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<br /> <br />United States Department of the Interior <br /> <br />OFFICE OF INSPECfOR GE"ERAL <br />\\'a.~hinl{ton. o.c. 20:!-IO <br /> <br />JUL 2 0 1994 <br /> <br />MEMORANDUM <br /> <br />TO: The Secretary <br /> <br />FROM: Acting Inspector General <br /> <br />SUBJECT SUMMARY: Final Audit Report for Your Information. "Development <br />Status of the Dolores and the Animas-La Plata Projects, <br />Bureau of Reclamation" (No. 94-1-884) <br /> <br />DISCUSSION: We found that the economic justification and the financial feasibility <br />of the Dolores and the Animas-La Plata Projects, both located in southwestern <br />Colorado, have declined because of changes in both the Bureau 'Of Reclamation's <br />criteria for computing project benefits and in the local farmers' ability to afford the <br />cost of irrigated agriculture. These situations have occurred since the projects were <br />authorized in 1968. The $568 million Dolores Project is scheduled for completion <br />in 1996, while construction on the Animas-La Plata Project, estimated at $653 <br />million, has not yet begun. Both projects are integral to implementation of the <br />Colorado Ute Indian Water Rights Settlement Act of 1988, under which the <br />Government agreed to reserve specified amounts of water from the projects for use <br />by the Colorado Ute Indian Tribes in return for settlement of tribal water claims. <br />Our review disclosed the following: <br /> <br />'-' <br /> <br />t/ <br /> <br />.: <br /> <br />- The irrigation benefits of both projects were overstated because the Bureau <br />used indirect benefits in justifying the projects' irrigation components. The Bureau's <br />revisions to its economic planning guidelines in 1983 disallowed the inclusion of <br />indirect benefits because they could not be accurately measured and tended to <br />overstate the value of irrigation. When we recomputed the irrigation benefits to <br />eliminate the indirect benefits, the estimated construction costs exceeded project <br />benefits. Such a condition indicates that neither project was economically justified. <br /> <br />,--; <br />P. <br /> <br />f.~ <br /> <br />~ <br />.,;; <br />}~ <br /> <br />- The capacity of the irrigators to pay their contractual share of the operation <br />and maintenance costs assigned to irrigation has diminished since the Bureau <br />completed payment capacity studies on the projects. . As such, both projects could <br />be financially infeasible. Since the payment capacity studies were last performed in <br />the late 1970s, estimated operation and maintenance costs for the projects have <br />nearly tripled, while the prices paid for crops grown in the project areas have risen <br /> <br />Prepared by: Marvin Pierce <br />Extension: 208-4252 <br />