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FINDING AND RECOMMENDATIONS PROJECT DEVELOPMENT CONSIDERATIONS The Bureau of Reclamation has not reexamined the diminishing economic benefits and decreased financial feasibility of the Dolores and the Animas-La Plata Projects' irrigation water supply components since the projects were planned in the late 1970s. Reclamation law and policy require that Federally constructed water projects be economically justified and financially feasible. However, because construction of the projects is required by the Colorado Ute Indian Water Rights Settlement Act of 1988, which settled the Colorado Ute Indian Tribes' long-standing tribal water claims, the Bureau has concentrated on completing construction of the Dolores Project and resolving environmental concerns with the planned development of the Animas-La Plata Project to meet the time frames mandated by the Settlement Act rather than addressing the changed financial and economic conditions since the projects were authorized. Consequently, the Bureau may not be able to effect cost savings on the Dolores Project, since substantially all construction costs have been incurred and repayment terms are fixed. However, we believe that changes to the proposed Animas-La Plata Project resulting from a reevaluation of the Project's size, scope, and repayment could mitigate some of the economic and financial problems associated with development of the Project. Downsizing the Animas-La Plata Project based on current economic and financial conditions could save a substantial portion of the estimated construction costs and provide significant additional cost recovery. For example, we estimated that elimination of the non-Indian irrigation component of the Project could save the Government from $134 million to $171 million in construction costs and that mutual agreement between the Bureau and the Tribes to convert the Project's remaining Indian irrigation water supply to municipal and industrial use could increase cost recovery by $59 million. ~ ~ , ;,'0 f~ Background 't~ ,-:-, Economic justification for a project occurs when project benefits are equal to or ) exceed project costs, while project financial feasibility is determined through payment capacity studies, which measure the ability of the irrigators to repay their share of project construction and operation and maintenance costs. Historically, irrigators have been assisted by power users, who repay the portion of the Federal irrigation investment that is beyond the ability of the irrigators to repay, However, Reclamation law and policy have required irrigators to pay for their entire share of operation and maintenance costs on completed projects. :"'., ;: -~^ '~ '" :;] " ?~'/ As authorized in 1968, the Dolores and the Animas-La Plata Projects were only marginally feasible. During hearings held prior to the authorization of these projects, Office of Management and Budget officials noted that substantial subsidies 9