(3) Whether the relation and proximity of the water-resource project area to existing recreational areas of national interst are such that the development will supplement the program on those federally administered areas. 28. Additional standards relating to fish and wildlife (a) Fish and wildlife potentialities shall be fully evaluated in the planning of proposed water-resources programs and projects. (b) Potential damages to existing fish and wildlife resources shall be recognized in planning for water-resources programs and projects. Reports shall provide for the acquisition of land when recommended by the Secretary of the Interior to compensate for wildlife habitat destroyed or damaged by a Federal project. The costs of prevention of such damages or of replacement of such resources to the extent practicable, including the cost of any land acquisition, shall be set forth. All such costs shall be considered as joint costs and shall be allocated to the major purposes of the project. (c) When modification in the design or method of operation of a project, including provisions for augmenting low-river flows, are required in order to make fish and wildlife values available to the public, such modification or development shall be included in the project proposal only if: (1) The State or local governments or other beneficiaries agree to repay the full costs; or (2) Such values are indicated in a statement by the Secretary of the Interior as being of national significance or within the purview of the Federal laws relating to fish and wildlife, and if either (a) the work is proposed to be authorized as part of the program of the Fish and Wildlife Service and is to be financed from appropriations made for that program, or (b) the letter transmitting the proposed report to the Congress contains proposed authorizing language stating the maximum amount of such costs which would be borne by the Federal Government. 29. Additional standards relating to pollution control and abatement (a) The control or abatement of river pollution by means of the augmentation of low-river flows shall be fully evaluated in the planning of water-resources programs and projects. (b) The report on any program or project having significant pollution-control or abatement effects should include a statement of the views of the Secretary of Health, Education, and Welfare on such aspects of the program or project. The views of the Department of Health, Education, and Welfare should be reconciled with the views of other agencies concerned prior to the submission of a report to the Bureau of the Budget. (c) Any reduction in pollution-control or abatement benefits derived from a river which would result from the construction of a proposed project shall be recognized in planning for water-resources programs and projects. The cost of preventing a reduction in existing benefits or of substituting other facilities to provide similar benefits shall be set forth. All such costs shall be considered as joint costs and shall be allocated to the major purposes of the project. (d) When modification in the design of a project or in the method of operating a project is required to accomplish pollution control or abatement, additional to that prior to construction of the project, through the low-flow regulation of a river, such modification shall be included in the project proposal only if: (1) Normal waste-treatment requirements have been or will be provided to the maximum extent practicable, and the augmenting of low-river flow is considered to be necessary for the further control or abatement of pollution, in accordance with a comprehensive program for pollution control or abatement developed under the Water Pollution Control Act of 1948; and (2) The States, local governments, or other beneficiaries agree to pay the full costs. 30. Provision in Federal water-resources programs and projects for future municipal or industrial water-supply requirements Where detailed analysis in accordance with the criteria contained in paragraph 19a above indicates that a significant saving will result from modification or enlargement of the structures or facilities of a proposed project to serve anticipated future needs for municipal or industrial water supply, proposals for such inclusion will be reviewed in accordance with the following criteria: (a) Whether the separable costs of including the facilities for anticipated future needs represent not more than 15 percent of the initial investment costs of the affected structure or facility, unless special considerations warrant recommending a larger percentage. (b) Whether all properly allocable costs of such modification or enlargement will be repaid within 50 years after the date on which initial use of such addition is begun, regardless of the degree to which the full capacity provided is utilized during that period. In arriving at the costs of such additions, interest on the initial investment during the period of deferral of any use may be waived. (c) Whether reasonable assurance is given by local interests at the time the report is prepared that initial use of the proposed modification or enlargement of the program or project will begin within not more than 10 years after the completion of construction, and that a repayment contract will be signed by local interests prior to the beginning of construction agreeing to start repayment within such 10-year period unless special considerations warrant an exception. By direction of the President: Director. [Attachment A] CIRCULAR NO. A-47 (REVISED) DEFINITIONS OF CERTAIN TERMS USED IN CUCIRLAR NO. A-47 (REVISED) 1. Additions or modifications: Substantial features or facilities that are added after the initial installation of the project. 2. Associated costs: The value of the goods and services needed, over and above project costs, to make the immediate benefits of the project available for use or sale. 3. Benefits: All identifiable increases or gains in assets or values, whether in goods, services, or intangibles, whether primary or secondary, and whether measurable in monetary or nonmonetary terms which, taking account of conditions with and without the project, are properly creditable to that project, and which are net of all associated costs and induced costs of the project. 4. Induced costs: All uncompensated adverse effects caused by construction or operation of a program or project, whether in goods, services, or intangibles, and whether measurable in monetary or nonmonetary terms. 