10 Low cost electric power which is vital to the continued economic growth of Southeast Asiao

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1 SOME CONSIDE~~TIONS LOOKING TOWARD IMPLEMENTATION OF PA MONG PROJECT Presented at SEADAG MEKONG DEVELOPMENr SEMINAR February 7-8, 1969 By GoGo Stamm, Assistant Commissioner Bureau of Reclamation The Committee for Coordination of Investigations of the Lower Mekong Basin and all the people in this room recognize that the Mekong River is one of the greatest single natural resources in Southeast Asiao Thus, it should be considered in the perspective of overall basin, regional, and national development of the affected countries if the resource is to be developed for maximum benefit. This broad perspective should be applied not only to the integrated planning of Mekong water resource projects, but also to the planning of all segments of basin development such as transportation systems, industrial installations, and educational programs. The potential Pa M1ng Project is multipurpose in concept and would provide major benefits to the resident countries of the ~~kong River such as: 10 Low cost electric power which is vital to the continued economic growth of Southeast Asiao 20 An assured water supply for irrigation, municipal a~d industrial, a~d domestic uses ~lich are needed in Laos and Thailand to ensure adequate food supplies for expanding populations and to promote overall economic and social development. 3. Pa Mong Dam and Reservoir ~)uld contribute su~stantially to flood control and thereby alleviate dowastream flood damages, particularly in the Vientiane-Nong Khai area. Also it would control sediment and reduce land erosion. 4. Regulated releases of project water during the dry season would stabilize the lower Mekong River for navigation.

2 5. The substantial storage capabilities of Pa Mong Reservoir would permit the regulation of flows for downstream run-of-the-river hydroelectric plants. 6. The fishery, an important source of diet protein, would likely be enhanced by construction of the reservoir. 7. Potential recreation and fish and wildlife development, although not now of major interest, represents an important potential resource. 8. Pa Mong Prdject in combination with another large reservoir at Stung Treng would provide important multipurpose river regulation over the entire length of the lower Mekong River. 9. The construction of project works would provide a ready market for labor and locally supplied materials. 10. The project would provide impetus to the establishment and growth of new industries. Construction of the Pa Mong Project appears to be a highly desirable early unit in the orderly development of the Mekong River as part of a long-range development scheme for basin-wide benefits. A tremendous investment is necessary to bring the Pa Mong Project to reality. The bulk sale of project power alone can provide the necessary revenue to repay such an investment. Surplus revenues from the sale of power and possibly water would be available for distribution to the countries sponsoring the Project. Negotiation of the treaties, compacts, and agreements prerequisite to development of the Pa Mong Project will undoubtedly become the means for hammering out the specific criteria and framework for equitable allocation and distribution of project costs and benefits. Because of physical barriers, monetary or other means of compensation may be needed as a substitute for direct benefits to provide equitability to treaty participants. Although some project functions are not directly revenue producing, they are nevertheless important considerations of benefits received by the four riparian countries for participation in the necessary treaties and agreements. 2

