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In support of a determination that the Canadian Entitlement Agreements will contribute to "economical operation” the following factors are of particular significance:

1. The United States share of the prime power benefits to be realized from ratification of the Treaty at Grand Coulee and all other Columbia River projects for which the Administrator has marketing responsibility.

2. The power that will be generated in the United States as a result of the Libby Project 544,000 kilowatts).

3. A comparison of the cost of alternative sources of power to meet the power requirements on the Columbia River Federal Power System. I am advised that on the next added” basis which underlies the Treaty, the United States share of Treaty power is substantially lower in cost than power from alternative sources.

4. The economics associated with the flexibility of operation afforded by incorporation of the Canadian entitlement into the federal system.

5. The net power gains to be realized over the term of the exchange by retention in the federal system of the benefits from the Canadian storage minus the average energy and capacity to be delivered in exchange.

6. The surplus secondary energy on the federal system which can be converted to firm energy.

7. In addition to the foregoing, there are, of course, the substantial flood control benefits that can be realized only if the Treaty becomes effective.

It is not intended that the foregoing factors should limit the matters to be taken into account in determining that the execution of the Canadian Entitlement Exchange Agreements will contribute to economical operation, but the obvious conclusion to be drawn is that such factors support that determination as a matter of law. d. Authority of the United States Entity.

In the execution of the Canadian Entitlement Exchange Agreements, the Administrator will be acting for and on behalf of the United States Entity. It has previously been noted that the Administrator and the Division Engineer, North Pacific Division, Corp of Engineers, Department of the Army, are to be designated as the United States July 20, 1964 Entity. I am advised that the Entity will authorize the Administrator to act for it in the execution and performance of these exchange agreements relating particularly to the marketing aspects of the implementation of the Treaty.

in the interest of economical operation. We assume that such a determination has been or will be made. The General Accounting Office does not have sufficient information to be able to express an opinion whether the agreement would or would not promote econom. ical operation of BPA's functions. It seems to us that any such opinion must be based on assumptions concerning future operations of the NPR and future costs of new power producing projects." Dec. Comp. Gen. B-149016, B-149083, July 16, 1962, p. 2.

Article VIII of the Treaty provides in effect that disposals of the Canadian entitlement within the United States shall be in accordance with general conditions agreed upon between the two governments.

The Treaty further vests the United States Entity with authority to approve the use of the improvement in stream flow in the United States for hydroelectric power purposes upon “such conditions, consistent with the Treaty, as the entity or authority considers appropriate” (Article XI), to carry out the disposition of the Canadian power entitlement in the United States (Article XIV(2) (i)), and "to formulate and carry out the operating arrangements necessary to implement the Treaty” (Article XIV(1)).

The January 22, 1964, exchange of notes states that "it would be in the public interest of both countries if Canada's entitlement to downstream power benefits could be disposed of, as contemplated by Article VIII of the Treaty, in accordance with general conditions and limits similar to those set out in detail in the attachment hereto, * * *." The parameters within which the United States Entity is directed to arrange for the initial disposition of the Canadian entitlement were, therefore, set forth in the "Attachment” to the exchange of notes. In the execution of the Canadian Entitlement Exchange Agreements, the United States Entity is therefore acting under and by reason of the authority of Article VIII of the Treaty. e. Hanford Exchange Agreements.

In 1963 the Bonneville Power Administrator entered into a number of contracts providing for the exchange of the output of the generating facilities to be constructed by nonfederal interests 22 in conjunction with the Hanford New Production Reactor for capacity and energy from the federal system. The Hanford agreements provide that the total output of the generation at the Hanford plant will be exchanged with the Administrator for amounts of capacity and energy from the federal system computed by applying the Bonneville rate schedules to the financing expenses paid by each participating utility. A close analogy can be drawn between those agreements and the Canadian Entitlement Exchange Agreements.

* Authorized by Sec. 112(b), P.L. 87-701.

76 Stat. 599, 604 (1962).

The financing of the generating facilities at Hanford was to be done through the issuance of revenue bonds, secured by contracts of sale of portions of the output of the project to 76 utilities in the Pacific Northwest. Because the operation of the generating facilities was dependent upon the operation of the Government's atomic reactor to furnish steam for the generators, the purchasers of the output were insistent upon obtaining, in exchange for their share of the output, a dependable source of supply. The uncertain nature of the availability of power from the generating facilities prompted the necessity for the Hanford exchange agreements. Such agreements enabled the financing of the project. So it is with the Canadian Entitlement Exchange Agreements. The participating utilities are unwilling to finance the purchase of a block of power, when the availability or size of the block is beyond their control. In both instances, the flexibility and magnitude of the Columbia River Federal Power System, with its existing reservoirs for the storage and release of water, puts it in position to make the maximum use of such power, thereby enabling a mutually beneficial exchange.

