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The CHAIRMAN. Let me ask whether the Laguna Dam, now, has been regulating the Imperial Valley district in its use of water? Mr. SHAw. No; it has not. The CHAIRMAN. It, of course, has regulated the Yuma project, necessarily. Now, do I understand that the Imperial Valley irrigation district has just taken its chances and has taken the water from the river without a dam, the same as though there had been no Laguna Dam! Mr. SHAw. They have been taking it in that way for 15 years. The CHAIRMAN. And it has been in the power and the right all the time of a Government dam, namely, the Laguna Dam, to shut off water or to conserve water. Of course, they have wisely administered this power and with due regard to the interests of the Imperial Valley irrigation district, but have the interests of the Imperial Valley irrigation district required any consideration on the part of the Laguna Dam interests, that part of the Yuma project. In other words, have you asked any consideration of them in the control of the water at the Laguna Dam as to your being afforded an opportunity to secure enough water, for instance, in times of stress, or when it is really dry? Have you asked any consideration of the Government about taking water from the Yuma Dam, as, for instance, when they have more than a sufficient supply? Mr. SHAw. We have not. Mr. WELLING. Is not your only connection with the Yuma project the fear they have that you will back up the water and injure their canal system? Mr. SHAw. That is all; yes, sir. Mr. WELLLING. You are just catching the overflow of the Yuma Dam? Mr. SHAw. Yes, sir. Mr. WELLING. That is simply a diversion dam? Mr. SHAw. Yes, sir. The CHAIRMAN. It is not a storage dam? Mr. SHAw. No, sir. The Laguna Dam does not provide for storage, it only provides a means of diversion. No question has arisen between the Imperial Valley irrigation district and the Yuma project over water for the reason that there has been plenty of both. The CHAIRMAN. I want you to state that again. Mr. SHAw. There has been no controversy between the Yuma project and the Imperial Valley irrigation district, in regard to water, because there has been available sufficient water for both, except there have been times in the year when we could not get it, but that was because of physical conditions heretofore mentioned. Mr. HAYDEN. When you do construct a dam to divert water into the Imperial Canal you imperil the Yuma project? Mr. SHAw. They have allowed us to build a temporary weir or diversion dam, but have said to us that they could not do so much longer. In fact, they have made it stronger than that, they have a temporary injunction pending in court, I believe, forbidding us to do it. It has only been through persuasion and good fellowship that we got permission this year. Permit has been granted with the understanding that we will get away from present point of diversion immediately. Otherwise, they threaten to cut us off.

The CHAIRMAN. Then, you must provide another plan for diversion? Mr. Shaw. Yes, sir.

Mr. HAYDEN. The only other means of diverting water from the Colorado River would be to connect with the Laguna Dam?

Mr. Shaw. Yes, sir. Mr. HAYDEN. And a contract has been entered into between the Imperial Valley irrigation district and the United States Reclamation Service, which controls the Yuma project, which provides for a connection with Laguna Dam.

Mr. SMITH. And money appropriated for that? Mr. HAYDEN. This is the situation: The engineers of the United States Army and of the Reclamation Service all agree that if the weir constructed at the present Imperial Canal heading is maintained it might cause a flood in the Colorado River to utterly destroy the Yuma project and would be certain to do so if the structure were made permanent. That_weir has been built and then partially removed year after year. Each year the Imperial irrigation district has asked the Federal authorities to permit them to replace the weir just one more time so that they may save their crops. Finally, last year an agreement was perfected between the Secretary of the Interior and the Imperial irrigation district whereby the district agreed to build a canal from their present heading near the Mexican border up to the Laguna Dam so as to divert the water for the Imperial Valley there. In that way they will remove the present menace to the Yuma project and will also pay for an interest in the Laguna Dam.

Now, when the time came to build this connecting canal the people of the Imperial Valley say that their credit has been ruined by a report made to the Federal Farm Loan Board; that by reason of this adverse report they can not sell their bonds to raise the six or seven million dollars required to make this physical connection. Therefore, they want their bonds guaranteed by the Federal Government, not only for that sum of money, which is about $7,000,000, but, I believe, for $23,000,000 more with which to continue on and build an all-American canal. Now, this proposal is of interest to the United States because the Government has advanced the money to construct the Yuma project, and of interest to the settlers on the Yuma project because the present diversion dam at the Imperial heading which is such a great menace will be removed if connection is made with the Laguna Dam. The further expenditure of money for the construction of the all-American canal is solely of interest to the people in the Imperial Valley in order that they may get away from the Mexican interference with their water.

