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<br />APPENDIX I <br /> <br />APPENDIX I <br /> <br />IMPROPER ACTIONS TAKEN TO ALLOW <br />CONSTRUCTION TO CONTINUE <br /> <br />Construction on the Bonneville Unit began in 1966. In the <br />late 1970's, the Bureau first recognized that the 1965 repayment <br />contract would not recover all allocated M&I costs because of a <br />lengthened construction period and inflation. On the basis of <br />the Bureau's interpretation of reclamation law and congressional <br />actions, Bureau policy requires a firm repayment contract with <br />project beneficiaries for construction to proceed. The <br />Bureau--aware that construction could be delayed unless the M&I <br />repayment obligation of $102.4 million was increased--negotiated <br />a supplemental contract with the district in 1980 that would have <br />increased the district's repayment ceiling. However, the <br />Assistant Secretary of the Interior for Land and Water raised <br />several concerns about the contract and withheld approval. The <br />Bureau then took two actions that permitted construction to <br />continue under the existing contract. We believe that these <br />actions were improper. <br /> <br />Use of 1958 Water Supply Act <br />to defer a portion of M&I costs <br />was legally improper <br /> <br />In 1981, the Bureau invoked the Water Supply Act of 1958, <br />deferring to the future repayment of costs associated with all <br />but 39,000 acre-feet of M&I water to be delivered by the <br />Bonneville unit. This deferral enabled the Bureau to continue <br />construction because the district's repayment obligation was <br />sufficient to cover the remaining costs. At the same time, the <br />district contributed $10 million in cash, increasing its M&I <br />repayment obligation and the related construction ceiling to <br />$112.4 million. <br /> <br />According to the Regional Director and the headquarters <br />Repayment Branch Chief, the Bureau did not obtain an opinion from <br />Interior's solicitors regarding the Water Supply Act's <br />application to the Bonneville Unit. We believe the Bureau's us~ <br />of the Water Supply Act for the Bonneville Unit was not legally <br />proper. The act allows the Bureau to enlarge a project for <br />storage of additional water to meet an anticipated future demand, <br />without a contract for repayment of the enlargement. It does not <br />allow the Bureau to defer repayment obligations and thereby <br />continue planned construction of facilities for M&I water supply <br />already under contract. <br /> <br />6 <br />