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with all .)contracting organizations within the ,,~ 1 eventual repayment 0' construction .s; (c) 1m- service area of the prolect. 0 0 G 1 5 -_ plication 0' perpetual Federal control 0' the prol- ect; and (d) Implication of Federal ownership and control of prolect water. In the year prior to the enactment of the Reclamation Project Act, a special provision of an appropriation act was enacted, approved May 9, 1938, known as the Hayden- O'Mahoney Amendment. This special provision appears based on a principle fraught with the gravest danger to the West. This danger appears inherent in the current' contract program to substitute 9(e) contracts for repay- ment contracts. That principle ean be stated as follows: Federal funds expended in construction of power features of reclamation projects are perpetual Federal investments. The present 9(e) contract program poses the hazard that a similar principle will be applied to funds expended in construction of irrigation features of such projects. This danger is due to the close similarity of the wording of Sec- tion 9(e) with the wording of Section 9(c) authorizing power contracts. Also, the Hayden-O'Mahoney Amendment reo quires that both irrigation and power revenues must be deposited in the Reclamation Fund of the U. S. Treasury and cannot be expended except pursuant to Act of Con- gress and there is no legislative direction as to the method of recordation within the fund. The essential basis of both water and power contracts is identical. Indeed, the lan- guage of Section 9{c) of the act authorizing power con. tracts, and the language of 9(e) relating to water delivery is almost identical. If, therefore, construction costs of power features are perpetual Federal investments, the question arises __ Are construction costs of irrigation features likewise a perpetual Federal investment? ,The Federal authorities under the Federal recla- mation laws are obligated to acquire water rights 'or pro;ect purposes 'rom the State pursuant to State law and under the reclamation laws hold such rights as trustee for beneficiaries of the prol- ect. Here the United States has acquired from the Steite applications to appropriate water, but no permits have been issued pursuant to such appli- cations. Under State law no right to the actual present use of water may be acquired until after Issuance of permit. Nevertheless, firm 40-year con- tracts have been executed, including those now being litigated, for the delivery of water without reference to State law precisely as though the United States had unqualified ownership 0' both works and water. The de'ects of Part A of the contract concerning water delivery are therefore (a) no assurance of permanent water service; (b) no assurance 0' 8 Part B of the contract consists in a true repayment con- tract for the return to the Federal treasury within a period of 40 rears in annual installments, without interest, of Federa funds expended in the construction of a distribu- tion system for the purpose of enabling the contracting district to utilize :the water delivered under Part A of the contract and to apply that water to beneficial use within the district. The two parts - A and B - of the contract are therefore in the strongest contrast with each other. Inherent in the combination is an inference that water will be delivered after the 40-year period provided the parties can agree on the terms, but this is an inference only. Federal law requires that "no water shall be delivered" from a project until a repayment contract shall be exe- cuted with an organization formed under State law for the repayment of a proportion of the cost of the project allo- cated to irrigation and to be returned by the water users. Section 9(d) of the act in terms unequivocally so requires. The 9(eJ contract before the Court in the Ivanhoe case evidentfy is not a repayment contract, and clearly is not designed for that purpose. The question then arises, "What purpose was Section 9(e) designed to serve?" 1 1 It is believed the answer can be found in the report of the Special,Repayment Commission (House Document No. 673, 75th Congress, 3d Session) entitled "Repayment of the Construction Costs of Federal and Indian Reclamation Projects." The Reclamation Project Act of 1939 was en- acted responsive to this report. At page 20 of the report under the heading, "Projects Requiring Special Consider- ationl: several projects are discussed which the Commission finds require special cpnsideration; and at page 38 of the report it is recommended that the Secr.etary of the interior arrange for a special study of such projects, and concludes, "During the period of this work water should be delivered on a rental basis, the repayment of construction charges should stand suspended and a consideration of the ques- tion of further payments should be postponed until the establishment of a program as a result of such studies." Based on these highly revealing portions of the report of the Repayment Commission,. it is my considered opinion that resort to a contract under Section 9{e) is authorized only in the event that due to special considerations it is impracticable to execute a repayment contract and resort is had to water delivery under Section 9(e) to remain in effect until a repayment contract can be negotiated and e.xecuted pursuant to the provisions of S.ection 9(dl or Sec- tIon 7(a) of the Act. The latter subsectIon prOVIdes for a 9: