WSP06943 - Laserfiche WebLink

Home Browse Search

,. . ^ ~ ~ through payment capacity studies, which measure the ability of the irrigators to pay all operation and maintenance costs attributable to irrigation and a share of project construction costs, The Bureau last performed payment capacity studies on the Dolores and the Animas-La Plata Projects when they completed the' projects' Definite Plan Reports in 1977 and 1979, respectively, Since those reports were prepared, the estimated costs of operation and maintenance for both projects have ahnost tripled, while the prices paid for crops grown in the areas covered by the projects have increased less than 60 percent. This condition haS reduced the expected financial returns from farming and has diminished the ability of the irrigators to pay for their contractual share of project construction and operation and maintenance costs, For example, since 1988, the Bureau has subsidized operation and maintenance costs associated with interim irrigation water delivery from the Dolores Project to assist farmers in financing on-farm irrigation systems while the Project was still under construction, In October 1993, the Bureau issued a policy memorandum that requires recovery of incremental operation and maintenance costs associated with interim water deliveries from projects under construction, However, Bureau officials stated that they expected to subsidize such costs during construction of the Animas-La Plata Project as well and that when the Project was C9mpleted, the operation and maintenance costs attributable to the irrigation component could exceed the irrigators' payment capacitY"by as much as 15 percent. Therefore, the Animas-La Plata Project as currently formulated would not be financially feasible under existing Reclamation law and policy. :",; , We concluded that the opportunity to effect cost savings on the Dolores Project was minimal because the Project was nearly complete and its repayment terms were fixed. Therefore, we focused our attention on the cost effectiveness of the unconstructed Animas-La Plata Project. We believe that the irrigation component of the Animas- La Plata Project should be reexamined given that Project irrigation is apparently neither economically justified nor financially feasible. We estimated that the elimination of the non-Indian irrigation component of the Project could result in construction cost savings ranging from $134 million to $171 million. We also estimated that the Government could recover up to an additional $59 million of its construction investment if the Colorado Ute Indian Tribes were to agree to an arrangement whereby water curre.ntly designated for irrigation use was converted to municipal and industrial use. Sucb an arrangement may require compensation to the Tribes in lieu of constructing the Indian irrigation component of the Project. To better protect the Government's interest, we recommended that }he Bureau (I) revise, to the extent practicable, the cost allocation and repayment arrangements for the Dolores Project to exclude indirect irrigation benefits and to recover prior operating deficits with interest; (2) reevaluate the economic benefits and financial feasibility of developing the irrigation component of the Animas-La Plata Project; and (3) inform the Congress of the results of the reevaluation and, if warranted, seek Congressional approval to reformulate the Project. In itS May 23, 1994, response (Appendix 3), the Bureau generally concurred with all three recommendations and provided sufficient information regarding its planned action for us to consider the