The CHAIRMAN. Suppose the Imperial irrigation district water users or ranchers had been accorded loans by the Federal farm land bank, and they had gone on pursuant to this agreement made with the Secretary of the Interior which you have referred to, then, it is not contemplated that they would come here for aid, but they would have gone on and extended the canal up to the Laguna Dam, and conveyed the water then through the Alamo Canal around through Mexico, instead of building the all-American canal, but now that they have been discredited financially, and they can not sell their

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bonds if they issue them, they find it expedient to ask for this legislation.

Mr. HAYDEN. Yes; but instead of asking for enough to relieve the immediate necessities, so far as menace to the Yuma project concerned, which calls for an expenditure of about $7,000,000 to make the physical connection between their present system and the Laguna Dam, the people of the Imperial Valley now ask for some $23,000,000 more, or for that much more credit, in order that they may build the all-American canal.

As I understand it, there was an offering of bonds by the Imperial irrigation district that were sold below par?

Mr. KETTNER. I believe they sold as low as 70.
Mr. Shaw. At 83.
Mr. HAYDEN. How much was sold at that price?

Mr. SHAW. $2,500,000 worth were sold at 83, and within two weeks from the time they were sold they were being resold by bond brokers for 97.

The CHAIRMAN. What are they worth now?
Mr. Shaw. I am not sure, but I think they are at par.
Mr. HAYDEN. You have paid the interest on all your bonds?
Mr. Shaw. Yes, sir.

Mr. HAYDEN. As a matter of fact, you have not tried to sell six or seven million dollars worth of bonds to carry out your existing agreement with the Secretary of the Interior, but you have simply said that inasmuch as the Federal Farm Loan Board has made an adverse report, and that inasmuch as the last time you sold bonds they sold at 83, you are afraid to go on the market and offer bonds for sale with which to raise money to do what you have contracted to do, but you are coming to Congress to get the money?

Mr. Shaw. That is the general feeling. However, the fact that they did sell at 83 does not have all to do with the question. There are other reasons that we will bring out in the course of the hearing.

Mr. HAYDEN. Nobody is more competent to do that than yourself.

Mr. Shaw. Mr. Rose can answer that.

Mr. KETTNER. Is it not a fact that some bankers have spoken to the bankers in Los Angeles, and did not the bankers tell then that they did not think they would be able to take them because the farm land banks had made this report?

Mr. SHAW. Yes, sir.

Mr. LITTLE. Do I understand that if it were not for the claim of the Yuma project up the river these people could go on and get water in the way they were doing?

Mr. HAYDEN. I do not think that it would be good engineering to do it that way.

Mr. LITTLE. It would be practicable, would it not?

Mr. HAYDEN. To divert water at the present Imperial heading will always be a menace to the Yuma project. There is always danger of cutting into the alluvial banks of a stream that has tremendous floods of water in it. When such floods occur the water will go around any permanent works in the bed of the streams. Therefore if a rock abutment is available to tie the diversion works to at both ends such a site should be used.

