liiiiiiiiiinmiimiuiiimiii, >.,< THE WATER POWER PROBLEM OUR refusal to develop our wasting water powers constitutes the strangest feature of our National conduct. For the greater pan\ our water powers are idly wasting their energy. The reason is that we have not yet been per- suaded to enact laws under which money may confidently be Invested in them. Until we do this, our water powers will be as useless to us as though situated on another planet HENRY J PltRCr SEATTLE. WASHING i I illllllllllllllllllllllllllllllll THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES Jl* ■'• Jp " .-■"'.. z "::..: : : : -' ac ::::"_ :"" : .' ----.--- :::.:" For the 'part • . : : :::"-" is : : fed t "V ' : ' ------- \ : " '" : " * be : - : :_- : : -- - was CONTENTS PAGE Explanation of Purpose 7 How the Nation Is Concerned 9 The Practical Side of the Question 16 What Are We Quarreling About? 24 Who Pars for Unfair and Restrictive Legislation? 35 The Water Power Business and Its Risks 41 Water Power Ownership and Control 45 Water Power Legislation 48 ( inclusion 62 Appendix A — Comparative Review of A damson Bill and Adamson-Shields Bill 67 Appendix B — Comparative Review of Public Lands Water Power Bills 72 Appendix (—The Adamson-Shields Bill 83 Appendix D— The Ferris-Myers Bill 119 Appendix E— The Jones Bill 137 Appendix F— The Works Bill 149 Appendix G— The Smoot Bill 162 550-286 LIST OF ILLUSTRATIONS OPPOSITE PAGE Plates la to lb— IN THE NAME OF CONSERVATION. Plate la — Navigation Dam and Power Plant at Look 12, Coosa River, Alabama 8 Plate lb — The Lock 18 Site, Coosa River, Alabama 8 Plate Ic — Power Plant of Ontario Power Company, Niag- ara Falls. ( Exterior) 8 Plate Id — Power Plant of Ontario Power Company, Niag- ara Falls. ( Interior) 8 Plate Ie — Nitrogen Plant of the American Cyanamid Co., Niagara Falls, Ontario 8 Plate Ha — The Rjukan Power Plant at Vemork, Norway. . 10 Plate lib — The Nitrogen Plant at Saarheim, Norway 10 Plate Ilia — Denver & Rio Grande Train Crossing Soldiers Summit, Utah 14 Plate Illb — Ore Train on Butte, Anaconda & Pacific Rail- way, Montana 14 Plate IV — Water Power and Irrigation 18 Plate V— A Glimpse at What Might Be 22 Plate VI — The Electron Power Plant, Puyallup River, Washington 26 Plate VII— Water Power and Live Stock 34 Plate VIII — Hydro-Electric Power in the Portland Cement Industry 40 Plate IX — Hydro-Electric Power in I rrigatioD 44 Plate X— Blewett's Fall Dam, Yadkin River, North Carolina 48 Plate X I — All Farmers Are Not Equal Before the Law. . . 52 Plate XII — Water Power and Highways .">{> Plate XIII — A Desert Reclaimed with Water Pumped by I [ydro-Electric Power 60 Plate XIV- IIvdro-Eleetrie Power in the Mining Industry (>f> "A t every waterfall two angels stay, One clothed in rainbows, the other veiled in spray. The first the beauty of the scene reveals, The last revolves the mighty water wheels, And there those ivhite-robed sisters ever stand, Beauty and Utility, hand in hand.' >} LOOKING SQUARELY AT THE WATER POWER PROBLEM To Members of Congress : This is a personal appeal for water power legislation. The author confesses that he has an old-fashioned ambition to do a constructive thing — to assist in the creation of an industrial opportunity in a neglected place and to make homes on land now silent. He also cherishes a hope of reasonable and wholesome reward. These are two honorable incentives which have, from the beginning of things, animated individual effort. Some people re- gard such motives distrustfully but it cannot be believed that such sentiments which, if manifested in an earlier day, would have impeded or stifled our greatest commercial achievements, will long survive in the present day. Therefore, the author will state his case in all frankness and be confident that those who cannot accept his conclusions will have no reason to misconstrue his purpose. The author is one who, seeing a development opportunity, thought it good and praiseworthy to invest therein. This oppor- tunity comprises agriculture, industrial plants, transportation, *it ios and towns, homes, schools and churches — in short just that sort of opportunity which, pursued in colonial days, made this Nation an actual thing. All this forward movement is con- tingent on the development of water power. The wisest commer- cial minds of the country have endorsed this project, yet the author is unable to raise money for its development. Those who would, under ordinary conditions, gladly lend their money, point to only one vital defect. The power site is on a navigable river and the United States controls the situation, because it has the sovereign right to withhold its approval to any development on navigable waters. The Government cannot and will not make 8 THE WATER POWER PROBLEM the development itself, and the Federal laws under which the United States can grant the privilege to private initiative are so restrictive and unbusinesslike that no one is willing to risk his money. This is a strange situation. Believing that it could not logically persist, the author has spent the past two years in a study of the matter, both in Europe and in America. He has conferred with business men, bankers, lawyers, engineers and pub- lic officials of all parties and prejudices. The following state- ment is a resume of the results of that experience. It is sent to Members of Congress and others in authority in the hope that it will be of service. It is inevitable that the water power question must soon be dealt with by Congress. Unless that dealing is wise and business- like, the effort will be useless. As will later be shown, the water power business involves a multitude of investment risks. There are nearly 5,000 standard investment securities for sale in the open market. The water power business must compete for money with all of these other standard investments. It ought to be ap- parent that any water power law under which an invested dollar is inevitably doomed to depreciation will not encourage water ] lower development. If, in considering legislation, our law-mak- ers, while protecting fully the public interest, will at the same time apply the homely and familiar rules of honest business and will searchingly test each section of a legislative bill by deter- mining whether, under the terms proposed, they would be willing to invest their own money, or were thev executors of an estate, the money held by them in trust, the path to power development and all its manifold benefits will be greatly smoothed. 3 V, 3 p a 3 - t-. -rl -M ^^ ■ •j j a 5 u a - -■a *^ ~ — ■ *- •" n> -h at o-i " .-- .5 a : a r. - S o - — —I — -~2 ' x* a a • ■/. _ - ■ " Si a j ■s — - •/. a — "3 03 Ofl «"" S" « " - - - a cj- - j-i ca a) a) oS a; § te <" * - « I « — 5 -r 5 -• a o" ■5aS«o - •- - £ « ± - * a a. - - '1= a? | /• 3 ra _ x ago d f _ a ssa DC 3 2 — c _ ■/. 'f- m * ^.-a H a UTJ a-U-r; - ■- ° o a a 5 ^t-.-5-a |§ . , ♦, S S g So »J < +; - ~ - ~ =>" - - - C = ■- US8 •- J8 £5 -a ' S £ a. a -^ ai ? -^ — a g ^ >. - ; , _£ a tc 2 a - — m ■Ski o ' |2 2 a .2 g | ~ a "? a - V a r " a m- 3 2 C o a S a a ■?c ; = .! i j2 _ a . 80*S O cifl » ^ 5 3 ' ~- ' = . — sz r* a j a. 3 ■/. a I u +-> & to ■, a + J Ji a a: - - X •« w -*- • - - - - S, = '-- = 3 S ,2 S .- a "* * ■/ - — - ^~ •" fe it-S"" - ~ x '; « ^ • - ~'~ :=;l "5 S3 a 3 ' •- _2. -*— '— a '"" — ' - ^ '- ; t i a ■^ „ a r ~ !a S - tr E "5 ~ c — it T .ZL '"^ v >"> c ?- - Sffl — w a — cs in o+j 2"™ d V, -- , a, a a a jjjg V "^ *a - — -^ H Sis S > u u a g, 5 bo « 2 u 1 7- a ^> - - .- ~ |«gg3gg i_ u~* — £ - — 71 a, « a 2 t? 2 w t_ 1 '— *— ■* y - - — ~ Q fcl — a -' / - a = * » a - w •: i o 0) " ■ o n; * i) k " - a a - k H a a T £ +5 •'"' 3 "H.— a - - . t- — - — — — - 25 » s e - S ^ - -r a * a - 2 *- - - - a — 1 * +j - >. ~- - -""__a <- > o __. a * o a> o O ja L^ ~ U t- qj t* 53 X. l?- = "-U 555g'Sg a, & - > a a a*5 y == - **■ ._;_-, ._ a r — a a ° «- Bj - — « > - -a to •?. _ a '■ — - o5 « S - | ,_ - £ J a .a 7 '5 " ~ a / * £_•* .a-c = E :. ? — ^ **~ *** 2 ff — ^ — ^ ~ ,' : u " j:' y -i r — - - .- > w. ai C r — ~t * - - fl§« ? g p P a *" ■ •J- >■ a a a - -J / u Z : — r* a « ti .m a = a a a - - a a. n - = •- a: x - ■— T O C J. SCgj etj"2 91 < > si s z o o a - o .a - S'g'oCfl -'•c & c CD t-< 7t Z ^0) 3S 1~ ^j a >»"ih a t - q ^£- ccj.a ti ^ +-» ci a cs z£S ' a ■a - En a PS o > 2 ::: 9 — ~ o ^ rX ■— a •« a o 2 t- a :"«0 > _ — -'-' - = - a g = u ~f - • c .Ea = ^ ^ a c3^2 o a n J s »■ 7 - O 4J -,-W Pk A « 2 5 v a w * « s 2 a siiu * ~ - r Marj .5 3 > A, O — CD q :l - " CJ >> CO +-» a 03 a - a o 3 ad - a / - 00 "s ' ■r o / ed — ■a - : "7 " a§§. lis a - c« So o S u QQ ~i DO — T. o g ID g §£ 1* J3 e5 03 fi 3 05 2 B — o 03 - . 09 & « fcl a n v. ■j. z o * a =-■+< — a -as 2 O aJ'-'-'ai 81 " -0 »> S „ a ~ - a •- ^-=.£ ■= a •/. i; C -. a a —■=: MS i; -f .a :. — , — ^ < _^_ HH ^ *-* r r y. 2 © a — j o £ 0Q ^ ^ ° A - S3 S30 U cu 6D— CU o s3.a - - - a ™ < = 5 = Saw ^ a - a a. o 3_-= •«•;- — ■/. 2 o 3 © i = =".£■= m a. > 2+3 p" a '- ■'■ — ? s t - - r -> ■a =2 ^ 2 ■_■ . a a. p» o < o V. •J. 'A S3 > c o .Sis w H u a; r: o fc Mg > ca V, o b « ? ?! a> t. n 5 4) a s - m HOW THE NATION IS CONCERNED 11 water powers to extract nitrogen from the air. So it is that the farmer is enormously interested in water power from the fertilizer standpoint, and because this interest has to do with food produc- tion, every citizen of the country is likewise affected. But the farmer's interest does not stop with fertilizer. As will subsequently be explained, it extends to irrigation in the arid West, to the transportation of farm products and farm supplies, including implements and clothing; and in the water power re- gions, the farmer's interest extends to hydro-electric energy in farming operations. In like manner, we might consider every other vocation and show how closely water power benefits in a large degree control them. Water power is an individual matter, a community matter, a national matter and, finally, the most im- portant commercial matter now before the people. The water power is ours to develop if we only will. The farmer who indulges in day dreams when he should be harvesting crops is not highly regarded by the community. What then shall be said of the Nation that follows a similar practice with respect to water power de- velopment? Wherever (he United States has control, water power develop- ment is stagnant. This fact is well known by all who are con- versant with the situation, and it has been officially announced by members of the Cabinet and members of both Houses of Con- gress on many occasions. It means that under present laws it is practically impossible to develop water power sites that exist on the navigable streams of the country or on the public lands of the West. Water power sites on the navigable streams do not belong to the Government except in those very pare rases where land has hemi acquired by the Governmenl for purposes of navigation. The land is, as a rule, in private ownership, and under the "Riparian Doctrine," which prevails in the East, the ownership of land car- ries with it the right to use the water in the adjacent navigable 12 THE WATER POWER PROBLEM streams. Such use, however, is contingent upon the paramount use of the streams for navigation, and as the Federal Government has supreme authority over navigation in our rivers, it follows that no obstruction such as a dam or any other water power struc- ture can be placed in such a stream without the consent of the Federal Government, Therefore, the Government is in supreme control, though not necessarily owning a foot of land. The United States controls power sites of the West in enormous aggregate capacity through ownership of land. The control is, therefore, not begotten of sovereign authority, as in the case of navigable streams, but is precisely the same as that which any individual would possess who owned land necessary to a water power development. The situation is further complicated by the fact that these Western lands of the Government do not usually carry rights to the use of water in adjoining streams, as is the case under the Riparian Doctrine of the East, but such rights are acquired under what is known as the Doctrine of Prior Appropriation, which means essentially that he who first appropriates the water and applies it to a beneficial use secures a vested right therein (so long as, and to the extent it is actually used) which can be exercised to the detriment, if need be, of those who made subsequent water ap- propriations. The water of the Western streams belongs to the States and not to the Federal Government, and the fact that the latter holds title to the land does not give it sovereign or even pro- prietary control over the waters. In practically all the arid States, the holder of a State water appropriation can, where physical con- ditions permit, divert the water from and carry it around Govern- ment, or any other land, and use it for all public beneficial pur- poses, but without the State water appropriation, the mere owner- ship of land by the Government, or anyone else, gives of itself absolutely no right to appropriate the State's water. The water, therefore, is the important thing and in all developments involving HOW THE NATION IS CONCERNED 13 water appropriations the land is appurtenant to the water right, which is quite the reverse of the situation in the East where, under the Riparian Doctrine, water is appurtenant to the land. There is a strange contradiction in the present Federal policy with respect to Western development and Federal laws providing for the occupation of Western lauds and conve3 r ing rights of way over them, discriminate against water power development, Land for railroad purposes can be secured merely by constructing the railroad; land for county roads and highways is freely given; land for irrigation ditches can be acquired merely for the asking. Under the so-called "Carey Act," millions of acres have been turned over to the States and thence to private citizens on the sole condition that they shall be reclaimed. It is only in case