5. Initial investment costs: All monetary outlays made and goods and services contributed or provided by various interests for the initial project construction, including contract work, materials and supplies, labor, and use of equipment; acquisition of lands, easements, rights-of-way, and water rights; costs of relocating facilities and the settlement of damage claims; interest during construction; any capital expenditures for protection of public health and for preventing loss of, or damages to, recreation, fish and wildlife and mineral resources, and scenic, archeological, and historical values; any capital expenditures for the replacement of recreation and fish and wildlife resources damaged or destroyed by the project; the appropriate portion of engineering, administrative, and general expenses of the agency relating to the project; and all other expenditures specifically applicable to the investigations and surveys, and the designing, planning, and construction of the project. 6. Joint costs: The costs remaining after deducting the sum of the separable costs of the various purposes from project costs. This differs from a common definition of joint costs as the total cost of jointly used facilities. 7. Major replacements: Substantial facilities or project features installed at infrequent intervals over the life of the project to replace earlier installations of similar facilities or features. 8. Net revenues: The difference between the total revenues of the program, project, or separable purpose thereof, and the properly allocable costs of such program, project, or purpose. 9. Operation and maintenance costs: All monetary outlays made and goods and services contributed or provided by various interests for materials and supplies, labor, necessary services, equipment and operating facility use, and an appropriate portion of engineering, supervision, and general expenses which are needed to operate a project once constructed and to make repairs, minor additions, and replacements, and otherwise to maintain the project in sound operating condition during the life of the project. This includes any expenditures required by the project, other than capital expenditures, for protection of public health, for preventing loss of, or damages to, recreation and fish and wildlife resources, and scenic, archeological and historical values; and any expenditures required by the project, other than capital expenditures, for replacement of recreation and fish and wildlife resources damaged or destroyed by the project. 10. Primary benefits: Benefits which result directly from the measures for which project costs are incurred. 11. Program: Any combination or system of two or more interrelated projects. 12. Project: Any separable physical unit or several component and closely related units or features, or any system of measures, undertaken or to be undertaken within a specified area for the control or development of water or related land resources, which can be established and utilized independently or as an addition to an existing project, and which can be considered as a separate entity for purposes of planning, evaluation, financing, construction, or operation. Units or features of a proposed development which fit the above definition will generally be considered as separate projects. 13. Project costs: All monetary outlays made and goods and services contributed or provided by various interests in connection with a project, such as the initial investment costs, major replacements, additions or modifications, and operation and maintenance costs; less any net salvage values of the project remaining at the end of the evaluation period. These costs may be expressed either as present values, with all expenditures converted to present worth, or as annual charges, which include amortization and interest on the initial investment costs. Where the term "costs" is used in other definitions or in the body of the circular without any prefix, reference is to "project costs," unless the context clearly indicates otherwise. 14. Reclamation: Making land suitable for productive agricultural use or increasing or maintaining its productive agricultural use by means of (1) irrigation; (2) drainage, excluding drainage undertaken under section 2 of the act of December 22, 1944 (58 Stat. 887), and excluding drainage undertaken solely to counteract the effects of flood-control works; and (3) recharging of ground waters. 15. Salvage value: The net value, if the project were discontinued, of any remaining resources disposed of for other than project uses. 16. Secondary benefits: Benefits creditable to the project other than primary benefits. 17. Separable cost of any purpose: The difference between project costs with the purpose included and project costs with the purpose excluded. 18. Specific cost of any purpose: The cost of facilities or features which serve that purpose exclusively. EXHIBIT 4 COMMENTS OF THE COMPTROLLER GENERAL OF THE UNITED STATES Hon. JAMES E. MURRAY, COMPTROLLER GENERAL OF THE UNITED STATES, Chairman, Committee on Interior and Insular Affairs, United States Senate. DEAR SENATOR MURRAY: Reference is made to your letter dated December 10, 1956, in which you have requested further suggestions relating to policies and criteria in allocation of costs of multiple-purpose water resource projects. Audits by the General Accounting Office for fiscal year 1955 and previous years of the Department of the Interior and Corps of Engineers (Civil Functions) have resulted in reports to the Congress on the important Federal water resource development programs that include power generating and marketing operations. These audits have disclosed that even though projects have been in operation for a number of years, firm cost allocations have been made for very few multiplepurpose projects. Moreover, although the Federal Power Commission has been authorized to approve rate schedules for sale of surplus power by Interior from most projects authorized for construction and operation by the Corps of Engineers, the Commission has been given specific authorization by the Congress to make the allocation of construction costs in very few projects. For those projects on which the Federal Power Commission has not been given specific authorization to make the allocations of costs, a