3 The Pa Mong Damsite and Reservoir would sit astride the international boundary and would be about equally divided between Laos and Thailand. Additionally, the Mekong River passes through Cambodia and South Vietnam on its journey to the South China Seau Hence, any modification of streamflows by the Project will affect riparian rights in those countries as well as Laos and Thailand. Although most of the effects of the Project on the four riparian states will be beneficial, it is likely that treaties and agreements will be needed to avoid misunderstandings involving the respective rights of the riparian states. Assuming Pa Mong would be but one of the developments in the Mekong River Basin, it would be necessary to fit operation of Pa Mong into a basin system. This also would likely entail international agreements and operating criteria to maximize benefits. A viable Pa Mong Project rests upon the cardinal principle that an equitable distribution of project costs and benefits can and must be formulated. The formula should recognize and protect the rights of the host countries of the project as well as those of the two subjacent countries. It is generally agreed, as in most water projects, that the portion of the Mekong flows impounded and put to use by the Pa Mong Project are those in time and space unusable by existing and expected future downstream rights. The annual flood flows of the Mekong River above Pa Mong can be trapped, preventing flood destruction, and put to beneficial use without serious conflict with downstream uses. Whatever conflict may arise can be adjusted equitably by treaty arrangements. It can be expected that the necessary treaties will spell out the distribution of project power, wa~er, and revenues and will contain provisions for the protection of downstream rights. Conceivably such treaties and agreements might also contain methodology for project financing, interest rates, debt service, and operation and maintenance. Laos and Thailand, being the resident countries for Pa Mong, will be confronted with several special considerations relative to construction and operation of the Project, such as: 1. Deferral of import taxes and duties and local taxes on materials and equipment entering Laos and Thailand 2. Distribution of local labor, transportation facilities, and construction materials to be supplied by each country 3

4 3. Location of construction camps 4. Agreements on use and ownership of river navigation bypasses and dockage at Khone Falls and Pa Mong Dam 5. Construction and ownership of recreation facilities 6. Distribution of operation and maintenance personnel to be supplied by each country 7. Assignment of fishing rights on the completed Pa Mong Reservoir 8. Agreements to take care of peoples relocated by construction of the dam and reservoir 9. Awareness of the changes in basin ecology caused by the Pa Mong Project 10. Honoring existing water rights Recent negotiations between Laos and Thailand for a potential bridge crossing of the Mekong River at Nong Khai, Thailand, and for exchange of electric power from the Nam Pong and Nam Ngum Powerplants are examples of cooperative agreements between the two countries. The matter of mainstream bridge crossings and the power interconnection are referred to in Dr. Boonrod Binson's paper "Systems of Administration of International Water Resources." In the western United States the full development of the water resources of several rivers involve treaties with other nations. In 1964, a treaty between Canada and the United States paved the way for construction of four new dams and reservoirs on the upper reaches of the Columbia River. Three of the dams in Canada and one in the United States will control the floods on the Columbia and will increase the hydropower output tremendously. This treaty spelled out the plan of development by each country and established the equitable distribution of benefits from flood control, power, improved streamflow for downstream power and other uses, water diversions for irrigation and municipal and industrial uses, and fish and wildlife and recreation enhancement. Also included were each nation's liabilities, cooperative operation and maintenance arrangements, rights to and payment for water and power, and provisions for the settlement of differences. 4

5 The Colorado River is of international importance between Mexico and the United States. The United States by obligation of a 1944 treaty is required to deliver 1.5 million acre-feet of water to Mexico annually. A series of dams throughout the length of the Colorado River and its tributaries permit full use of the water resource and still meet the Mexican Treaty commitment. Another river, the Rio Grande, is also a subject of the 1944 treaty between the United States and Mexico. The treaty established the general basis upon which the United States and Mexico have planned, developed, constructed and operated dams, reservoirs, and hydroelectric facilities on the Rio Grande. These functions have been and continue to be carried out through an International Boundary and Water Commission. The Commission has the status of an international body and consists of a United States Section and a Mexican Section, each headed by an Engineer Commissioner. The Commissioners are accorded diplomatic status by both countries. Each Section retains jurisdiction over those works located within its country, but has no jurisdiction over works located in the other country. As the Rio Grande situation is similar to Pa Mong in several respects, I would like to mention a few specifics with regard to it: 1. Each country (Mexico and the United States) acquires the necessary rights-of-way within its own country under its respective laws. 2. The 1944 Treaty provides that conservation capacity of each reservoir shall be assigned to each country in the same proportion as the capacities required by each country in the reservoir for conservation purposes. It further provides that the costs of construction, operation and maintenance of each dam shall be prorated in proportion to the capacity alldt~d to each country for conservation purposes in the reservoir at the dam. In the case of Falcon Dam, the costs were prorated 58.6% to the United States and % to Mexico. At Amistad Dam, the costs were prorated 56.2% to the United States and 43.8% to Mexico. 3. Costs of power facilities are shared equally between the two countries, and each shares equally in the power produced. At Falcon each country constructed identical 5

