Page 2

2 II. THE INTERIOR PROPOSAL The Pacific Southwest Water Plan includes these basic elements: (1) 8 projects for immediate authorization, including enlargement of the California State Aqueduct, and related programs in Arizona, California, Nevada, New Mexico, and Utah at a cost of $1.7 billion. (2) 4 projects for later authorization in California at a cost of $1.4 billion, making the total cost of the Plan $3.1 billion. (3) establishment of certain guarantees described below, which would be new in Federal water policy. (4) establishment of a Development Fund, consisting of revenues from sales of power and water as well as appropriations, to finance construction and the guarantees included in the Plan. Net power revenues from Hoover Dam would be credited to the Fund after repayment of its original cost in 1987. Attached are (a) an outline of the Department of the Interior's proposed bill, and (b) maps illustrating the various projects involved in the Plan. III. MAJOR POLICY ISSUES NEEDING RESOLUTION A. Federal Financial Guarantees to Lower Colorado States: Three guarantees are involved in the Pacific Southwest Water Plan. California recommended them, and the Plan is unacceptable to California without all three. (1) Water Availability Guarantee. Guarantee, through construction and operation of necessary works with Federal financing, the equivalent of 7.5 million acre-feet annually in the Colorado River below Lee Ferry. This feature eliminates the necessity of the Secretary having to apportion any deficit in flow. The Department notes that this guarantee, though benefiting directly the Pacific Southwest, also makes it easier to meet Mexican Treaty obligations requiring delivery of 1.5 million acre-feet annually to Mexico. (2) Water Cost Guarantee. Guarantee that cost of water to users in Arizona, California, and Nevada would be no greater than if 7.5 million acre-feet were available in the future. Under this provision, the Plan would in effect subsidize the difference between the cost of water based on natural flow in the Lower Colorado River and the cost of water if importation is found to be necessary. (3) Water Export Guarantee. Guarantee that any additional costs of future Federal or non-Federal projects on north coastal California streams caused by the pre-emption under the Initial Plan of lower-Epson Perfection 4870 Photo, 400 dpi, 8 bit, 14,448,640 byte