The authority of the Administrator on behalf of the United States to execute the Hanford exchange agreements was reviewed by the Comptroller General at the request of the Joint Committee on Atomic Energy. The Comptroller General held that:

The proposed agreement is clearly a contract for the exchange of power and comes, therefore, within the general authority granted under the two provisions of law [Section 5(b) of the Bonneville Project Act and Section 14 of the Reclamation Project Act of 1939] quoted above. (Dec. Comp. Gen, B-149016. B-149083 (July 16, 1962))

The distinction between the intent and purpose of the Hanford agreements and the Canadian Entitlement Exchange Agreements is found only in the impact which the Canadian Entitlement Exchange Agreements have upon the implementation of the Treaty. However, in carrying out the common purposes of both agreements, some distinctions are noted.

The amount of power to be made available by the Administrator to the Hanford participants is to be determined from year to year as measured by the expenses of construction and operation of the project. The Canadian Entitlement Exchange Agreements specify the amount of power to be made available each year by the Administrator. The latter method would more nearly follow the "normal" concept of an exchange.

Provision is made in the Canadian Entitlement Exchange Agreements for the payment of liquidated damages to CSPE in the event the

August 27, 1964

Administrator shall default in the delivery of all or a portion of the exchange power. While no such provision is contained in the Hanford agreements, they do expressly require the United States, in the event the NPR is discontinued prior to commencement of commercial power generation, to meet certain costs and obligations incurred by the nonfederal interests. And, of course, the obligation of the United States to respond in damages in the event of default is otherwise existent in both cases. However, in the Canadian exchange agreements the Administrator has limited the Government's liability to CSPE to a portion of the debt service to be paid by CSPE equal to the extent of the default. Such provision in the agreements, in the light of all the

. circumstances, is a "suitable exchange term,” as contemplated in Section 5(b), constitutes a "compromise or final settlement of any claim arising thereunder," as contemplated in Section 2(f) of the Bonneville Project Act,28 and is one of the provisions "as in his judgment are necessary,” as provided in Section 14 of the Reclamation Project Act of 1939.

The other distinguishing characteristics of the two sets of agreements do not appear to be material to this opinion.

In response to your request, therefore, I am pleased to advise you that, in my opinion, each of the Canadian Entitlement Exchange Agreements, if executed by the Administrator in the form referred to above, and when delivered pursuant to the escrow arrangement, will be a valid and binding agreement of the United States enforceable in accordance with its terms. I assume, of course, that such Agreements will be duly authorized, executed and delivered by the other parties thereto.

23

FRANK J. BARRY,

Solicitor.

UNITED STATES v. KENNETH MCCLARTY

A-29821

Decided August 27, 1964

Mining Claims: Common Varieties of Minerals

A deposit of building stone fractured to a large extent into regular rectangular

shapes and sizes which are suitable for use in construction without further cutting or splitting and which exist in a greater proportion in the deposit than in other deposits of the same stone in the vicinity is not an uncommon variety of building stone which is locatable under the mining laws because

Dec. Comp. Gen. B-149016, B–149083 (July 16, 1962).

it has a special and distinct value where it appears that the regularly shaped stone is usually, by customer preference, mixed with irregularly shaped stone from the claim in construction usage and that the regularly shaped stone is not shown to have any uses over and above those of deposits of ordinary building stone in the locality.

APPEAL FROM THE BUREAU OF LAND MANAGEMENT

The Forest Service, Department of Agriculture, has appealed to the Secretary of the Interior from a decision dated September 24, 1962, by the Director of the Bureau of Land Management vacating a decision of a hearing examiner holding null and void Kenneth McClarty's Snoqueen placer mining claim within the Snoqualmie National Forest, Washington, on the ground that the claim, located after July 23, 1955, is for a common variety of stone which is not locatable under the mining laws within the meaning of section 3 of the act of July 23, 1955, 69 Stat. 368 (1955), 30 U.S.C. $ 611 (Supp. IV, 1963).

Section 3 of the act of July 23, 1955, amended the mining law by the provision that: A deposit of common varieties of sand, stone, gravel, pumice, pumicite, or cinders shall not be deemed a valuable mineral deposit within the meaning of the mining laws of the United States so as to give effective validity to any mining claim hereafter located under such mining laws. * * * "Common varieties" as used in this Act does not include deposits of such materials which are valuable because the deposit has some property giving it distinct and special value *

Section 1 of the Materials Act of July 31, 1947, as amended, 69 Stat. 367 (1955), 30 U.S.C. $ 601 (1958), authorizes the Secretary of Agriculture to dispose of mineral materials, including but not limited to common varieties of sand, stone, gravel, clay, etc., on public lands of the United States administered by him for national forest purposes under such rules and regulations as he may prescribe upon payment of adequate compensation therefor.

On June 23, 1960, a forest supervisor, acting as the delegate of the Secretary of Agriculture, issued a special use permit to John W. Pope entitling him to remove 50 tons of selected rock for building stone, common variety, for 50 cents per ton from a 2-acre site to be chosen by the permittee and the district ranger between White Pass Lake and Dog Lake within sec. 36, T. 14 N., R. 11 E., or sec. 1, T. 13 N., R. 11 E., Willamette Meridian, which site might include a portion of the pit site under permit to the State Department of Highways for the removal of highway surfacing materials, known as pit site E-137. On August 1, 1960, the ranger and Pope chose a 2-acre site within sec. 36, which was found later to be included in the placer mining claim which McClarty located on the same day.

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