6 plants on its side of the river. The plants are electrically interconnected by a high voltage bus tie. No power plant was built at Amistad although future provisions for one are incorporated in the dam. 4. The dams (Falcon and Amistad) were built as international treaty projects and justified solely on flood control benefits. No portion of the costs is reimbursable by the water users. The powerplant at Falcon was justified on a self-liquidating basis over a 50-year period. 5. The international dams are operated and maintained by or under the supervision of the Commission. Generally each Section performs or supervises the work in its country. The powerplants are operated or supervised by each Section of the Commission within its own country. The operations by the two Sections are controlled by the joint Commission. 6. Insofar as the United States waters in the reservoirs are concerned, the Te*as state water authorities regulate releases for irrigation and other domestic uses. Power is produced only incidental to those releases. There are no releases solely for power production. The releases are regulated by the Commission during flood operations. These are but some examples of the cooperative effort between nations for equitable sharing of costs and benefits associated with the development of international water resources. Numerous agreements between Great Britain and other countries were formed to prevent interference with the equitable beneficial use of waters of the Nile River and its tributaries. Another agreement between Great Britain and Egypt not only provided protection of existing uses but recognized future extensive development of the resources of the Nile. Thus, precedent on water resource treaty negotiation and ratification are available for study by the lower Mekong River Basin countries. Also, under the agreements with other nations of the world, the Mekong Committee can request help in formulating a viable treaty for development of the water resources of the Mekong River. Treaties providing for the full development of international water resources are many and varied. Each treaty must be carefully tailored for an equitable distribution of benefits in relation to 6

7 contributions of each participating country. At the same time, care should be taken that as many multipurpose project objectives as possible are accounted for. Some recent reports have suggested that studies be made to determine whether greater benefits might not be obtained by expending funds for education rather than water resource development, or for expanding industry rather than water resource development, or other alternatives. In my opinion, the answer is not one in lieu of another, but rather the several teamed together. There is ample evidence to demonstrate that better education, better communication systems, accelerated health programs, better transportation systems, expanded industrial development are all needed along with, and to go hand-in-hand with, development of our basic wealth-generating, renewable resources. Development or exploitation of natural resources is basically wealth-generating. However, in some cases, resource development is an extractive process involving an exhaustible supply. Water is renewable rather than exhaustible and, therefore, the benefits of its development are virtually perpetual. Prudent conservation practices are compatible with water resource development. Nobody has suggested that educational expansion and improvement be held in abeyance until we finally can determine whether it will contribute more to society than will improvement of transportation, or communication, or social welfare. Why then should it be suggested that the very basis of a sound viable economy, land and water resource development, be held in abeyance until those benefits can be equated against others? Few people question the need or desirability for flood control. This can only be accomplished by regulation of runoff and streamflows. Electrical energy has been proven to be fundamental to the progress of developing areas and nations. When the opportunity for hydrogeneration exists, this often can be accomplished most economically through streamflow regulation and, incidentally, without stream depletion. Most developing nations are short of locally produced agricultural products. Expansion of production depends on several important factors, not the least of which is an adequate water supply appropriately distributed throughout the growing season. In most cases this can be accomplished only through streamflow regulation. 7