land is wanted for water power development that the laws close down and say, "No, you cannot get titles to this land at any price and you cannot use it except on terms that make financing of your project impossible." It makes no difference if the right-of-way for power purposes over Government land is required by the State, a municipality, an irrigation district or an individual; it makes no difference whether the power is for a public use and is to be developed under complete sovereign control or is for a private use; it makes no difference how vital the development may be for the prosperity and general well-being of a struggling Western com- munity — the strong hand of might says, "No; nothing doing." There surely can be nothing discreditable in the attempt to develop water power. Indeed, its benefits are in many cases more widely distributed than those of any other line of development. Yet the door is closed. Some have said that there is no water power stagnation and in their attempts t<» prove their statements, they point to large power developments that have taken place in this country during the past few years. A little inquiry will, however, develop the fact 14 THE WATER POWER PROBLEM thai those recent developments have almost all occurred on private lands or in situations over which the Federal Government has no control. Is it not a humiliating fact that if one desires to develop a modern industry, to increase and to facilitate public service and public convenience, to give employment to idle hands and to ac- complish all of the other beneficial things that are a part of national progress, he must, under present laws and policies, care- fully avoid all of those sites and locations which are, even in the smallest degree, in the ownership and control of the Federal Government? Conservation has often been defined as "wise use." The present embargo on water power development is maintained in the name of Conservation. The President must have had this and related facts in mind when, in his address to the Sixty-third Congress at the opening of its Third Session in December, 1914, he made this statement : "We have year after year debated, without end or conclusion, the best policy to pursue with regard to the use of the ores and forests and water powers of our national domain in the rich States of the West, when we should have acted; and they are still locked up. The key is still turned upon them, the door shut fast at which thousands of vigorous men, full of initiative, knock clamorously for admittance. The water power of our navigable streams outside the national domain also, even in the Eastern States, where we have worked and planned for generations, is still not used as it might be, because we will and we won't; because the laws we have made do not intelligently balance encouragement against restraint. We withhold by regulation." We may possess the highest and most devoted faith in the prin- ciples of Conservation and at the same time concur in the state- ment made by former President Taft to the Third Conservation Congress in 1912, as follows: "I am bound to say that the time has come for a halt in general rhapsodies over Conservation, making the word mean every known good in the world; for after the public attention has been roused, such appeals are of doubtful utility and do not direct the public to the o a o o 50 4J , © t. A M tj o> U V ? 5 a -r o oa to o> jr. 1) H a cen bs 4- o is & o — V- m> 3 o - O •— V M 7 a S si In — » A 0) g *- a s > 1)4-1 «i *- +-J ; o 7 go = h © *t- 3 ovo .— o is -r *— < : m > -' X - Ih cd *— oi 01 •~ co /. - S * o 0/ a) c >c > « to t" ■s a 5 « ~ > -'~ ft d 0> * o > a tr t- «■> = ■= a ©£*. to ., o cuS o - 3 S T. *-> " 03 a to o Oflfl K - es es+2 £-5= is ~ c ts be C3 53 B5 n - - 2. gl8 s |s .2 2^ 5 * a) a) ILi ^ to - t- O . BO >«« !B Of, f c3 cd c3 ^ B..G to "3 ■0 *-^4jb~ * i gjgn - m a o _ ■» S a> _, u +j w © o «2 o s Si r: s« eS« ©J3 > C DO s as M flj O *"0 a)- s > a flO o o ft.. 93 g .2 « i 2 C>.?ft **S 5 - * - © aj ova i = r HOW THE NATION IS CONCERNED 15 specific course that the people should take, or have their legislators take, in order to promote the cause of Conservation. The arousing of emotions on a suhject like this, which has only dim outlines in the minds of the people affected, after a while ceases to be useful, and the whole movement will, if promoted on these lines, die for want of practical direction and of demonstration to the people that practical reforms are intended * * *." i :; i THE PRACTICAL SIDE OF THE QUESTION The following estimate taken from the U. S. Geological Survey Report of 1909 shows the available water horsepower in the differ- ent sections of the United States, if developed to the practicable maximum without storage: North Atlantic States 4,910,000 South Atlantic States 5,107,000 North Central States 1,270,000 South Central States 3,312,000 Western States 11,019,000 Total available potential horsepower. . .01 ,078,000 It is also estimated that with practicable maximum storage, the total available water horsepower that could be produced in the United States would be 200,000,000. The present actual water power development in the United States is about 0,000,000 horse- power, or l-10th of the amount available without storage and l-30th of the amount available with storage. The Geological Survey Report for the year 1913 shows that our consumption of coal for all purposes was about 570,018,125 short tons, of which the railroads alone used about 20 per cent. In addition to this, the petroleum used in 1913 was equivalent to 21,000,000 tons of coal. Every water horsepower now going to waste which could be economically substituted for fuel power would represent approximately 5*4 tons of coal per year, based on an average of 12 hours per day. To indicate what are the possi- bilities of conservation along this line, we need merely to reflect upon the fact that the ultimate development of 01,078,000 horse THE PRACTICAL SIDE OF THE QUESTION IT power on the foregoing- coal consumption basis, is equivalent to the annual use of nearly 340,000,000 tons of coal, which at $2.00 per ton, represents an annual value of $680,000,000. Under conditions of practicable maximum storage, and a development of 200,000,000 horse power, the equivalent would be 1,200,000,000 tons of coal, and $2,400,000,000 annually. If all the water at these power sites were used constantly, the foregoing coal con- sumption figures would be doubled. Of course, this represents the maximum attainable development, which, in all probability, will not be approached for a long period, but it also represents the end which may finally be achieved. It is certain, however, that unless a start is made by the enactment of fair and practical legislation, efforts to accomplish this much to be desired result, even in small part, will fail. Does not the possibility of so tre- mendous a saving of our exhaustible coal supply suggest that the attitude of the Government should at least be more than sympa- thetic toward the development of our water powers? Every unde- veloped water power for which a market now exists represents a will ful waste of an exhaustible natural resource. Conservation, about which we have heard so much, does not mean merely the wise and economical use of a resource like coal. It means the saving of that exhaustible store in all places where au inexhaustible resource, like water power, can be substituted for coal. Every time the United States has, by the exercise of its present policy of stagnation, prevented the development of a water power, it has not alone prevented the growth of cities, or the mak- ing of homes on the land; not alone has it discouraged the expan- sion of industries or driven them to other lands. These results, un- fortunate ami unrighteous as they are, could be compensated in some degree by wholesome legislative penitence in the future. Bui all the penitence that a great nation can possibly show cannot replace one atom of the thousands of millions of tons of coal that IS THE WATER POWER PROBLEM have been ruthlessly I mi rued while that nation, in the name of Con- servation, li;is plated ils water powers beyond the reach of indi- vidual enterprise, where the thoughtful investor and the prudent guardian of trust funds must look upon them with suspicion or scorn. The electrical energy produced through the development of our water powers will find many markets, among which are the fol- lowing : The Electric Furnace. — Marvelous new processes involving the use of the electric furnace have been perfected within the past few years. Over 1,200,000 horsepower has been developed in Nor- way, Sweden and other European countries for the fixation of at- mospheric nitrogen in the form of nitrate of lime, nitrate of soda and cyanamid, which products are used in the manufacture of fer- tilizers, explosives, cyanides and other needful products. There lias been positively no development of the kind in this country because our great water powers cannot be financed under present laws. The United States imported during 1913 nitrogenous prod- ucts to the value of over $44,000,000. These were composed of ( Chilian nitrate of soda to the value of $23,000,000, the remainder of manufactured nitrogenous products coming from Germany and other countries. We have long been dependent on Chili for the greater part of our nitrogen, and we have paid the price fixed by an absolute monopoly known as the "Nitrate Board." This is a Euro- pean organization. To manufacture nitrogen from the air in amount equivalent to that imported from Chili in 1913 would require 1,100,000 horsepower. To this extent then have we fostered the equivalent of a water power monopoly over which we can have absolutely no control. It is estimated that the richer deposits of Chilian nitrate of soda will be exhausted within twenty years and then the world will have to depend upon the fixation of atmospheric nitrogen for its supply. Thus there is opportunity to build up a ■j: 3 r- So. s ,d*O.C P a ID ° ■- ? &*« 32a ■r. - £ -og * J t* on C5-3 i 2 § 3 4) 2 O fcc £■ "f- rt "Z a 5 o s; - CJ 00 ~ ~ s- 3 3 - d a, o, EL ?■•= •*-» a *H 2 O 03 cJ X THE PRACTICAL SIDE OF THE QUESTION 19 great nitrogen industry in the United States which would require enormous quantities of electrical energy and which would free the United States from being dependent upon foreign countries for its supply of this tremendously important product. By failing To develop this industry, we not only inflict upon ourselves a depen- dent condition, but we contribute largely to the enrichment of foreign countries, which, in their wisdom, have fostered and encouraged the nitrogen industry. Nitrogen (saltpeter) is the basis of explosives and from the standpoint of National defense it is imperative that the product should be made within this country. The fact that nitrogen is not manufactured in the United States would prove of serious moment in case of war. In urging the necessity for building plants for the manufacture of nitrogen through the fixation of atmospheric nitrogen, military authorities have urged that the plants be so st rategically located throughout the country as to be well protected against attack from foreign invasion from any quarter. Idealizing this precarious situation, the War Department has for some years been trying to accumulate a reserve store of 65,000,000 pounds of Chilian nitrates. That is, the Department has been forced to buy from interests that may be hostile the very elements necessary for defense of our Nation. The Army and Navy use annually over 6,000,000 pounds of this material in times of peace. Our ideas concerning the consumption of war munitions have been changed during the great crisis of the past year. We know that modern offense or defense is largely a matter of the efficient use of amounts of explosives undreamed of in wars past. In a prolonged war our Store of 65,000,000 pounds of sodium nitrate would not go far. In a war such as is now raging in Europe this supply would probably hist much less than one week. With a coast blockaded, we would find importations of nitrogen difficult or impossible. Our crops would have to be appropriated and our fields would have to be 20 THE WATER POWER PROBLEM devastated to secure that needful element ; and all this at enormous cost, and delay to the Government. Water power development will solve this difficulty, hut it should he remembered that the construc- tion and equipment of water powers and nitrogen plants require rears. They must he ready for service at the onset of war. A quantity of phosphoric acid, greater even than that of nitro- gen, is used in the manufacture of fertilizers. Fortunately there are enormous deposits of phosphate rock, both in the Southern and Northwestern States. By an electric furnace process recently perfected, phosphoric acid may he produced through the treatment of phosphate rock cheaper than by ordinary methods. Here is an- other great use for hydro-electric power. The electric furnace is being more and more used in metallurgy. We in the United States are far behind Europe in this respect, but it is apparent that with the development of cheap hydro-electric power, great amounts of electricity will he used in the treatment of ores and in the manufacture of steel. Hydro-electric energy will be largely used for two great agricul- tural purposes — in the manufacture of electro fertilizers and in the operation of pumping plants to convey water to the higher arid lands of the West. In many cases, large areas of the richest lands lie above the reach of gravity water. In many other cases the conditions are such that irrigation with pumped water is cheaper and more practicable than irrigation by gravity water. Indeed, the cheaper gravity irrigation propositions of the West have been largely developed. The great irrigation development of the future will take place in those localities where the streams of the West not only furnish water for agricultural purposes, but also furnish the power with which to raise