Letter including legal opinion from Franklin T. Hamilton (Los Angeles) to Thomas A. Campbell (Las Vegas), February 24, 1954

COPY O'MELVENY & MYERS 433 South Spring Street Los Angeles 13 February 24th 1 9 5 4 In reply refer to Subject: B-2805 LAS VEGAS VALLEY WATER DISTRICT Mr. Thomas A. Campbell President, Las Vegas Valley Water District 135 South Fourth Street Las Vegas, Nevada Dear Mr. Campbell: In connection with the issuance of bonds by the Las Vegas Valley Water District, we have indicated the need for federal legislation granting to the District and to Basic Management, Inc. (referred to as BMI"), the necessary lands and rights of way for the construction, maintenance and operation of their respective water facilities. For that purpose, proposed bills granting the District and BMI such lands and rights of way have been drafted and are enclosed herewith. A recapitulation of the pertinent facta necessitating such legislation will be given. Organization of District. The Las Vegas Valley Water District is a public corporation organized under an Act of the Nevada Legislature for the purpose of producing, transmitting and distributing water in the Las Vegas Valley and for the purpose of bringing in Colorado River water from Lake Mead to supplement the underground waters of the Las Vegas Valley. The district covers an area of 307 square miles in and about the City of Las Vegas and has an estimated population of 65,000. The rapid growth and water demands of this area have caused a substantial overdraft on the underground water supplies, necessitating the importation of water from Lake Mead. Plans of District. In September, 1953, the electors of the District overwhelmingly approved the issuance of $8,700,000 of bonds. The bond issue has two principal purposes. One purpose is the acquisition of the existing wells, springs and the transmission and distribution facilities of the Las Vegas Land COPY #2 Mr. Thomaa A. Campbell 2-24-5* and Water Company now serving the City of Las Vegas. The second purpose is the construction of a water transmission line to obtain Lake Mead water. This line will extend from Las Vegas to intercept and receive water from the existing water transmission line of BMI. The existing BMI line now extends from Lake Mead to the City of Henderson. Delivery of Water by Basic Management. Inc. At the present time, the District does not have the financial capacity to construct its own transmission line the entire distance to Lake Mead. The most economic manner for the District to obtain Lake Mead water is to utilize a portion of the delivery capacity of the existing BMI water facilities. Accordingly, in 1953, BMI and the District entered an agreement whereby BMI, through said water facilities, will deliver certain water for the District. The District will construct its own transmission line from the delivery point on the BMI line to Las Vegas. The transmission of Lake Mead water to the Las Vegas Valley will thus require the use both of the existing BMI line and the new line to be con-structed by the District. Necessity for Special Legislation. There is no existing Act of Congress adequate to permit the Secretary of the Interior to grant to BMI and the District title to the lands neces-sary for rights of way and other related activities for the construction, operation and maintenance of water transmission lines. The most that existing legislation permits is the granting of a revocable license under the Act of February 15, 1901 (43 U.S.C., 959). The principal security behind the bonds of the District will be revenues derived from the sale of water. To assure the bondholders of the continuance of water revenues, it is essential to eliminate any possibility that rights of way necessary for the main transmission lines (either of the District or BMI) may be revoked or otherwise terminated before the bonds are paid off. The magnitude of the District's proposed investment and the importance of satisfying bond buyers makes the additional legislation necessary. Similar bills have been passed for the benefit of other public agencies where water transmission lines have been construc-ted on public lands. Such legislation was enacted for the City of Los Angeles by Acts of June 30, 1906 (34 Stat. 801) June 5, 1920 (41 Stat. 983), and June 23, 1936 (49 Stat. 1892). A similar grant was made to Metropolitan Water District of Southern California by Act of June 18, 1932 (47 Stat.324). COPY Mr. Thomas A. Campbell 2-24-54 Form of Bills. To a large extent, the proposed bills have followed the form and text of the Act of June 23, 1936, for the City of Los Angeles, which in turn follows the form of the Act of June 18, 1932, for Metropolitan Water District. The proposed bills cover not only water lines, reservoirs and pumping stations but also necessary electric lines for the transmission of pumping energy, telephone control lines and other appurtenances. All safeguards provided in those Acts for the protection of the interests of the United States and third parties have been incorporated in the proposed bills. The main concern of the District is to obtain adequate and permanent rights of way and interests, and no objection would be made to additional conditions reasonably necessary to protect the interests of the United States or third parties. Background Concerning BMI Water Line. As above noted, the security or the District's supply of Lake Mead water depends on the obtaining of permanent rights of way both for its own works and for the existing works of its water supplier, BMI. A word of explanation will be given concerning the construction of the BMI pipeline and the present lack of any permanent rights of way for the same. The 40-inch pipeline in question was constructed in 1942 by Defense Plant Corporation (a wholly owned subsidiary of Recon- struction Finance Corporation) to transmit water from Lake Mead to the Basic Magnesium Plant at Henderaon. In April, 1942, Defense Plant Corporation applied to the Secretary of the Interior for Neces-sary rights of way, but for some reason unknown to us this application was never perfected. At that time and until June 30, 1947, permanent rights of way for pipelines could have been granted to Defense Plant Corporation pursuant to Section 5f(a) of the Recon-struction Finance Corporation Act (56 Stat. 175). After the repeal of Section 5f(a) by Act of June 30, 1947 (61 Stat. 207), there has never been any general law which would authorize the granting of permanent rights of way. After the end of World War II, the pipeline was sold as surplus property, first to the State of Nevada and thereafter to BMI. In 1951* application for rights of way waa made by the Colorado River Commission of Nevada on behalf of the State of Nevada, and a second application was made in 1952 by BMI, the owner of this pipeline at that time. Both applications were considered by the Department of the Interior as having been made under the Act of February 15, 1901, providing for the granting only of "revocable licenses." Although we have no definite information on the matter, it is our understanding that neither the Colorado River Commission nor the BMI application has been granted by the Secretary of the Interior. COPY #4 Mr. Thomas A. Campbell 2-24-54 Recommendation. As the bonds of the District are payable primarily from revenues, adequate assurances must be given bond purchasers concerning the permanence of revenues. Permanence of revenues can be aaaured only if the Diatrict, and BMI, its water supplier, have irrevocable rights to transmit Lake Mead water over public lands. To insure a successful sale of the District's bonds, we recommend that at the earliest possi-ble time the District seek the enactment of legislation authorizing the granting of permanent rights of way in public lands. Very truly yours, O'MELVENY & MYERS By Franklin T. Hamilton Franklin T. Hamilton FTH;gb