8 Federal Reclamation projects in the United States make a vital and significant contribution to community, regional, and national economic growth and development as well as sociological improvement. Economic impacts flow from two general sources (1) the immediate impact from construction activity,and (2) recurring impacts from project operation. One of the first major economic effects from a reclmnation project is the industrial impact generated by construction activity. This creates a demand for a wide variety of products and services which affects many industries throughout the nation. Once construction is complete and projects go into service, they generate a steady stream of annual recurring benefits. Numerous studies have been made over the years to quantify some of these impacts. The most recent study was completed in 1968 by the University of Nebraska on the economic impact of irrigated agriculture on the economy of the state. The Nebraska study employed a relatively new technique of interindustry input-output analysis. Input-output analysis is based on the idea that a large portion of the economy is devoted to the production of intermediate goods. Nebraska has over 3 million acres under irrigation of which 420 thousand acres are served by Federal Reclamation projects. The purpose of the Nebraska study was to measure the current economic impact of the Irrigated Crops Sector on the state's economy. The current impact refers to the short-run impact due to the additional crop production attributed to irrigation during any production and processing period. In that study the current impact was further subdivided into 3 categories: direct, indirect induced-by, and indirect stemmingfrom impacts. The current direct impact is the net increase in the output of the Irrigated Crops Sector over what would have been produced under dryland farming conditions. For 1963 this net gain in crop output was estimated to have a value of $121.6 million, or over $45 per acre irrigated. The current induced-by impact refers to the increase in the activity of the Nebraska sectors which are required to enable these sectors to sell the necessary inputs to Irrigated Crops so that this sector can produce the net increase in output. For example, additional inputs of fertilizer, seed, and labor among others, are required by Irrigated Crops as compared to dryland farming. Various financial and other services are also needed. In 1963 this induced-by impact totaled $

9 million. In other words, to support the net increase of $121.6 million in output by Irrigated Crops, other Nebraska sectors which served as direct and indirect suppliers of Irrigated Crops experienced increased sales of $157.0 million in This amounts to $1.29 of induced activity per dollar of increased output of Irrigated Crops, or over $58 per acre of irrigated land. The current stemming-from impact refers to increases in activity of Nebraska economy which were required to enable the processing sectors to process and sell to Final Demand, a part of the increased output of Irrigated Crops. In 1963, about 33 percent of the increased crop production was sold to several processing sectors within the state, while the balance was exported outside the state. This stemming-from impact involved activity valued at $533.7 million in This is equivalent to approximately $4.39 worth of stemming-from activity per dollar of increased sales to Final Demand by the processing sectors and the required supporting activity of the Nebraska suppliers except that required for crop production. The total increased activity within the state from all three sources of impacts (direct, induced-by, and stemming-from) was $812.3 million in 1963, or over $300 per irrigated acre in a single year. Of the $812.3 million, $259.1 million was spent with agricultural sectors of the economy. Another $241.7 million was spent with mining and manufacturing industries. Finance and service industries received $158.6 million of activity. Increased income to households of the state totaled $153.0 million. As demonstrated by that study, irrigation has made a major impact upon the economy of Nebraska. The total impact of irrigated agriculture during the post-world War II period, , was over $3.5 billion in direct and induced-by effects. Stemming-from impacts were not estimated in detail for all postwar years but could easily have totaled another $6.5 billion, making a total economic impact of over $10 billion during the 20-year period. No attempt was made in the Nebraska study to measure the regional and national impacts outside the State of Nebraska. The interindustry activity from Nebraska exports and imports would generate similar far-reaching impacts throughout the nation. Thus, having spent over 30 years in a conservation and land and water resource development field, having been exposed to the engineering, economic, and sociological disciplines, and having 9

10 witnessed what happens in areas blessed with water resource development as compared to those without, I believe strongly that the engineer, the economist, and the sociologist should end their interdisciplinary squabbles and should join forces in accomplishing the best multiple-function and the best balanced combination of programs for the long-term benefit of society. By society I mean people now living, as well as generations yet to be born. No public program can be properly justified unless it is pointed toward benefits for people generally. The Pa Mong development is not the last increment of Mekong River control. Rather, it may logically be the first. As such, our studies to date show it to offer great benefits in teaming up with other desirable economic and sociological programs to produce broad benefits for the people in the Mekong River's area of influence. 10

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