that water to the thirsty lands. There is also a great field in the use of hydro-electric power for pumping underground waters to arid fields, which underground water would otherwise be unavailable for this purpose. THE PRACTICAL SIDE OF THE QUESTION 21 Transportation. — The marvelous financial and operating success of railway electrification on the Butte, Anaconda and Pacific Rail- way in Montana furnishes a most powerful argument in favor of hydro-electric development and it shows that if by the adoption of a sound and sane water power policy, the electrification of rail- roads, especially in the West, can be accomplished, the transporta- tion benefits alone will be sufficient to warrant speedy legislative action to that end. This railroad, which is largely devoted to the transportation of copper ore, has about 90 miles of electrified track. Electrification has brought about a reduction of 75 per cent in oper- ating delays, an increase of 8.77 per cent in ton-miles hauled per annum, and a decrease in annual operating expenses of $268,728.12, or 36 per cent. This annual saving is equivalent to about 20 per cent of the total cost of railroad electrification. In the year 1913 this road was operated under steam traction and the cost of coal alone was $315,235.74, while in 1914, under electric traction, the cost of delivered electric power was only $164,508.70, a decrease of 47.81 per cent. The Chicago, Milwaukee & St. Paul Railroad Company is now electrifying a 450-mile stretch of its transcontinental road between Barlowton, Montana, and Avery, Idaho. It has contracted to pay $550,000 per annum for delivered electric motive power, as against (he present cost for coal over the same line, approximating $1,750,- 000 per year. Under the new development, this coal will be saved and the water power, a product that has gone to waste from the beginning of time, will be utilized. It has been credibly stated that one-third of the freight equipment of this and other Western mountain roads is necessarily employed in hauling coal for the railway companies' use. Electrification will release this costly equipment for more useful purposes. The suc- cessful completion of the electrification of this 450 miles of line is sure to be followed !>v similar electrification of hundreds of THE WATER POWER PROBLEM miles of the mountain divisions of other railroads of the West if suitable water power laws are enacted. It may be remarked that no pari of the water power sites at the Great Falls of the Missouri and at Thompson's Falls on Clark's Fork, which will supply the Chicago, Milwaukee & St. Paul Railroad with power, are owned or in any way controlled by the Federal Government. If they had been these great developments in transportation could not have been financed and could not have taken place. The foregoing - are merely a few examples which show that new uses and new markets are created for electrical energy, if only the tenures are permanent and safe, and the size and cheapness of development are such as to make reasonable profits possible at unusually low selling costs. Every practical man of wide experi- ence in this business knows that the permanency and safety of the investment mean more and cheaper development capital — and perhaps to most of us determines the ability to get the capital — and that in turn the cost of capital is by far the most important element in the water power business. Water power development in different parts of the country is already projected to the extent of more than a hundred million dollars. That development only awaits the passage of water power legislation by Congress under which capital may be safely provided for construction purposes. In New England, a great power on the Connecticut River would be utilized, adding largely to the navigable reaches of that stream and furnishing power for industrial purposes. Great water pow- ers in the Columbia Basin would be developed, making possible the navigation of those streams far into the interior and furnishing power for the manufacture of fertilizer, the operation of pumping plants for the raising of water to vast tracts of land, and for trans- portation and municipal purposes. Water powers now latent in the Tennessee, the Coosa and other Southern rivers and also those >. - .p — £^ * a 2 u s e "^ T- -^ - s _ p- S^~ S « on - a Sis SJ-^ 2 03 Q % EH - I s°, fee oj p hi O c . — CO O! = w x 'rj o'fl P~ ■I - IS P 03 P pa oo w H o ~ • - - pel n g — _, o ? P ==- P P £"£ S > o ca h .5 o > pa +J-D P.0J oH = -- p &s cd °-= P ;p> ' J _s M •= d s- BC THE PRACTICAL SIDE OF THE QUESTION 23 in the upper reaches of the Mississippi River would be developed with similar beneficial results. In the mountain streams of the West there are enormous water power resources. Even in the more level States where water powers have heretofore been given little consideration, investigations have shown that good opportu- nities exist. All of this being true, it is manifest that water power legislation cannot be considered a local or a sectional matter and it lies far above the realm of politics and the prejudices of men. WHAT ARK WE OUARRKLING ABOUT? More than one man who lias, with open mind, investigated this national water power controversy, has closed his review bv asking:, '•What are they quarreling about?" Here is a controversy of about eight years' standing, which has prevented economic devel- opment in the United States to the extent of hundreds of millions of dollars. It has caused and is causing sectional discontent and suspicion where nothing but harmony and industrial co-operation should prevail. Some entire States feel that they are harshly aud inconsiderately treated by the Federal Government — that they are being strangled by the hand of might. There is a widespread con- tention that the Western water power States are being denied the sovereignty to which they are entitled under the Federal Constitu- tion, and are having their growth impeded and are being impover- ished because such large proportions of the lands in such States are withdrawn by the Federal Government for water power pur- poses. Such lands are not subject to local taxation, although the communities and States are burdened with the maintenance of the law on those withdrawn lands. There is bitter complaint that although those lands were withdrawn from sale or entry under the pretext that they would thereby be rendered readily available for power purposes ami thus their use for such purposes would be facilitated and encouraged, yet present laws make it impossible to use them — laws of fulsome promise but of deadly effect. Such are the consequences. Yet strangely enough the real differences between the contending parties are so small that it seems as if an hour's consideration by full-grown men ought to remove all cause of controversy. Therefore, is it not time that the leaders on both sides pause for a while and reason a little? Per- WHAT ARE WE QUARRELING ABOUT? 25 haps it will be found that some are continuing the quarrel merely from force of habit. Well, then, what are we quarreling about? Merely for convenience, we will call one side ''Theory" and the other side "Practice." The conference would run substantially as follows : Theory — "You water power people can't have any more perpetual permits to build and operate dams on navigable streams, nor can you have any more fee titles to public lands which involve water power sites." Practice — "All right ; we gave up expecting such things long ago and have planned accordingly in our calculations for the future. We had supposed the policy was all set- tled ; why do you keep on making speeches about it?" Theory — "Water powers must be developed under a per- mit or some form of term grant running, say, 50 years, after w hit h the people must have the right to take over the property." Practice— u Ave you going to pay us for the property when you take it over?" Theory — "Certainly, we shall pay the fair value." Practice — "Good scheme — we're all agreed." Theory — "But we are going to pay you only for the fail- value of the property, and for no blue-sky stuff, like capitalized value of the permit and the Government lands occupied, goodwill, profits that you expect to get from cout i-acts, nor anything that is not actually put into the property as a hard cash investment or its equivalent." Practice — "All right again — don't want to be paid for any blue-sky stuff." Theory — "And we want you to make prompt develop- 26 THE WATER POWER PROBLEM meat of the properties under permit and not to hold them unused for speculative purposes." Practice — "Of course, we agree, and even if we didn't the fad would still remain that money is too scarce and too valuable to throw around and leave idle in such a man- ner, even for speculative purposes." 'Hi corn — "There shall be no artificial manipulation of things, nor any jockeying to the end that the consumers' rates shall be raised or that service be deficient or dis- criminatory." Practice — "No; such things should not be. Under mod- ern practice, the power business must be conducted on the large-volume and small-profit plan, which necessitates low rates and equal service. But even if this were not so, public regulation through commissions now estab- lished in nearly every State of the Union will prevent high rates ami discriminatory service." Theory — "Your consumers' rates should be as low as is commensurate with a reasonable return to the capital actually invested, irrespective of stock issued." Practice — "Certainly — just a reasonable return on the actual cash value of the property. The stock issued has nothing to do with the case, and is to be disregarded en- tirely, no matter whether it be represented by actual face value in the plant, or be watered to a million times that amount. This 'reasonable return on the fair value' idea, regardless of stocks or bonds, is universally an established principle in public utility regulation. A reasonable return has been well defined as the lowest return that will induce investors to purchase the securities of any particular in- vestment. A larger return is unreasonable, and a smaller return will fail to get the investment capital. The — i- £ H 7.5 y. _- I JN Jz — S. — aS .— ^ ^j — 73 n — a a> a a B - - .- E — ~ & £ C J 3 • X - / - 3 x - (41 WHAT ARE WE QUARRELING ABOUT? 2? only complaint that we have is that some of you people have selected public-land and navigable-stream power plants as subjects for strict regulation by the Federal Government, but you do not propose to exer- cise such regulation over plants that happen to be located on private lands. Regulation is a great and necessary in- stitution ; it should be exercised indiscriminately and not concentrated on projects that happen to be located on sites either owned or controlled by the Federal Government. Private land plants and Government land plants should operate under exactly the same burdens and same laws." Theory — "For all Government property occupied or used you shall pay a fair rental or charge during all the years of the permit." Practice — U A11 right, suit yourself about that. So long as you don't place your charges high enough to make it impossible to compete with gas or steam power, or with other water powers over which the Government has no jurisdiction, and so long as we know the amount of the charge clear through to the expiration of the grant, we are quite indifferent in the matter. You should bear in mind, however, that in the last analysis every burden placed upon a water power plant in public service which occupies a right of way over Government land is, and must necessarily be, passed on to and paid for by the consuming public. There is no other place for such money t<» come from. Every burden put upon such con- suming public, beyond the fair value (for all purposes) of the Governmenl land so used constitutes merely an unjust charge by the National Government (not upon the public service company hut upon the consuming public) in nn amount which would not for a moment be countenanced THE WATER POWER PROBLEM by a jurv or a court of equity if a private citizen owned the same land and was in court asking for adequate compensa- tion for (lie use of such land by the public." Theory — "You practical men talk as though you believe that we conservationists are trying to lock up all the water power sites and prevent their use. Don't you know that we realize as well as you do that the present enormous amount of water power going to waste is lost forever; that "the mill will never grind with the water that is past?' " Practice — "Well, it was you conservationists who stopped the wheels of progress in water power development. Why don't you start them again and stop the great waste from which the country is now suffering? Let development pro- ceed and incidentally save our non-replaceable fuel." Theory — "That is exactly what we have been trying to do, but you practical fellows are too fussy and critical con- cerning our Department rules and of the bills that we have had introduced into Congress." Practice — "Why should the investor not be afraid of placing his money under the absolute control of a Federal department when the laws now in effect do not allow the department heads to make water power agreements which will bind the Government or create property rights even though 11,000,000,000 may be invested in a plant, Have you forgotten the large number of permits that were arbi- trarily revoked notwithstanding the fact that the permit- tees had not violated law or regulation? Have you over- looked the fact that a large number of consequent ejectment suits are now pending in the United States courts which, if successful, will, in effect, confiscate about $100,000,000 worth of property, some of which was built many years WHAT ARE WE QUARRELING ABOUT? 