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000370 In .;.e decisions the traditional concept of rep. \jent contracts was directly involved. Without going info un- necessary detail, it will be sufficient to state a fundamental feature of the Federal reclamation laws always has been that costs allocated to irrigation and to be repaid by the water Users is without inierestl and such repayment ca.n only be accomplished by meanS of contracts between the United States and water user organizations, similar to irri~ gations districts. for the repayment by each such organiw zation of its proper pro-rata share of the project cost allocated to irrigation and to be returned to the Federal treasury by the w,ater users, without interest. over a max. imum period of 40 years. Under these decisions it is held that in develop- ing and operating such projects the United States must acquire such water rights as are necessary pursuant to State law; that the United States is a mere carrier and distributor 01 the water and that its primary interest is the recovery of the reim- bursable project costs; and that water rights ac- quired by the United States lor irrigation purposes are held in effect in trust lor project beneficiaries who on applying the water to beneficial use will acquire vested rights thereto appurtenant to the land irrigated in accordance with State 'aw. The Reclamation Project Act of 1939 restates this tra- ditional concept in Section 'lId) with the added provision that in addition to the 40-year repayment period, in the discretion of the Secretary a maximum development period of 10' years may be added. The purported primary objective of the Reclamation Project Act is stated in the title to be the formulation of a variable payment plan to provide solutions for anum. ber of aggravated repayment problems which had arisen under numerous repayment contracts throughout the West. In explaining the bill before Congressional committees administration leaders unequivocally stated that ther"e was nothing in the bill at variance with the traditional concep- tion of repayment contracts. The variable payment plan is set forth in Sections 3 and 4 of the Act, but other sections relating to repayment contracts overshadow in importance the provisions relating to the variable payment plan. These sections are Sections 7 and 9. Both sections contain a number of subsections. Section 9(d) contains a faithful restatement of the tradi- tional concept of repayment contracts; but Section 'lIe) is a sharp departure from all past precedent, if'taken in a & " \ strio_~..,teraJ sensa without regard to its context. '.. ,~as frequently been stated in discussions of this subsection that there is nothing in the legislative history that gives any indication whatever of the intent of Congress in its enact- ment. However, I do not believe that such is the case. On the contrary, I believe that there is an authoritative source which enables an ascertainment of the.. general circum- stances under which resort to the section is authorized. This particular. point will be referred to later. , . As applied in the contract program of the United States Bureau of Reclamation in California, Section 9(e) contracts are resorted to in substitution for repayment contracts. An essential question in the pending validation suits is whether this substitution is valid under Federal and State law. As a preliminary to a consideration of this question, I do not believe it is possible.to give consideration to the question of validity of the 9(eJ contracts from the standpoint of Federal law apart from State law or vice versa, but rather that the problem must be approached on the basis of a coordination of both Federal and State law. This I believe to be inherently true. The contract before the court in the Ivanhoe case is typical of the numerous contracts which have been exe- cuted as a part of the contract program of the U. S. Bureau of Reclamation for the Central Valley Project. It contains two parts - A and B. Part A comprises the 9(e) contract, so-called, and is essentially a 40-year term contract for water delivery at prescribed annual rates. Part B is a tra- ditional repayment contract for return to the Federal treasury of the construction costs of a distribution system to enable the district to utilize the water to be delivered under Part A. In Part A there is no breakdown or explana- tion of the items entering into the rate base and nO mention of construction charges or construction cost com- ponent in the rates. The contr.act expresses no obligation to apply a construction cost component of the rates to repayment of construction charges allocated to irrigation and to be returned by the water users. Neither does the contract contain any reference to delivery of water after expiration of the term of the contract - it is completely silent regarding this subject. It is dear however, that full repayment of a definiie proportion of the costs of the project allocated to irrigation and to be returned by the water users is not contemplated by Part A of the contract within the 40-year period. How then is repayment of those costs to be accomplished under contracts 01 this nature? rhe answer as given by concerned Federal authorities is that repayment will be accomplished within the uselul life of the project by a succession of term contracts lor delivery 01 both water and power 7