jurisdictional difference has existed between the Corps of Engineers, the constructing agency, and the Department of the Interior, the power marketing agency, as to who has the responsibility to make these allocations. This difference has extended also to the Missouri River main stem projects constructed or under construction by the Corps of Engineers, except the Fort Peck project. The Corps of Engineers has consistently reported to us that a substantial and increasing degree of agreement on cost allocation methods and procedures has been achieved through the combined efforts of the three Federal agencies primarily concerned with the problem and that accordingly the matter of agency in ilustrate the difficulties of resume des om o0, 100, of $155,691,000, inaang interes me da bakal besteral investment of $157,779 To resolve the map of lus Bm cost allocations, we believe tha 1 Fetablish pdicine quod salpala bu mahing the cost allocations, and designs 2. Estas poncies and criteria for making the cost allocations and designat the Federal Power Commission to make the firm cost allocation, wherever powe Cover specifically designated by the Congress to make the allocs a purpose in the project I was designated to make the allocation of the Fort Pees the bore Dam, MeNar Dam, and lower Snake River project In the Columbia River Basin, the Federal Post: the censtr. 2 grey, the power marketing agency, and the Federal Power Fu and cruria for masing the cost alocations and requiring Commissiez xunt t apprehimate reports on aleations of costs to the es to approve an allocation. project Congress, or its 16-27ated com Inder ether aterratie. we be at the Congress should require that the ghout the time the project is substantially completed and placed in operation. I de fes and criteria used for cost allocations and related matters have not been wthorn between the agencies having water resource development responsibilities. proposed cost allocation, be made and submitted Notwithstanding the efforts in recent years of the Inter-Agency Committee on Water Restrees (and its predecessor, Federal Inter-Agency River Basin Cominition), the Presidential Advisory Committee on Water Resources Policy, and 3, ireau of the Budget to formulate mutually acceptable principles and prowe believe that the Congress should provide the basic framework of s and criteria. Among the factors in which the congressional intent may ressed are: Benefits and costs to be considered in the benefit-cost analysis for the tion of projects and in the allocation formula. ess may want to consider the degree to which secondary benefits and inUnder this factor the costs are to be included in determining the total benefits and total costs. Costs to be included for purposes of allocation and to be repaid by benees; that is, whether interest on the Federal investment, costs of other al agencies applicable to the project, and similar costs not paid directly by onstructing agency are to be classified and recorded as costs of the projects. Number of years to be used as the basis for realization of project benefits epayment of reimbursable project costs. Rate of interest and method of computation. Costs applicable to other purposes to be repaid by power revenues. The purposes to which costs are to be allocated and the criteria for allocation. e agree that some flexibility is needed in applying fixed policies and criteria e peculiar conditions that may surround particular projects. However, we ve that this flexibility can be provided through permitting deviations by the osing agency from the congressional established policies and criteria, but with explanation on these deviations and the specific reasons in the project plan other reports submitted to the Congress for authorization or initial approtion of funds for construction of the project. Ve are happy to be afforded the opportunity to present the additional sugtions in this matter to your committee. However, we believe that resolving matter of cost allocations is but one part of the problem in establishing quate financial administration of the Federal power operations. We shall be opy to discuss these matters further with you or your committee staff should 1 so desire. Sincerely yours, JOSEPH CAMPBELL, EXHIBIT 5 EDERAL POWER COMMISSION COMMENTS ON SENATE RESOLUTION 281, A RESOLU TION RELATIVE TO THE CONSERVATION AND DEVELOPMENT OF LAND AND WATER RESOURCES The principal objectives of Senate Resolution 281 are stated in section 6 which irects the Senate Committee on Interior and Insular Affairs and the Senate Committee on Public Works, jointly, "to study in consultation with other approriate committees and executive agencies, and to design and formalize a compreensive and particularized set of standards and overall criteria for the evaluation of all proposed projects for the conservation and development of land and water resources," with particular attention to the factors set out in section 4 of the resolution, viz, "all potential utilizations, costs, allocations, payout, and benefits, both direct and indirect." Pursuant to this section of the resolution the chairman of the Senate Committee on Interior and Insular Affairs requested the comments of the Federal Power Commission in this matter by letters dated August 14 and 17, 1956. The role of the Federal Power Commission with respect to water-resources development is defined and limited by congressional enactments. function, which is the Commission's oldest activity, dates back to the Federal Water Power Act of 1920, now part I of the Federal Power Act. The licensing authority, the Commission issues licenses to non-Federal interests, including Pursuant to that citizens, corporations, States, and municipalities, authorizing the construction, operation, and maintenance of water-power projects on Government lands and on streams over which the Congress has jurisdiction. It may also issue licenses to such non-Federal interests for the purpose of utilizing the surplus water or water power from a Government dam. Licenses issued under the Federal Power Act are for fixed periods not exceeding 50 years and contain terms which protect both the public interest and the licensees. Important provisions of the Federal Power Act, which safeguard overall national interests and insure initial consideration of Federal development, are (1) the requirement in section 10 (a) that each project to be licensed shall, in the |