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I I I BACKGROUND evaluate water projects until replaced by the Principles and Guidelines' which were approved by the President in February, 1983. I I I Both the original Principles and Standards and the current Principles and Guidelines focused the evaluation of projects on the contribution which the project would make to national economic development (NED). Contributions to NED are the direct national benefits that occur in the planning area and the rest of the nation. The Principles and Guidelines also allow the evaluation of projects to look at the impact that would be achieved through improvements in environmental quality, social well-being, and regional development. I I I I I I I The objective of federal participation in water development is to maximize net national economic development benefits. As a result, focus on the economic analysis used by federal agencies has been on the plan alternative which maximizes contributions to NED. The guidelines do allow other plans to be formulated which reduce NED benefits in ord<;,r to address federal, state and local concerns not fully addressed by the NED plan. These additional plans are formulated to allow decision makers the opportunity to judge whether the beneficial effects of such plans outweigh the corresponding NED losses. I The general economic theory behind the focus on the NED account is that most additional regional economic benefits are, in effect, economic transfers from other areas rather than the true generation of additional value to the national benefit. This thought process has directed Reclamation and other federal agencies to look at only direct benefits. These direct benefits are the benefits that are associated directly with the beneficiaries of the project. The agencies do not consider in their final evaluation any secondary or indirect benefits which would be induced by or stem from a project on the theory that those indirect benefits are achieved at the equal expense of reduced secondary benefits in other regions of the Nation. However, since regional development was a major objective of the 1988 Colorado Ute Water Rights Settlement Act, it is appropriate to consider the secondary benefits in the setting of ALP. I I I I I 5 Economic and Environmental Principles and Guidelines for Water and Related Land Resources Implementation Studies, March 10, 1983 2-10