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<br />Our review disclosed that the Bureau's cost allocations overstated irrigation benefits <br />under current criteria, The Bureau justified the irrigation component of the Dolores <br />and the Animas-La Plata Projects in part by assigning indirect benefits to irrigation. <br />As used by the Bureau, indirect benefits did not accrue directly to the recipients of <br />the projects' water but, in theory, improved the regional economy of the projects' <br />area through the profits earned on the increased production of crops. The use of <br />indirect benefits was an acceptable procedure at the time the projects were <br />authorized and the respective Definite Plan Reports were prepared. However, in <br />1983, the U.S. Water Resources Councif issued the "Economic and Environmental <br />Principles and Guidelines for Water and Related Land Resources Implementation <br />Studies," which restricted estimates of irrigation benefits on Federally constructed <br />water projects to the direct net benefits that could be measured by on-farm income <br />analyses. According to Reclamation Instructions, which were revised to incorporate <br />the criteria detailed in the "Principles and Guidelines," the difficulty of accurately <br />measuring indirect benefits precluded their use. <br /> <br />II <br />i <br />i <br />I <br />~ <br /> <br />Economic Justification <br /> <br />As stated in our 1992 report on the Central Arizona Project, which was also justified <br />in part on indirect benefits, the inclusion of indirect benefits overstates the potential <br />for agricultural production and distorts the economic capability of a Project's <br />irrigation component. We also analyzed the impact of indirect benefits on the <br />feasibility of the Dolores and the Animas-La Plata Projects and found that when <br />indirect benefits were eliminated from the benefit computations, development costs <br />for both projects exceeded the benefits that could be derived, Such a condition <br />indicated that neither Project was economically justifiable under current criteria. <br /> <br />~ <br />~ <br />~1 <br />~1' <br /> <br />T' <br /> <br />Financial Feasibility <br /> <br />~.: <br />.' <br />.:;i <br />L <br />f:~' <br />e," <br />'(-: <br />t;', <br />~ <br />I <br />I <br />lto. <br />~ <br />;v."j <br />t',.:! <br />1:,. ~ <br /> <br />The value of the crops grown in the areas of the projects has not risen <br />commensurate with the expected costs of operating and maintaining the projects, <br />which include power costs for pumping water. Operation and maintenance cost <br />estimates for both the Dolores and the Animas-La Plata Projects have increased by <br />about 200 percent since the Definite Plan Reports were issued in 1977 and in 1979 <br />for the respective projects, while crop values in the areas to be served by the projects <br />have increased less than 60 percent. This condition has diminished the ability of the <br />irrigators to pay for the projects' operation and maintenance costs, as well as to <br /> <br />7The U.S. Water Resources Council consisted of the Secretaries of Agriculture, the Army, Commerce, <br />Energy, the Interior, Transportation, and Housing and Urban Development, as well as the <br />Administrator of the Environmental Protection Agency. Although the Council is now inactive, the <br />'Principles and Guidelines' continues to govern water resource planning studies undertaken by <br />Federal agencies. <br /> <br />11 <br />