June 3, 1953: The Senate Foreign Relations Subcommittee, by a vote of 6-0, favorably reported out the Wiley bill, S. 589, with amendments (committee print No. 2). This legislation provides for United States participation essentially as embodied in two bills before this committee; namely, the Dondero bill, House Joint Resolution 104, and the Zablocki bill, H. R. 3319. ENCLOSURE 3. ESTIMATE OF CONSTRUCTION COST TO THE UNITED STATES FOR ST. LAWRENCE PROJECT, 27-FOOT CHANNEL, DECEMBER 1952 COST LEVELS UNDER H. J. RES. 104 OR UNDER H. R. 3319 (LAKE ERIE TO MONTREAL) UNDER SEC. 4 OF H. J. RES. 2 (DULUTH TO MONTREAL) UNDER H. J. RES. 195 (DULUTH TO MONTREAL, TOGETHER WITH POWER UNDER HOUSE JOINT RESOLUTION 2, EXCLUSIVE OF SECTION 4; UNDER Indicated allocation for power development under cost allocation formula referred to in these bills. Indicated net allocation, new navigation works--- 1 Based on division of cost between Canada and the United States understood to be intended by H. J. Res. 195. (For notes concerning these estimates see enclosure 5.) Based on division of cost in accordance with 1941 Executive Agreement between Canada and the United States. Canada has indicated that it considers this agreement no longer effective. ENCLOSURE 4. ESTIMATE OF CONSTRUCTION COST TO THE UNITED STATES AND CANADA COMBINED FOR ST. LAWRENCE PROJECT, 27-FOOT CHANNEL, DECEMBER 1952 Cost LEVELS UNDER H. J. RES. 104 OR UNDER H. R. 3319 (LAKE ERIE TO MONTREAL) UNDER SEC. 4 OF H. J. RES. 2 (DULUTH TO MONTREAL) UNDER H. J. RES. 195 (DULUTH TO MONTREAL, TOGETHER WITH POWER WORKS IN THE INTERNATIONAL RAPIDS SECTION) $99, 584, 000 $2,000,000 1,766, 000 86, 308, 000 172, 950,000 174, 950,000 UNDER H. J. RES. 2, EXCLUSIVE OF SEC. 4; UNDER H. J. RES. 3; OR UNDER H. J. RES. 98 (DULUTH TO MONTREAL, WITH POWER WORKS IN INTERNATIONAL RAPIDS SECTION) 1 Division of cost understood to be intended by H. J. Res. 195. 2 Division of cost in accordance with 1941 executive agreement between Canada and the United States. Canada has indicated it considers that agreement no longer effective. (For notes concerning these estimates see enclosure 5.) ENCLOSURE 5. NOTES 1. Canadian elements: Costs shown for providing a 27-foot project through the Welland Canal and the Canadian section, St. Lawrence River, are as furnished by the Department of Transport, Canada. 2. Other estimates: In February 1952 the Chief of Engineers filed estimates for all other components of the overall seaway project, Duluth to Montreal, based upon December 1950 cost levels. Those estimates included a detailed unit-price estimate for the entire development in the International Rapids section. Because of the time element involved, a detailed unit repricing estimate is not presented at this time. Estimates presented herein are adjusted to December 1952 levels, by application of the 10.84 percent increase in the Engineer37338-53- -7 ing News-Record Construction Cost Index between December 1950 and December 1952. Application of that index indicates generally, over a short-term period, the order of magnitude of change in cost of such work as is herein involved. See following notes for further commentary regarding the estimates for individual project components. 3. International Rapids section, seaway-only or dual-purpose construction: Estimates are predicated upon an unsually high degree of preproject authorization planning, accomplished in 1940-42. That planning included detailed topographic surveys, extensive subsurface explorations, advanced engineering designs, and preparation of plans and specifications for all early-period construction features. Derivation of the presently shown estimates by application of the 10.84 percent factor increase to the previously reported estimates on the December 1950 base, is considered to reflect fairly the general order of magnitude of the overall cost as of December 1952. However, the presently shown estimates are not precise in detail, primarily because the ENRCC Index is not particularly applicable to equipment items such as lock gates, spillway gates, operating machinery, or electrical generating powerhouse equipment. The costs of such items actually have advanced at a generally greater rate during the last 2 years than the ENRCC Index. With respect to power-development construction, the estimates presented covering the features therefor located in Canada are predicated essentially upon United States wage rates and materials prices. Construction costs in Canada are generally lower than those in the United States. These estimates are based upon a degree of planning far exceeding that accomplished in connection with the customary survey report. 4. Thousand Islands section: Meager hydrographic information is available concerning the exact extent of the rock shoals, lowering of which in involved here. No new soundings, probings, or borings have been taken. The cost estimate is therefore of a preliminary nature. Relative scope of work involved herein, however, is small. 