project and support it wholeheartedly.

Mr. Nelson is here, the regional director from region 1. He can

provide any further details you may desire or tell you about the plan.

Mr. Lee also.

Senator Moss. Do either Mr. Nelson or Mr. Lee have a prepared

statement or are they simply here to answer questions?

Mr. NELSON. We are here to answer questions.

Senator Moss. As you pointed out, Mr. Palmer, this is really an

additional unit of a series that have been going in in this general area,

the Chief Joseph area.

Mr. PALMER. That is correct.

Senator Moss. This use of power revenues from the Bonneville system is the pattern that we have evolved and are now using elsewhere

in the country. It is also standard operating procedure now; is that

right?

Mr. PALMER. That is correct, sir, and in the other three units that

have been specifically authorized by the Congress, the use of Bonneville revenues has been anticipated, revenues from Chief Joseph Dam,

not from the Bonneville system.

Senator Moss. I assume that you confirm that this cost-benefit ratio

is unusually high here?

Mr. PALMER. It is an unusually high benefit-to-cost ratio. It is an

unusually good project.

Senator Moss. Thank you. Senator Jackson?

Senator JACKSON. No question.

Senator Moss. Senator Church.

Senator CHURCH. No questions.

Senator Moss. Senator Jordan.

Senator JORDAN. No questions.

Senator Moss. That concludes the hearing on S. 2447.

(Whereupon the committee turned to other business.)

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