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Mr. LITTLE. Do I understand that they could get a supply of water, or that they could supply themselves with ample water if it were not for the Yuma project? Mr. HAYDEN. If the 1. irrigation district had a reinforced concrete dam right where their present heading now is, and should attempt to hold the water there with nothing but alluvial soil for abutments, the first flood that came down would be sure to wash around one end of the dam. The engineers all agree that if such a permanent dam were built the pressure against the east bank of the stream would break the Yuma project levee and then the whole Colorado River might be turned through the Yuma project. Mr. LITTLE. The reason then is that it menaces the Yuma project? Mr. HAYDEN. Yes. Mr. LITTLE. It would appear that they have been discriminated against physically, and discriminated against financially. Have they done anything else to them? Mr. KETTNER. There is another feature that has been overlooked, and that is that the Imperial Valley people are required to put up a bond of $500,000 every year for the protection of the people on the Yuma irrigation project. Mr. HAYDEN. That bond is put up for two purposes: One purpose is to pay any loss or damage the Yuma people might suffer if the water were to break through, and the second purpose is to be sure that the dam which is put in low water will be removed whenever a flood comes along. The only way to remove such a dam is to put dynamite charges in it. As a matter of fact, they have laid a curtain of rock over the bottom of the stream, holding it above its normal bed, and that rock can not be successfully blown out. The longer this continues the greater the menace will be, and that is the reason for this insistence on the part of both the United States Reclamation Service and the people of the Yuma project that this menace be removed. Now, a way to do that was agreed upon, but the people of the Imperial Valley now say, “We have agreed to build a canal to connect with the Laguna Dam, but we can not get the money with which to pay for the work.” Mr. KETTNER. The point that Mr. Little makes is correct, that were it not for the Yuma project these people could continue irrigating. Mr. HAYDEN. Yes, but the Yuma project is in existence. There are thousands of farmers there and millions of dollars have been invested. The Government itself is interested. Mr. LITTLE. The Government arranges with these people a method by which they can get away from their difficulties, and then one branch of the Government turns around and says, “We do not think that you are any good anyway.” If the Federal farm loan bank had said nothing about it until they had sold their bonds. then they would have gone ahead and built their connection with the Laguna Dam. It seems that nobody around there could be kept quiet long enough to do anything. Mr. HAYDEN. I have never seen the report made to the Federal Land Bank. I would be glad to see the original text of that report. The Federal Farm Loan Board is in this position. They are charged by Congress with the proper administration of public funds, and

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If they” i Loan Boat would it and they

they should not make a loan unless they know that the money will be repaid when due. Theirs is a business responsibility.

Mr. LITTLE. If this agreement had been carried through, and they had sold their bonds it would have been all right, would it not?

Mr. HAYDEN. The Federal Farm Loan Board does not make loans on a contingency. If they issue farm loan bonds ample security must be behind the bonds. Instead of promoting an enterprise, they are waiting until they are certain that loans can be safely made.

Mr. LITTLE. But they do not wait. They came in and made it difficult for these men to handle their loans.

Mr. SHAW. There is one point that I want to make clear in order that there may be no misunderstanding about it. We are not here asking for a congressional appropriation of one dollar for our project, but we are simply asking Congress to say, “We have confidence in these people and in this project.” We are going to carry our own indebtedness.

Mr. WELLING. You ask the Government to indorse your credit ? Mr. Shaw. We are floating bonds and asking the Government to indorse them. In addition to the bonds we are offering to put up a fund of approximately $4,000,000 in cash to guarantee the Government against any loss in the transaction.

The CHAIRMAN. Why do you refer to some of the irrigation districts in the bill? Is it contemplated that only a part of the districts shall issue bonds?

Mr. Shaw. At the present time there are only two irrigation districts in the territory covered—the Imperial irrigation district, covering what is known as the Imperial Valley, and the Coachella County water district, covering the Coachella Valley.

Mr. LITTLE. What is the difference in the ages of the two rival projects, Yuma and Imperial Valley ?

Mr. Rose. Yuma Project had land irrigated 20 years before we had any irrigation at all in the Imperial Valley.

Mr. LITTLE. They started first?

Mr. HAYDEN. There is no Government project in the Imperial Valley.

Mr. Rose. We started before the Yuma project was adopted by the Government, but Yuma irrigated some lands, I suppose, for 20 years before we actually started in.

Mr. HAYDEN. If the report to the Federal Land Bank of Berkeley is such a report that it injures the credit of the Imperial Valley to an extent that you can not sell your irrigation district bonds, and if it is also such a report that a Member of Congress after considering it would hestitate about furnishing the credit of the United States to you for the same purposes, what should be done? If you were a private banker and you had this adverse report of the Federal land bank before you, would you not say: “ Your credit is not good”? If you, as a private banker, would not make the loan, why should I, as a Member of Congress, responsible for public funds, vote to advance the money? The reason I ask that question is this: It seems to me that it is incumbent upon you to demonstrate that the report made by the Federal land bank was not justified by the facts. You should do that for this committee before we get through, because we ought

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