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<br />capacity by as much as 15 percenL However, Bureau policy guidance established in <br />October 1993 provides for recovery of the incremental operation and maintenance <br />costs applicable to water service on partially completed projects. <br /> <br />We agree with this policy guidance and believe that subsidizing operation and <br />maintenance costs should not become a precedent for on-farm development of <br />Federally constructed irrigation projects. In our 1991 audit r~ort on the Bureau's <br />recovery of operation and maintenance program expenses, we noted that the <br />Bureau understated the interim water rate for the Central Arizona Project because <br />of concerns that water users could not pay the full costs of operation and <br />maintenance, We believe that this situation was a precursor to the financial <br />problems currently associated with the Project's irrigation component. A 1993 <br />Bureau report on the status of the Central Arizona Project stated that the <br />agricultural component was "failing and will be unable to meet its financial <br />obligations" because of low commodity prices and high operation and maintenance <br />costs. According to the Bureau, the Central Arizona Project's operation and <br />maintenance costs make farming under present commodity prices too expensive, even <br />with climatic conditions that permit crops to be planted and harvested from the same <br />land more than once a year. At the time of our review of the Dolores and the <br />Animas-La Plata Projects, the Bureau was analyzing ways to financially restructure <br />the Central Arizona Project to protect the Federal Government's investmenL We <br />believe that the marginal payment capacity on the Dolores Project and the potential <br />financial infeasibility of irrigation on the Animas-La Plata Project may be an <br />indication that a similar repayment problem could also arise for these projects, <br /> <br />f <br /> <br />,. <br />~_\ <br />.- <br /> <br />" <br /> <br />i,1 <br /> <br />Project Scope <br /> <br />.." <br /> <br />".< <br /> <br />We recognize that the Federal Government has a responsibility under the Colorado <br />Ute Indian Water Rights Settlement Act to complete both the Dolores and the <br />Animas-La Plata Projects, However, we believe that inclusion of the irrigation <br />componen~ of the Animas-La Plata Project should be reexamined because of its <br />apparent lack of economic justification and financial feasibility. <br /> <br />r.." <br />t', <br /> <br />, <br /> <br />The Bureau has not effectively reevaluated the economic justification or financial <br />feasibility of the Animas-La Plata Project and fully informed the Congress of the <br />substantial changes in Project conditions since issuance of the 1979 Definite Plan <br />ReporL We believe that a reevaluation effort should be initiated before construction <br />begins, In the reevaluation, the Bureau should preclude the use of indirect irrigation <br />benefits and revise beneficiary payment capacity computations to reflect the present <br />economic constraints on agriculture in the Project area. If the irrigators will be <br /> <br />,>." <br /> <br />90ffice of Inspector General report "Recovery of Operation and Maintenance Program Expenses, <br />Bureau of Reclamation" (No. 92,1,269), issued in December 199\. <br /> <br />13 <br />