5. Great Lakes connecting channels: These 27-foot project estimates are based on a degree of planning and hydrographic information that conpares favorably with that which would ordinarily be accomplished for the preparation of a survey report, except for those areas where no previous dredging has been done. For those areas which are over and beyond the areas heretofore deepened no new soundings or borings have been taken. Subject to this limitation, the estimate presented represents the order of magnitude of the cost of the work. Connecting channels estimates herewith are exclusive of costs involved to complete navigation facilities now authorized for interlake traffic alone, including St. Clair River compensating works; widening Southeast Bend, St. Clair River; improvement of the westerly half of Amherstburg Channel, Detroit River; and replacement of the Poe Lock at the Soo. ENCLOSURE 6. ECONOMICS OF NAVIGATION PHASE OF ST. LAWRENCE PROJECT, 27FOOT CHANNEL, DECEMBER 1952 COST LEVELS (Interest rate taken at 3 percent except for work in upper lake channels, for which an interest rate of 21⁄2 percent was used) UNDER H. J. RES. 104 OR UNDER H. R. 3319 (LAKE ERIE TO MONTREAL) ENCLOSURE 6. ECONOMICS OF NAVIGATION PHASE OF ST. LAWRENCE PROJECT, FOOT CHANNEL, DECEMBER 1952 COST LEVELS-Continued UNDER SEC. 4 OF H. J. RES. 2 (DULUTH TO MONTREAL) 27 UNDER H. J. RES. 195 (ST. LAWRENCE RIVER PORTION ONLY) $928, 943, 000 446, 152, 000 482, 791, 000 41, 957, 000 524, 748,000 20, 027, 000 4,498, 000 24, 525,000 60, 000, 000 36,500,000 2.45 1.49 UNDER H. J. RES. 2, EXCLUSIVE OF SEC. 4; UNDER H. J. RES. 3; OR UNDER H. J. RES. 98 For Lake Erie to Montreal portion only, annual carrying charges would total $14,612,000, the same as under H. J. Res. 104 or H. R. 3319. Thus, with $60 million savings for this portion of the project, the toll revenue-cost ratio would be 2.50. ENCLOSURE 6. ECONOMICS OF NAVIGATION PHASE OF ST. LAWRENCE PROJECT, 27FOOT CHANNEL, DECEMBER 1952 COST LEVELS-Continued UNDER H. J. RES. 2, EXCLUSIVE OF SEC. 4; UNDER H. J. RES. 3; OR UNDER H. J. RES. 98 (ST. LAWRENCE RIVER PORTION ONLY) ENCLOSURE 7. ECONOMICS OF POWER PHASE OF ST. LAWRENCE PROJECT Statements by the Federal Power Commission during the 1951 hearings before the House Public Works Committee (p. 277), and again in connection with the 1952 hearings before the Senate Foreign Relations Committee (p. 34), showed that on the basis of a then-estimated cost allocation of $192,493,000 (on December 1950 price level) for the United States share of the power development power from the project could be delivered to points as far as 300 miles distant at less than one-half the cost of electric energy generated by steam power plants within such consuming areas. It was pointed out that under that assumed cost allocation the delivered cost of St. Lawrence power to the load centers would average less than the fuel costs alone for modern steam-electric plants in the consuming areas. Recognition of the very favorable economics of the power phase of the St. Lawrence development also was indicated by the chairman of the Power Authority of the State of New York, who testified during the 1951 House hearings (p. 334) that had a Federal Power Commission license been forthcoming, the power authority, together with the Hydroelectric Power Commission of Ontario, previously had been prepared to construct a power-only project, at an estimated cost of about $450 million to New York and Ontario, which project would lend itself to the later addition of seaway facilities. He stated that New York had been willing to pay $40 million to $45 million more under the power-priority plan than was estimated as its share under a joint development, because the cheap power from the St. Lawrence would mean a saving of $20 million per year to the State and it would only take a little over 2 years to pay back the excess cost. More recently in connection with the application by the Power Authority of the State of New York for a license to construct a hydroelectric project in the International Rapids section, the Bureau of Power of the Federal Power Commission issued an engineering report, revised in November 1952, which analyzed the economic aspects of such a project. That report indicated that a project involving a first-cost allocation of $239,310,000 to the power authority would provide for the delivery of power at load centers at a saving of the order of $16 million per year compared to the cost of supplying the power from fuelelectric plants operating under the most favorable conditions. Accordingly, it is apparent that for a dual-purpose project involving an allocation of first cost to the United States share of the power development of $223,076,000, as indicated in the preceding tables for a development under House Joint Resolution 195, the power phase of the development is economically justified by a wide margin. The economic justification for the power phase would be even greater with an allocation of only $213,734,000 for the United States share of that phase of the development, as would result under House Joint Resolution 2, exclusive of section 4; under House Joint Resolution 3; or under House Joint Resolution 98. The finding that the power phase is justified by a wide margin is concurred in by the analysis of the Bureau of Power, Federal Power Commission. That finding appears to be concurred in also by the Hydro |