BOARD00198

• Board Meeting Date: 1/15/1969
• Description: Agenda or Table of Contents, Minutes, Memos
• Board Meetings - Doc Type: Meeting

you on this subject. There was submitted to
us in October of last year a proposed feasi-
bility report on the Yellow Jacket project on
the White River in northwestern Colorado.
This was submitted to us by the Director of
Region 4 of the Bureau of Reclamation in Salt
Lake City.

I

The Yellow Jacket Project is conceived
as a multi-purpose project to serve both
agricultural lands and municipal and indus-
trial uses. The benefit-cost ratio for the
project is favorable at 1.46 to 1. However,
if the new discount rate is applied to the
project, which it will be, then the benefit-
cost ratio will show a material decrease.

I might emphasize at this point how this
interest rate comes into the picture. In
considering a project, let's say for example
the project costs $50 million, in figuring
the cost an interest rate is applied against
that project and amortized over the life of
the project. If there is a $50 million capi-
tal investment and an interest rate is applied
to it over a long period of time, this ob-
viously increases the cost by several million
dollars. The change from 3-1/4 percent to
4-5/8 percent adds several million dollars
to the project cost. This then decreases the
benefits when compared to the cost. It is
very possible that by the application of the
new rate this project will no longer meet the
requirement of a favorable benfit-cost ratio.
The new interest rate becomes a critical
factor as far as the project is concerned.

Virtually all of the municipal and indus-
trial water uses contemplated by the project
are predicated upon the future development of I
the tremendous oil shale reserves in the White
River area, and more particularly in the
Piceance Basin. Construction of the project
as now planned will be contingent upon assur-
ances that the municipal and industrial