29 ago on the faith that Government permits were unques- tionably secure?" Theory — "Those revocations were and are great mistakes. We believe in government by law and not by individual dis- cretion. We believe that every dollar devoted to a public use, to serve the people with water power or anything else, should be protected by the strong arm of the Government — - that the good faith of the Government should be pledged in the strongest language possible to protect all servants of the people who do their duty honestly and efficiently." Practice — "That is right, but your suggested laws do not accomplish this purpose; they are not practical; they shackle and impede your public servants so that it is im- possible to serve the people well, efficiently, or, perhaps, at all. Why do you continue to pile on harsh and burdensome requirements and uncertainties which do not apply in any respect to public servants on privately owned lands; which add to the cosl of money, which increase operating expenses and which prevent lower rates to the people? Don't you know that all this prevents development, injures the whole country and benefits no one?" Theory — "No; such results are not desired nor intended. We are not advocating these things as a means of securing revenue for the Federal Government beyond a fair return on tin- reasonable value of its lands for all purposes. We want, however, to he sure that you water power men do not abuse the public nor extort unreasonable profits from the people." Practice — "That is entirely proper; but the things of which we complain have nothing whatever to with deter- mining the reasonableness or unreasonableness of rates or the quality or conditions of the service. We are objecting 30 THE WATER POWER PROBLEM to special burdens applying to power sites under Govern- ment control and not to all power sites alike; to the things that benefit no one and yet either prevent development or increase the cost of service to the people. Why is not regu- lation and protection the only practical way to get the best service, to secure investment capital and to confine profits to a reasonable return on that capital?" Theory — "That is all right, but how do we know that reg- ulation will always be effective unless the departments in Washington can at all times keep a strangle hold on the public service corporations in the States and make them be good." Practice — "There you go again, back to government by the individual and at the discretion of an appointive Fed- eral officer — subjecting millions of the people's savings to the ever-changing personnel of a Federal office and to the individual preferences and whims of the Federal officer for the time being. That is exactly the present state of affairs ; that was exactly what resulted in the large number of per- mit revocations in the past and the subsequent ejectment suits. You know that capital is now shunning power developments where Federal authority is involved. A burned child dreads the fire." 77 teor< y_"YYe agree that regulation, if effective, will remedy all these things and will make it safe to enact a short law putting the power sites now under Government authority upon just as favorable a basis as those on private lands. We want the largest and best power development and we want it now. We are willing to put the public land developments on even a more favorable status than those on private land if this is necessary to accomplish the de- WHAT ARE WE QUARRELING ABOUT? 31 velopment. But how can we be sure that regulation will be honest and effective?" Practice — "Practically every State now regulates its public servants and this will soon be universal. The people have the power to regulate and cannot divest themselves of that power. Who are most interested in the development of power and in the quality and conditions of the service and in the rates charged?' 1 Theory — "The people who use the service and pay the bills, of course." Practice — "Certainly, it is the consuming public that has a direct personal interest at stake. If their public service commissioners do not do their duty, it is in the people's power to get new commissioners. If the local law regard- ing such matters is defective, the public can change it. Some of the proposed Federal laws on this subject have ap- parently been framed with the idea that it is wrong to secure the greatest possible development and the least pos- sible rates to the public. They have been framed with the idea of maintaining rates that will produce fancy profits and to divide those profits with the Federal Government. If this is not done, but, on the contrary, the consuming public is allowed to regulate the rates that they pay, and if they arc allowed to take all the benefits that arise from the securing of cheap money, large volume of business, inter- connection of power systems, etc., don't you think that human nature is such that the consuming public can be trusted to get for themselves every such benefit over and above sneh reasonable return as is necessary to get the in- vestment capital in any particular case?" Theory — "Von are right. Besides, if any particular com- munity or State has large and cheap water power re- 32 THE WATER POWER PROBLEM sources, it would not be fair to take away from that com- munity or State the inherent advantage given it as a birth- right by denying the fullest right to the lowest possible rates to its industries and people so as to secure for them all the benefits over and above a fair return on the invested capital." Practice — "It has been proved over and over again that the lower and more stable the rates, the greater the indus- trial development in any particular community and the safer the capital — one thing helps another. This plan means more volume of business and more and cheaper money and more development. The Federal tax or the scheme whereby fancy profits are divided with the Federal Treasury means the reverse, and besides, it stunts the growth of those communities by robbing them of their nat- ural advantages." Theory — "But all the while your books and records must be open to inspection of the proper authorities, and there must be full publicity." Practice — "Yes, that is all a part of modern public utility regulation." It will be noted that "Practice" conceded, as it has done repeat- edly in the past few years, every correct principle put forth by "Theory." "Practice" has some points of its own to bring up, viz. Practice — "You theorists seem to think that we want something for nothing; that we want lands and rights without charge, and, when they are taken over by the Government, that we want to be paid millions of dollars for them. Do you think that, in view of our previous an- WHAT ARE WE QUARRELING ABOUT? 33 swers to your questions, you are justified in your public charges that we are robbers and oppressors of the public?" Theory — "It is quite apparent that if you will make good on all you have said, the charges made against you are undeserved." Practice — "You folks think we ought to make a little money on our investments?" Theory — "Oh, yes; liberal earnings — as much as 12 per cent in some cases to compensate for your great risks." Practice — "You think that legislation should be so framed that we can safely provide money at low rates of interest; that we should have an assured title in the prop- erty, irrevocable except for breach of contract; that we should, so long as we serve the public faithfully and well, be free from harassment and needless abuse, and all attendant dangers and menaces to our securities — in short, that we should be able to live normally on a stable basis, and have our securities accepted as standard investments?" Theory — "Yes, yon should have the benefit of all of those things." Practice — "Now, do you think we can have and hold all those comforting assurances if you pass a law under which the rules of the game may be changed after we have put our money on the table? Do you think we can secure money cheaply or sustain the value of our securities if the law that you pass leaves the safety of our property without even the right of appeal, subject to the varying views of successive Federal officers, or hides the future from us, or makes us guess as to what will be the order of the day or the rules of the game 20, 30, or 40 years hence? Do you 34 THE WATER POWER PROBLEM think that uncertainty and financial stability can dwell in accord?" Theory — "No; judging from the principles of old-fash- ioned business under which one honest man always has and always must deal with another man, it appears only logical and reasonable that your water power law must be uniform in its application, definite and sure in its terms and give you a clear look through to the end." Thus, theory and practice are entirely in accord, as is always the case when practice is honest and theory is correct. ■S u< §| t - — i. a r a - SdlH^ — _r: y ^ tf^ o £~ 5.5 § >■ — T* — Vh ^ wi ' r* <— - g £ > , ^ fl >i^ *"* " "-J". 1) x -^ E- Q -/" "Z- * ^ ^ s -■=>-.- r- £ gofe^ y. — •»— '" "T a a a - HH ~ r~ cuoj _Z £ .5 +j ■ t* a w o w .. e, O '■" — -" y. a y — •o ~ c a £ a; a,; a i o.m _ aa ~ £n2d a — c ~ r ■/. /- 4- r — - .— zi £ o ~.c — ~ a ^ >~-" ~ a ^ -*-> a a— -- - S a; J.a £ C ir— a — a £ " C - 5 WHO PAYS FOR UNFAIR AND RESTRICTIVE LEGISLATION? The foregoing imaginary conference covers all of the fundamen- tal things involved in the legislative features of this water power question, and concerning them there is, and there can be, no dis- pute among considerate persons. When, however, we come to the drawing of a legislative measure, it seems that we are almost cer- tain to break away from this understanding. Small details and uncertain or indefinite expressions creep in or are, in ignorance and without malicious intent, placed in to defeat the very real ob- jects that all parties seek to attain. Who pays? No one but the con sinning public. Well-meaning speakers and writers blessed with patriotic regard for the public welfare have thoughtlessly advocated many things the effect of which would be to impede the progress of the water power developer, restrict his operations or prevent his exercising skill, enterprise or other goodly quality in the interest of his business. It will not be practicable to enumer- ate and discuss all such instances here but every one familiar with this subject will recall one or more. Those who propose such things do not need to take the word of anyone; let them get right down to fundamentals, use some good old-fashioned arithmetic, and they may prove to their own satisfaction that the consuming public pays and pays right well. To illustrate this point, we may select one of several unwise provisions of the so-called "Ferris Water Power Bill" as passed by the House of Representatives in the Sixty-third Congress. The provision here selected, which was subsequently changed in Senate Committee, occurs in Section 5 of the House bill and pro- vides that the Government, upon taking over the property at the ;;<; THE WATER POWER PROBLEM expiration of any lease period, shall pay, "first, the actual costs of rights of way, water rights, lands and interests therein purchased by the lessee * * * and, second, the reasonable value of all other property taken over, including structures and fixtures ac- quired, erected or placed on the lands * * *." Reduced to simplest terms, these expressions mean that no lessee would be allowed to benefit from any increase in land values that might take place, or, in other words, the owners of the power plant could not partake of any of the prosperity which they, by their invest- ment, had created or initiated. On the other hand, the power plant will be penalized under the term "reasonable value" for all obsolescence and depreciation on structures and equipment, i. e., the owners would receive, on taking over of the plant, a price considerably less than the cost of the structures and equipment. Thus, the Government says, "Eleads, I win ; tails, you lose." It was argued by the well-meaning gentlemen who were responsible for this clause, that the people would thereby be saved large sums of money. A little arithmetic will demonstrate that it would have quite the opposite effect. Assume a water power site of 10,000 horsepower capacity, which occupies land valued, for power purposes, at f 100,000. One-half of this land, owned by the United States, is acquired under lease, as proposed by the "Ferris Bill;" the other half is owned in fee by private parties and is purchased by the lessee for the sum of $50,000. Under the above plan, the land, when taken over, would cost the public only $50,000. Let us go beyond the point at which the advocates of this measure stopped. The power plant, with all its appurtenances, including transmission and distribu- tion systems, would normally be worth, say $3,000,000. How much is it actually worth as an investment risk under the abnormal condition created by the proposed law, in which it cannot partake of the normal prosperity of the region as reflected by land values? WHO PAYS FOR UNFAIR LEGISLATION? 37 Obviously, the plant starts out with a handicap. It cannot stand in competition with other investment risks in the region. Lands in the vicinity, occupied by dwellings, stores, industrial plants, railroads, etc., can all appreciate in value along with the country's prosperity. Not so with the power plant. It is doomed at the outset to curtailment. The penalties of depreciation are certain while the usual rewards of appreciation are denied. Of course, the plant can never be worth all it costs to build and maintain it. What is the result? No one is going to be foolish enough to buy the bonds of that power plant at as large a price as could be demanded if the plant were not tied up with an anti-appreciation stipulation. Moreover, more interest will surely be demanded on a bond covering a plant of this kind than in the case of a security underlying any other proposition that could hold up its head in a competitive bond market. Remember that all of these industries compete with one another for money, and the one that shows the weakest case is the one which pays most for its money, unless, indeed, it is so weak that it can't get money at any price. The bonds of a non-appre- ciating and surely depreciating plant on Government land would be discounted in excess of 5 per cent more than they would if on private land, and pay at least 1 per (cut additional interest during their life. A $3,000,000 plant bonded to SO per cent of its value would issue securities aggregat- ing 12,400,000. Five per cent discount on that sum would amount to |120,000. One per cent interest would be $24,000 annually. Throughout the period of bonded indebtedness, this extra interest would be paid and the land in question, originally valued at $50,000, would eventually cost al least $1,000,000. Who would pay for this? No one but the consuming public. All of these extra costs are the just and legal obligations forced upon the power plant. The power plant, on the other hand, derives its en- 38 THE WATER POWER PROBLEM tire income from the public and in fixing a just consumers' rate, a public- service commission would have to allow for all of these extra costs due to increased risks. The public would find it all in their monthly bills. So it is that the great and beneficent purpose of saving the public the cost of appreciation on land worth $50,000 fails when tested by the ordinary rules and laws of credit, of in- vestment and of common sense. The procedure and the equities in a real estate transaction are familiar. Suppose, for example, that a man buys a lot of land in a new and rapidly growing town that has been located around a water power development or is created by industries that spring up within the area of power transmission as the result of a hydro-electric development. It is known that the usual and proper course of procedure is for the purchaser of that lot of land to erect a building thereon, say for mercantile purposes. He does not anticipate appreciation in value of the structure. On the contrary, he knows that the structure will depreciate and its value will become constantly less. His productive investment is in the land and there comes a time in the growth of the municipality when he can afford to disregard any value in the building because he secures a reasonable profit in the increased value of the land. Suppose, further, that with the growth of tin 1 municipality, Con- gress decides that it has become advisable to erect a Postoflfice building and selects this property as the best and most advantage- ous. No question would ever arise concerning the propriety of paying to the owner of the property a price that would represent the original cash price he paid for the land, plus the appreciated value. Such a proceeding would be equitable and the owner would be awarded that reasonable appreciation under condemnation proceedings. Now, during all the time in which that property was in private ownership, tin 1 owner thereof would be serving his own interest exclusively. There WHO PAYS FOR UNFAIR LEGISLATION? 39 would be no regulation of the amount of rental that he could charge tenants for the use of that property and he could discriminate and extort to his heart's content so long as he found a willing subject. The water power developer, on the other hand, whose hydro-electric property might perhaps be located on the next block, would be always subject to sovereign control; his profits would be regulated, his accounts made public and those with whom he conducted his business would be pro- tected from discrimination and extortion. Purely real estate transactions of the kind above described are considered thor- oughly honorable and legitimate. Are honorable water power transactions less honorable than real estate transactions? The fact that the water power operator is in public service is admit- tedly a justification for the sovereign control of his business in the public interest, while the nature of the real estate operator's busi- ness clearly exempts that business from such regulation. Never- theless, this difference in public relation does not justify the as- sumption that the fundamental laws governing property values are changed in any way or that justice and equity should not be applied uniformly. That which the real estate operator would lose on his building would be compensated by the appreciation on his land, and unless this principle be applied to all real estate transactions, there can be no stability of investment in real estate. If the Government must, in equity and justice, pay the appreciated value for the Postoffice site, it follows that that same equity and justice would demand that the Government pay for appreciated value in the lands acquired by purchase for a water power site. This does not refer in any way to the recaptured Government land for which nothing was paid, and for which nothing is asked, but it refers only to private land purchased for cash. How much pioneering would there have been in building our Western cities if it had been provided by law that someone could come in and (5) 40 THE WATER POWER PROBLEM lake over our homes, stores, or office buildings, at their depre- ciated values, and yet allow nothing to the pioneer for apprecia- tion of the land on which the structures are built? Again, let us consider the property as a whole. There can be no possible enhancement in the elements of value common to a private enter- prise because every possibility of obtaining more than a reason- able return upon the actual investment devoted to a public use is barred through regulation. The water power owner can claim nothing for the loss of anticipated profits from pending contracts, good will and many other items of speculative value which are and must be considered when the Government is taking over the business and property of a private owner. The case above discussed is similar to many others which could be picked out of the original Ferris Water Power Bill. We may be certain that whenever a patriotic gentleman arises, in the pub- lic interest, to place burdens on a water power development, he is actually not placing the burden on the development company but upon the people in whose interest he is supposed to act. In private homes, the master furnishes the money to maintain the household, and anything that makes it more expensive or more dangerous for a servant to perform his duties is first of all a tax on the master. In the public service power business, the people are the sovereign and master, and the public service company is the servant. The capital of investors is here being hired to serve the sovereign people. The people must pay the bill and be fair, else the servant will be unable to obtain the money upon reasonable terms, necessary for the service of the master. What master of the house can expect efficient and faithful service, or any service at all, if he starves or maltreats his servants? Does not the same rule apply to the hiring of money and practical men of experience in the public service power business? i a'Z S w> si .a ^r 3 >> £"3 «S eS a a .2: +J "*_? a 5 MJ.O > —I S* 53 H — by 03 °£ P s* o o — O r-l «8 So 3 "3 a £?a w> *"3 c z 00- ^ 0) A ■wja 7* a-M X. .2 2 §* O 5" • a i 3 «- 5 s3 — o . £ o 3 at 23 .- ■- a! — . u /E 93 THE WATER POWER BUSINESS AND ITS RISKS One should remember the peculiarities and risks of the water power business in this country, in the making of laws relating thereto. A law that might well serve the needs of mercantile or manufacturing business would utterly fail if applied to the water power business. Why? No business requires so much capital investment per dollar of gross annual receipts as the water power business. The pros- perous merchant will, in a year's operations, take in four, five and sometimes six times as much money as is represented by his capital investment, or, in other words, the merchant's capital in- vestment is only 25 per cent, 20 per cent or 16 per cent of his an- nual gross receipts. In the case of manufactures, the Thirteenth Census Report shows that on a total investment in the United Slates of $18,490,749,000, the value of manufactured products in 1909 was $20,7<;7,546,000. Therefore, the manufacturers of the country "turned their capital over'' a little more than once during that year. In the hydro-electric business, however, it requires on ;m average of from six to seven years' gross earnings to equal capi- tal investment. All of this means that in order to earn a dollar gross, the water power investor must tie up from 24 to 36 times as much capital as the merchant, and six times as much as the manufacturer. Therefore, the greatest items to he considered are i 1 i the rust of the large amount of money required and (2) the fact that under the besl and most liberal of conditions, the water power Investment risk must he large. A had title or a burdensome (lovernmental restriction might he a fairly safe financial risk in a 42 THE WATER POWER PROBLEM mercantile business and at the same time be quite fatal in the water power business. We always seek to place an office building, mill or factory in a safe locality. A water power plant must, on the contrary, always be located in a hazardous place. If it were not so put, it could not be a water power plant. One of the first requisites of a high-power transmission line is that it shall stand out free and aloof from every other thing — in other words, that it shall be exposed to all severe storm conditions. When the war broke out in Europe, Con- gress very properly hastened to provide for "War Risk Insurance." A power plant and its transmission lines are perpetually at war, with persistent and relentless forces of nature. Shall the water power investor be denied war risk insurance? Let him have it in the shape of reasonable dividends, good title and a contract from Government, which as to business equity, mutuality and certainty will conform to straightforward, honest business precepts. Stores and factories can be started on a modest scale and in- creased according to the growth of business. This is not so with a water power plant. About 90 per cent of the ultimate expenditure must usually be made at the outset and the "dead capital" must be carried through long years of lean business. The first customers cannot pay rates for power that will reimburse the owners for their whole investment. Their rates must be the same as though the power plant were disposing of its maximum output. So, the above mentioned items representing war risk insurance must here be included under "lean year insurance." Water power is useless without market and market is full of whims. Mills, factories and mines close down or reduce output in times of poor business, and this results in reduced power con- sumption; railroads operated by hydro-electric power carry lighter loads. The householder, in times of business depression, uses fewer lights, and is more careful about turning them out THE WATER POWER BUSINESS AND ITS RISKS 43 when they are not actually required. Even the heavens sometimes intervene; the hydro-electric systems of the West which operate pumps for irrigation duty find their revenues enormously reduced if the fields are blessed with a season of abundant rains. In such cases the farmers do not need power for irrigation purposes — an advantage to the farmer, but none the less disturbing in the diffi- cult financial operation of a power system. There are whims with- out number and each and all demonstrate the need for "market in- surance." Thus the power business requires generous consideration at the hands of Government. It should not be inferred from this state- ment that the author advocates license of corporate abuse or relax- ation in any degree of public control. Neither docs he seek to con- done any unlawful or unrighteous practice. The point is that as all these risks are natural and inevitable, and as the water power business must always be beset with more financial hazards than any other conservative business, the Government must, if it would encourage investment therein, extend to capital a definite and plain contract or franchise, leaving no loophole through which the public interest may be abused and relaxing in no respect the sovereign power of the people, but at the same time putting no burdens on the development on public lands or on navigable streams that are not also borne by developments that are not sub- ject to Federal jurisdiction. The investment banker who disposes of securities to his clients is and musl be as mindful of those clients' interests as are physicians or lawyers with respect to the interests <>f their clients. The investment banker's reputation is ;is dear to him iis is the reputation of any other practitioner t<> himself, lie musl look beyond the face of a paper offered as security for a loan. He musl be satisfied that the maker of that security is able to sustain the obligations entered upon. Me notes tin- water power hazards above discussed and he rightfully de- 14 THE WATER POWER PROBLEM mands that if his clients must sustain those hazards they must, on the other hand, have a good title, a fair chance for an assured re- turn of principal and reasonable interest and that the terms and conditions written into the franchise shall be definite and without unnecessary financial peril — that the occupation of the land is a matter of right and not of grace. X < ^ . : . VA ■ SS&v x •„ ;: u a > 4-3 c V — - p o O t* +j >» u ,£3 - 3J M - £ « A-a a) a 2 -a ~ asm 5 * — 5 ^; *§ a .=. &2 el 3 6 3 » Q "3 > — ' DQ — _Z SJ S5 OS s g I Sea S g fci o S a> 03 oj WATER POWER OWNERSHIP AND CONTROL The author has in years past been interested by the startling statements made in the press, from the platform, and in legislative halls, concerning a "country-wide water power monopoly." Dur- ing the past two years he has diligently sought for such a monop- oly and has found that such a condition can not occur in the "country wide" hydro-electric field. In the first place it is absurd to think of competition or restraint of trade between a hydro- electric field in New York and another in Montana. There can be no commodity control as between the two places because the use of the power or service generated in one field is relatively local in that field. In the second place, the public controls in all cases, either by direct supervision through Public Service Commissions or through the terms of public charter which can always be re- voked on violation. Considering now the local field of distribution alone, the water power business is a natural monopoly and can, in the public inter- est, be nothing else. In this respect, water power is in no wise different from our Post Office Department, our city water sup- plies or sewerage systems. Can one imagine two competing sewer- age systems in n community? The absurdity is uo greater than competing water power systems. On this point one can do no bet- ter than to quote from authoril ies. From the report of the National Waterways Commission (S. Doc. No. 469, 62d Cong., 2d Sess.) : "The important fact to be gathered from the entire discussion of this phase of the subject would seem to be not so much that financiers and promoters might And 11 to their advantage to promote a monopoly 46 THE WATER POWER PROBLEM as that the economical considerations and the natural character of the business make monopoly almost inevitable, and perhaps desirable, when subject to strict public regulation." From the testimony of Hon. Walter L. Fisher, then Secretary of the Interior, before the National Waterways Commission, Novem- ber 23, 1911 : "I think hydro-electric development is essentially monopolistic and should be essentially monopolistic in its character. That is why I think it should be effectively regulated. I think they should have the advantage of the control of the market and the freedom from harass- ing and vexatious competition if we are going to put them under the disadvantages of effective public regulation." From the testimony of Mr. Gifford Pinchot, before the National Waterways Commission, November 23, 1911 : "I am very strongly in favor of the consolidation of water power plants, coupling them up over large areas * * *. Better service to the community would be forthcoming if water power companies operated over large areas. But there must be public control of their operations to prevent the benefits which would come by reason of such consolidation from being translated into a general overcharge to the consumer." By Hon. B. H. Meyer, member of the Interstate Commerce Com- mission (the American Political Science Review for August, 1911, p. 374) : "There are few things which the industrial history of advanced nations proves more conclusively than that competition in the field of public utilities has failed to insure reasonably adequate service at reasonable rates. The public has had occasion to learn this lesson many times on a large scale * * *. Certainly we have had enough repetition of disasters to the public as well as to investors to lift this subject out of the field of controversy; but somehow these lessons have not been on a sufficiently large and overwhelming scale, for the fetish of competition is still being worshipped, and the cry of competition is still raised by many as the touchstone capable of dissolving every obscure entanglement which the strained relations between the utilities and the public sometimes create. OWNERSHIP AND CONTROL 47 "The Wisconsin public utilities law is a repudiation of the fallacy of competition as a guarantor of good service at reasonable rates and is planted squarely upon the ideas of monopoly in the utility business except in the case of telephones. Give a utility plant a definite field and compel it to do its proper work reasonably well within that field; this is one of the basal ideas in the law." And finally, President Wilson in an address before the students of the University of California in 1911, said : "Public service corporations are, in a very interesting sense, natural monopolies * * *. It is perfectly obvious that if other companies are allowed to compete with them there is a wasteful duplication in outlay and equipment, so that competition generally results in the eventual combination of the competing companies and the necessity to charge a price on what they supply that will pay the interest on twice as great an investment as was really necessary for the service." WATKR POWKR LEGISLATION The Sixty-third Congress gave much consideration to water power, yet, because of divers conditions and complications, failed to enact any law. Two bills had passed the House and were on the Senate Calendar when the Congress closed. H. R. 16053, known as the "Adamson- Shields Bill," covered water power development on the navigable rivers. H. R. 16673, known as the "Ferris Bill," related to power sites on the Public Lands. These bills differed materially because they related to entirely different situations. It will not be practicable to discuss these bills in detail nor to set forth all their merits and demerits. It will, however, be helpful to review certain parts of them because they will illustrate most con- cisely the important features of the discussion. For convenience, copies of these two bills are placed in the Appendix. Navigable Stream Legislation. — As amended and passed by the House of Representatives, the Adamson Bill was a mere waste of time and paper. In many respects it promised to the investor far less security and much more burdensome restrictions than the present General Dam Act of 1910, under which water power de- velopment has become practically stagnant. For an extended dis- cussion of the defects of the Bill the reader is referred to Senate Document No. 570, Sixty-third Congress, Second Session, entitled "Development of Water Power; Comments Relative to H. R. 16053." The Commerce Committee of the Senate, to whom the House Bill was referred, made material changes and, while retain- ing many of the fundamental principles upon which the Adamson Bill was based, partially eliminated the unworkable portions and added many new beneficial features. The "Adamson-Shields Bill," as finally reported, had the unanimous approval of the Committee. a SQ a x H ~-3 si "O a . a a - - g ■o o C 2 » So, S3 3gS ,; a es ^ 2 .* = T- ^ , „ t* o a °t. sh a - a™ 1 +j 5 a E* be > 2 ° -i aj G ® M 23 £ - ~ ~ o "O o o flfl ~ o o J ^i ir! 4-> fct"tt v a* a ".a a 3 CS -a-=> »-> -_ 9J ■_ a > *" o-a - 3* a a .a - -a a a D >. 09 — _ jj w . e WATER POWER LEGISLATION 49 The "Adamson-Shields Bill" gives the Secretary of War author- ity to approve the construction of dams and water power plants in the navigable streams, upon the grantee's compliance with the terms of the Act and the Departmental rules and regulations there- under. The specific terms may briefly be recited as follows: 1. The grantee must possess suitable qualifications under laws of the State in which the structure is to be erected, must promptly start and diligently perform the work within specified periods. 2. The grantee's right to occupy the site extends for 50 years, and until the Lmited States takes over the property upon payment of the fair value thereof, which fair value shall not include any value of the right or franchise granted by the Government. Thus the Government has the option at the end of the 50-year period to (a) operate the property, (b) renew the grant to the original grantee on mutually satisfactory terms, or (c) convey the prop- erty to a new grantee. 3. The grantee is required to pay the United States: (a) for the <<>st of investigation and supervision of construction by the Department; (b) for benefits derived from headwater improve- ments of every kind made at Government expense; (c) for all hinds of the United States occupied by the grantee, the charge to be in the form of annual tax or rental determined by the Secretary. All other taxes are left to the States and municipalities involved. 4. All plans must receive the approval of the Secretary of War, and he is directed to approve only those which are best adapted to expedite and utilize the water resources of the region in the most useful way. The plant must be operated under the direction and control of the Secretary of War. with due regard for the interests of navigation. As a condition of approval, the Secretary may, at the time of approval, require the grantee to construct locks and ot her nnvigat ion facilil ies, all of which become a part of compensa- tion to Government for the rights enjoyed. Ill, 50 THE WATER POWER PROBLEM 5. In case of dams built by the Government, the Secretary of War is given authority to lease the surplus power on such terms as may be for the best interests of the United States. 6. The bill provides for reserving the right to regulate rates and service in the case of interstate business; for reasonable rates and efficient service under all conditions; for full regulation by Secretary of War within States which have provided no regu- latory functions. 7. Complete penal section is provided under which every neces- sary executive and judicial act may be taken to secure full and complete compliance with all laws and regulations. Power developments on navigable streams by private capital would improve navigation and render the streams navigable for further distances into the interior of the country. This would not only benefit the whole public through increased transportation facilities, but would relieve the Government of the cost of making navigation improvements at the expense of the Treasury. Public Lauds Water Power Legislation.— The water powers of the public lands of the West were much debated during tlie Sixty- third Congress. In May and in December, 1914, hearings on the so-called "Ferris Bill," H. R. 16673, were held by the Public Lands Committees of the House of Representatives and the Sen- ate, respectively. There appeared at the time to be much diversity of opinion, though close analysis shows that all were contending for the same fundamental things. One side comprised those who, as public-spirited citizens, had studied the question in an academic way and desired legislation that would protect the public interest. They frankly confessed that they had no practical experience in the water power business either from the investment, the operative or the construction standpoints. The other side was represented by practical water power men who bad given long years to the construction and operation of hydro-electric systems; also by WATER POWER LEGISLATION 51 financiers, bankers and investors who were well informed from practical experience on that phase of the water power question. Thus there were the doctrinaires on the one side and the practi- tioners on the other. What was the trend of their testimony? The practitioners were in thorough agreement with the doc- trinaires as to the regulation of water power practices and the protection of the public interest, They disagreed only upon one general point, viz. : the practitioners insisted that the public in- terest could be protected without making water power investment impossible or a speculative thing at best ; that the legislation upon which the doctrinaires insisted would result in the immediate de- preciation of every dollar expended in water power development. So far as the author is able to learn, not a single engineer of prac- tical experience, nor an operator, nor a financier appeared in favor of the so-called Ferris Bill as it was introduced into the House of Representatives, favorably reported by House Committee and passed. Can it be possible that all of those experienced men were mistaken, or can it be believed that they all deliberately falsified? The author thinks not. In every walk of life we are guided by the weight of experience. Can there be any doubt that the practical men who testified concerning practical things were better qualified for such testimony than were the doctrinaires? One who sits in impartial judgment and who duly regards the weight of evidence in this matter is bound to arrive at one of two conclusions; either the practical men were right, or the practical men deliberately attempted to deceive Congress. Does anyone seriously believe in the second conclusion? Please remember in answering this ques- tion that the points at issue were not those of mere policy, nor did they involve any theorizing on prospective events. All were in agreement as to the results to be accomplished in the public interest. In all the public testimony and expressions of opinion that I have seen, the doctrinaires have, without exception, been THE WATER POWER PROBLEM liberal in their views as to the return which they believed the water power investor justly entitled to receive There were no differ- ences whatever as to what the final result ought to be with respect to all parties concerned. The only differences were as to the language in the bill necessary to accomplish the purpose upon which all were in agreement. These differences involved plain matters of business security, the principles underlying which were settled centuries ago. All will admit that the doctrinaires were sincere and their motives patriotic, but when w r e come to a choice between experience and inexperience it seems certain that the world will finally be governed by the findings of experience. The "Ferris Bill" as passed by the House of Representatives, was built up on the assumption that Federal ownership of land, necessary to water power development, carries with it the owner- ship or at least the right to control the use of the water and the right to impose a Federal tax and any other conditions, without limit, on the power developed by the water. The ownership and regulation of water in the West has, by State constitution, State statute and common consent, for many years been regarded as vested in the several States. In the Western States the doctrine of the appropriation of water for actual beneficial use prevails, as against the Eastern riparian doctrine that the abutting prop- erty owner can require the water to flow — and waste — as it is wont to flow, as against the claim of someone who desires to put the water to beneficial use. The appropriation doctrine of the arid States is the child of necessity, where water is as precious as the air and where practically every use of water is both a public and beneficial use. Under the "Ferris Bill," Federal owner- ship of even a minute portion of the land necessary for power development would mean Federal control which would cover or markedly influence the taxation of all of the remainder of the property used in the power site, whether its ownership be State or 2 a >» £ i « « = 2" a - - — o -*-> - ■- > o o ■Sg.1 Mb a o : X ■j: ? 6 P i-,s — a: r. : *- • _. w a> . <» _, +j — 3 +-> a s «J <» a> oj ■5*w"l; ft m *h 73 — S q, as " +J -M "^ ^ Wu i-i 5 £ o •" Z3 o ai & « Bq SS £ 3 .- — " a S 2 g -~ ~ „ > 3 0) o ^ j; 5 « ~— 3 ■/' * r- ~ > a.— - ■/ S - = 2 a « S S I £>_, >>> a " '-• a - a » os - E- - <"~ -r a ^^S Wa oa oj a r^ o ° O bljfe S?2' * oS be a o o s- — WATER POWER LEGISLATION 53 private. Almost every feature controlling the integrity of the in- vestment and the stability of public service, including the raising of Federal revenue, was, according to this bill, to be fixed by the discretion of an appointive official — the Secretary of the Interior — who has no sovereign powers, whose opinions do not commit the Government, nor does the opinion of any particular occupant of that office commit his successors therein. One of the confessed objects of the bill was to make it possible for the Secretary of the Interior to impose discriminatory rentals or taxes in accordance with his judgment, or his preferences in any particular case, all of which is diametrically opposed to the funda- mental American doctrine of equality before the law. Because of the financial uncertainties imposed, every investment made under the House bill would be highly speculative and no water powers could be developed except at great risk and under conditions which will permanently put great and wholly unnecessary burdens upon the people and throttle the growth of the Western States. As the bill was reported out of Committee in the Senate, it re- tained, though to a modified extent, the fundamental assumption in the House bill that Federal ownership of land may properly become a pretext for the control of the use of water owned by the State. Much of the absolute discretionary power conferred upon the Secretary of the Interior by the House bill was removed by the Senate Committee and the equivalent stipulations were either fixed in the bill or left to the sovereign discretion of the States. As a whole, the Senate bill is remarkably improved — so much im- proved, in fact, thai its few fatal defects seem ;ill the more regret- table. Among them are the following: 1. The last proviso of Section 1 requires that no lease shall be granted until the applicant has secured the water right from the State wherein the project is to be located. In many, if not all of the Slates of the West, wafer rights cannot be perfected until bene M THE WATER POWER PROBLEM ficial use has been made of the water. Therefore, the power devel- oper would be in the peculiar position of being unable to secure a Federal lease until he had procured a State water right, and, on the other hand, of being unable to secure the State water right until he had acquired and developed under the Federal lease. This difficulty would be well met by providing that the applicant must, previous to securing the Federal lease, have initiated water rights under the laws of the State. 2. Section 3 provides that authority for the regulation of rates And service and the supervision of the issuance of stock and bonds shall, in interstate cases, be vested in the Interstate Commerce Commission. Some legal objections have been made to this, the soundness of which the author is not qualified to discuss. The practical objection is that interstate regulation of electric service and the financing should not be confined merely to those water power plants which occupy public domain in whole or in part. Tf the time has come for the Federal Government to regulate this in- dustrv, then it is obvious that such regulation should be applied upon identical terms to all interstate service, whether the plants occupy public or private lands, or whether the electric power be generated by water, by steam, by gas or in any other manner. Any other procedure unjustly discriminates against and renders vastly more difficult the development of water powers on Government lands as compared with those on private lands. Why should the occupant of a right of way over Federal land be subjected to class legislation? Why should the amenability of a power developer to the law, and the consequent jurisdiction of the Courts over his business, depend upon whether his pipe line goes over or around a few feet of Government land? Is it better for Congress to settle all these matters by general laws, or that every individual shall be left free in this bill to vary his pipe location and thus settle these questions as he may elect? WATER POWER LEGISLATION 55 3. Section 6 contains a provision the real purport of which was probably not intended by the reporting committee. In any event, the provision directly violates the standards which the com- mittee has established in other parts of the bill, viz. ; that the in- vestor shall have definite and well-defined security. The section provides that if at the end of the 50-year lease period, the United States does not exercise its right to take over the properties, and does not renew the lease to the original lessee, nor issue a lease to a new party, who, on receipt thereof shall reimburse the original lessee for the fair value of his property, the said original lessee may, "at his option," retain the lease on such terms and conditions as may be in force at the time of lease expiration. What is this option? It is (a) to accept the lease on such new terms as may then be in force or (b) abandon the property. This is precisely equivalent to saying to a drowning man "sink or swim." Remem- ber that in the premises set forth, the United States fails or re- fuses to take over the property, fails or refuses to renew the lease to the original lessee and fails or refuses to lease to a third party who will pay for the property. Then comes the option, "sink or swim," or, in other words, "take what I give you or abandon your property." Please apply this principle to a lease of ground for the erection of a twenty-story building, in which lease it is stipulated that the lessee shall spend $1,000,000 for the building, and at the expiration of the lease will (a) be reimbursed for the then fair value of such im- provements, or (b) receive a renewal of the lease, or (c) — here comes the "sink or swim" provision — will be given a new lease upon such terms as the lessor may at that time be granting gen- erally to other lessees. Evidently, such a lease would give; no se- curity to large invested capital. This should be remedied by pro- viding that if the Government does not exercise its right to take over or to renew the lease at the end of the lease period, the orig- 56 THE WATER POWER PROBLEM inal lease shall continue until the Government does exercise this right. 4. The proviso in Section 7 excludes "going concern" as one of the elements of value which cannot be taken into consideration when the property is taken over by the Government. Justice of such an exclusion all depends on the framers' meaning of the term "going concern." The Supreme Court decided in the Omaha case (218 U. S., 180) that, properly interpreted, the term is applied to the product of legitimate cash expenditure. Therefore, the exclu- sion of "going concern" means confiscation of a portion of the property and under such conditions no prudent investor will buy the securities. Whatever may be the principal significance of this or anv other term, it is manifest that the Courts have uniformly excluded claims for values not actually represented in the property taken over. Therefore, it is both needless and dangerous to ex- clude off-hand a set of values which are likely to be thoroughly legitimate. 5. Section 7 of the bill provides that no lessee may execute con- tracts for the sale and delivery of electrical energy for periods ex- tending in excess of twenty-five years beyond the 50-year period of the lease. This gives a margin of 75 years for a contract if the same is made at the beginning of the lease term, which would prob- ably be sufficient except for very large and expensive industrial works, such as electro-chemical and electro-metallurgical plants; also for railroad electrification and large irrigation systems, both of which must have power for all time. All of these would be practically excluded, or at any rate greatly deterred by the provi- sion here discussed. Another serious consideration lies in the fact that at the end of, say, 40 years of the lease period, the lessee would, under no circumstances, be able to enter into contract with a con- sumer for a period longer than thirty-five years. This is a very heavv burden which cannot be borne by the hvdro-electric indus- ?— CD Dh - '"' a.* a — £ o - r cS s« Si -* 1 c -^ ft a X 6 a ai'd a c c- O) x £ trf O a y >> go, it* o ' " c _ 1_ — c ~— a — - ~ - * a . _ g +j o ~ ~ ~ - ~ r - T. '• r . 5 viz ., •— t. *r _ — ' *- v ~- a 3 : = :; p j? : — /. - WATER POWER LEGISLATION 57 try without serious detriment. It is, so to speak, a placing of shackles upon legitimate and praiseworthy industrial develop- ment; it greatly injures both the power investor and the con- sumers of the power. Whom does it benefit? The duration and the terms of contracts extending beyond the lease period should be approved in all cases by the duly constituted State authorities. 6. Section 8 provides that the rentals for Government lands may, in the discretion of the Secretary of the Interior, be based on the power developed at any site involving Government lands. This is a direct Federal tax on power production — a tax on West- ern development. It is wrong in principle. The Government holds its land as proprietor and the rentals for that land should be on the basis of the value of the land. In other words, the Gov- ernment should receive fair remuneration for the use of its land, but the Government cannot, in fairness, use the power of might to extort from the Western communities a higher rental than would be allowed for the same land were it privately owned. There can be no essential difference in equity between the basis of compensation to be paid to the Government for the use of its lands and that underlying the compensation paid to Farmer Jones. If the land occupied by a water power development is owned in part by the Government and in part by Farmer Jones, the land as a whole has a well-defined value for power purposes. Farmer Jones should receive as much, and no more per unit of actual value contributed for his land than the Government receives, and con- versely the Government is entitled to compensation on exactly the same basis as that given to Farmer Jones. If, however, the Govern- ment is compensated on the basis of power delivered at a rate to be determined in the case of each lease by an administrative officer, it will certainly occur that in many cases the lessee will be paying the Government a price which, if extended to cover all the land involved in the site, would render the power project a financial 58 THE WATER POWER PROBLEM impossibility. In such event, Parmer Jones and his neighbors — who may, perhaps, own, say, 94 per cent of the land necessary for the complete power development — will be unable to sell or use their water power lands. Clearly, this is in effect equiva- lent to the confiscation of the water power lands of Farmer Jones and his neighbors through the exercise of the arbitrary right of might by the Federal Government, owning in this case only 6 per cent of the power site lands. 7. Section 17 provides that in cases where a lessee proposes to occupy a power site containing 5 per cent or less of Government land, the Secretary of the Interior may, in his discretion, waive such terms of the Act as he may think best and impose such new terms and rentals as he may deem just. Why 5 per cent? Upon what principle is 5 per cent exempted rather than 6 per cent, 7 per cent or some other ratio? Or was this figure selected upon any principle? The fundamental defect in the "Ferris Bill" as passed by the House was its indefiniteness from the investment stand- point. It left to the discretion of an administrative officer the de- termination of many points vital to the integrity of the water power investment. This section establishes in a most extreme form, this unbridled discretionary power which the committee largely eliminated from the preceding sections of the bill. Irre- spective of the proportion of Government land occupied, whether it be five per centum or more, the Government should be paid a fair rental for said land based on its value for all purposes. Upon what principle of equity should industry, and particularly the struggling agricultural communities of the arid West, be forced to pay more? 8. Section 20 provides that the lands leased and the works created thereon may be used or enlarged by another person than the lessee for the purpose of "impounding water for irrigation, mining, municipal, domestic and other beneficial purposes." In WATER POWER LEGISLATION 59 other words, the original lessee who erects a dam and thereby cre- ates a fall for water power must, in case he can not use all the water while he is building up his business, donate the benefit of that improvement to one who may, without expenditure for a dam, enter into destructive competition, possibly for purposes of mere blackmail. It is only fair that any subsequent developer who makes use of a lessee's structure should be made to pay the reasonable proportionate cost of the benefits which he acquires from the original lessee's structures. Three other water power bills concerning public land sites were introduced into the Sixty-third Congress, viz. : S. 6712, by Senator Jones of Washington; S. 7071, by Senator Works of California, and S. 7101, by Senator Smoot of Utah. It will be instructive to refer briefly to these bills in order to illustrate the points of view of the authors and to compare them with the underlying theory of the "Ferris Bill." The "Jones Bill," S. 6712, provides for a grant of lands for a definite period under stipulations designed to protect the public interest, said grants available to all alike who comply with the law as enacted by Congress. With respect to the moot question of Federal vs. State sovereignty, the bill avoids extremes in either direction. It leaves to the United States the present and future control and disposition of the public lands, retaining the title therein to the Nation and imposing rentals or taxes on the value of the land. It accords to the States the exercise of their own sovereignty over waters and the operation of the water power plants, except in so far as the same may interfere with navigation. The bill is entirely practicable from the investmenl standpoint and its passage would, without doubt, be rapidly followed by great power developments. The "Works Bill," S. 7071, was drafted on the conception that the ownership and control of water by the State is the main inei- 60 THE WATER POWER PROBLEM dent in the granting of a water power concession or franchise, and thai the land owned by the United States is a somewhat subordi- nate feature, the ownership of which confers on the Federal Gov- ernment no more sovereignty than would the land of a private citi- zen confer sovereignty on him ; that the United States cannot, by mere stipulation with a willing grantee, deprive a State of com- plete sovereignty over the use of its water or over its purely intra- state developments. Accordingly, the Works BiJl provides that the United States shall grant the use of its land, without parting with the title thereto, said grant to be co-terminous with the grantee's right to the use of water. The rental for such land is based on the value of the land and whenever it is no longer needed in the beneficial use of the water under the State's authority, the land reverts to the Government. The bill is financiallv sound and investments would readily be made there- under. The "Smoot Bill," S. 7101, provides for the acquisition by the State, under certain conditions, of any public lands chiefly valua- ble for water power development. Any State possessing a public service commission or its equivalent, could, through said commis- sion, file application for such lands and receive patent thereon. Thereafter the State could not, under penalty of forfeiture of said lands, alienate the fee simple title or utilize the lands for any other purpose than that of power development and operation. The State, or those authorized under its laws, must develop the power and place the water to beneficial use and all power sold or deliv- ered therefrom must be under State authority as to rates and services. Thus the Smoot Bill is based in part on the same prem- ises as have been described for the Works Bill— that the beneficial use of the State's water is the controlling factor and that mere ownership of land is a mere incident; that inasmuch as sover- eignty over the water is vested in the State, said State and its ■-■:. t<< ",. *V 3 .i'«*- <-« e ^ — u b u *** <*-i — '-' ii^3 v. ■= ^- x — ~ — *™ ~ a — a a u 3 - r - — --• -•-'^■ t - — . :r- — c-i a b a* >^ ^ -_ •V !s O £ 3T5 — ug — a o o ij r.'~ o a > i-4-, bo ■ >- U_j3 — • c a 0).- S > ° S-g - >* Du So 3 M o O.0J -- B *X ' — "Z. O— C a ^ c 3 - = o a H ~ a . — 2. r 9 £ -w *" o ti - — a _ a H £ ~~ ~ ^ g . ra- fe tafee u -- - S X S a a ~ b k — 1 S 8 » « >— < > £-'"i = = --* - s^'s - - b~ a a — te « o> oj o a t;* j > S Pkn fl "* — < - = ? 5 2 iN S-. T — fn -> p o Ml /. J* "oj .2 a a 5 ' rQ fc,_ ft — •a ^ s w ^ " - -a - J • -/- sj ft /; — c > z v. S5S -o — .- * - ) • -Si '■♦•" ~ ^' ■<. "« '*!/.•*. ■ft •/. o^-otS e •* *^ a — a. _— u . z, - 7 - A b > - *- - PL( i. - - a y. ~ ■- '-■ Z == ^j a" bZ- — _ - / ; - 5 5 HH Z — ™ — — X Z at~a 3 ;— - a. - ' ^ <- a -' ■- : ~ M -a (7) WATER POWER LEGISLATION Gl citizens cannot lawfully be deprived of the incidents necessary to the exercise of that sovereignty, nor of the benefits to be derived therefrom. The bill is the antithesis of the Federal idea set up in the original "'Ferris Bill," and if passed will effectively stimulate power development. It is a simple and effective measure which con- sistently sustains the long-established American theory and consti- tutional guarantee, that the sovereign States shall be on a par as to conduct and regulation of their internal affairs. For the benefit of those who wish to make critical analyses of the several bills discussed in preceding pages there is inserted in the appendix, first, a concise comparative parallel-column state- ment of the provisions of the "Adamson Bill" as passed by the House of Representatives, and the "Adamson-Shields Bill" as re- ported to the Senate; second, similar parallel-column comparisons of (a) the "Ferris Bill" as passed by the House of Representatives; (b) as reported to the Senate; (c) the "Jones Bill" and (d) the "Works Bill." ( Jopies of the Jones, the Works and the Smoot Bills will also be found in the appendix along with the Adamson-Shields and the Ferris Bills. CONCLUSION If the author has been successful in expressing his beliefs, it must be apparent that he has not been contending for a water power law that deprives the people of any sovereignty, nor of any property rights that the people now, or in the future, may possess. Neither docs the author desire that any water power grantee or lessee should even for a moment be exempt from sovereign control nor from complete regulation in the public interest. His con- tention is that the Government may preserve all these rights and powers and still do business on an honorable and constructive basis with the investor and guarantee to him a mutual contract that will not deprive him of the security of his investment. There have been some who, in reply to the arguments set forth in the foregoing pages concerning investment security, have asked, "Why cannot the investor trust the Government to do the right thing when the time comes?" There are two answers to this, viz. : 1. The investor has learned that, in dealing with Government, with its changing administrations and shifting policies, he must have his contracts and other legal instruments as air- tight as though he were dealing with a private party. There are many cases which could be cited in support of this contention but the ones which bear more directly upon the subject here dis- cussed consist of the revocation of twenty-five water power permits by a Secretary of the Interior just before he went out of office in March, 1909. Under some of the permits so revoked millions had been spent and the plants had been constructed and were in operation. There was no allegation in any of these cases that the permittees had violated law or regulation or had in any way failed in their obligations assumed under CONCLUSION 63 the terms of the permits; nor had the public complained in any way that thev were not being faithfully and efficiently seryed. The plainly stated pretext was that the Department had made new regulations and desired to bring all previous permittees under them. Up to the time these revocations were made, investors had not been suspicious of the Act of 1901, notwithstanding the fact that by the terms of that Act, permits secured thereunder were reyokable at the discretion of the Secretary of the Interior. The investors had been advised by well-qualified legal authorities that construction and development gave them a vested interest — an interest which could not be revoked at the will of an adminis- trative official. There was also a comfortable feeling that the Government might be expected to set the example in the matter of good faith and fair dealing and investors commonly believed that the Government would not, in the absence of misbehavior on the part of any permittee, revoke a permit and thereby ruin the credit standing of a water power company and subject the security holders to great and irreparable loss. Vet these unfor- tunate revocations did occur and numerous ejectment suits are now pending in the Federal Courts. Confidence in such permits or implied promises of Government can never be restored. It should also be mentioned that this lack of trust by investors is intensified by the commercialized muck-raking in periodicals, newspapers and on the public platform, which has been aimed at water power men during the past few years. .Mnck-raking has become an avocation — a matter of bargain and sale, and abuse is applied irrespective of guilt or innocence. It is not strange that the prudent investor backs away from a water power franchise based on Government discretion or revocable promise instead of on a Government contract, when the only men whose water power efforts have borne fruit are the very ones who, irrespective of their deeds or intentions, have been lumped together and called unclean 64 THE WATER POWER PROBLEM by the muck-rakers, whose sole object is personal gain or notoriety. 2. The second answer to the foregoing question is that it is necessary that a Government grantee shall be able to rely upon a definite grant rather than upon the grace of the ever changing ap- pointive officials. The Government would not issue a bond cloud- ed with such uncertainty, and in like manner the Government should not even think of issuing a grant under which the grantee will have to offer an uncertain and possibly worthless bond to the public. That which the Government has found necessary to the integrity of its own securities should not be denied those who have devoted their money to a public enterprise and are working under a Government concession as honest and faithful public servants. Confidence in water power investments cannot be restored by mud-slinging speeches and writings. We cannot hasten the day of water power development by calling each other fools or rogues, or by inciting class against class or by promoting prejudices. The man who is skillful enough to build and operate a water power and the man who is brave enough to finance it are surely deserv- ing of reward, and they are not, by such acts, necessarily made over into thieves and oppressors as some would have us believe. On the other hand, the man who stands fast for a fair and right- eous deal to the public is not a charlatan and a seeker for cheap notoriety, as others would have us believe. As has already been remarked, all parties are very close to- gether. Some of the remaining differences are mere matters of terminology. Instead of "bawling out" a proposal merely be- cause it is advanced by a water power man, would it not be better to get beneath the surface and judge it upon its merits? Instead of scoffing at another proposal merely because a "conservationist," without water power experience, expresses it, let us see whether it does not have that estimable advantage of perspective. We want water power development as soon as possible, and it makes not a CONCLUSION 65 shade of difference who, in the controversy of the past eight rears, has been right and who has been wrong. The cause is bigger than any man or group of men. Let us forget the past and start new. We are sure of a few things : 1st. That it is not safe nor ultimately profitable to conduct an industry in a wrongful manner; this is one of the axioms of modern business and the successful water power business rests absolutely upon it. 2d. That the water power men do not expect to get from the Goyernment more than is fair, and they do not expect to conduct their business in a wrongful manner. If they had other expecta- tions or intentions, Congress would see to the one and public serv- ice commissions to the other. 3d. That there will be no water power development commensu- rate with the resources of the country unless Congressional legisla- tion will so safeguard development as to encourage investors to put their savings into water power enterprises and thus permit water power companies to obtain ample capital at reasonable rates. 4th. Thai Congress and tin 1 various State legislatures can con- trol water power companies engaging in public service business — can control their rates and service — and it is not necessary to impose conditions hindering or restricting development and the acquisition of capital in order to insure fair treatment of the con- sumer. 5th. That every petty burden and every irritating limitation placed on a water power development for the purpose of "protect- ing the public" is and must be paid tor by the public Therefore, in setting up these things for the public good, it is always well to ascertain whether or not some of the many obstructions really are for the public good and whether in each case the good derived is commensurate with the cost. It is only when the benefits equal or exceed t he cost t hat such things are wise. 66 THE WATER POWER PROBLEM 6th. Finally and most important — water powers on the public lands and on the navigable streams will always be commercially inferior to and will lag behind those developed on non-navigable streams and on private lands unless the conditions and stipula- tions governing the former arc 1 at least as favorable as those gov- erning the latter. Henry J. Pierce. Seattle, Wash., August 1, 1915. %, -v 4 r*. ¥5 *m$ I Ml ■"•■ i ... B T X .-* a 3.2 £ «s . 3 8) > 5 5 si ft o - o o -I -w ^ to _ - Ss x. 3 -a - £ - C - = = ~ - ™ y: s "2 ft H - X 2.8 H gO = . 3 •7 a - .£ "• - 5 ~ — r- - - - - : - - sj APPENDIX A COMPARATIVE REVIEW OF THE PROVISIONS OF THE "ADAMSON BILL" AND THE "ADAMSON-SHIELDS BILL" ADAMSON BILL (H. R. 16053) as passed by the House of Representa- tives. Authority. — The requirement that consent to develop water power must be obtained, in each individual case, from Congress would prevent the early development of our water powers. (Sec. 1.) Capacity of Grantee. — Any person, corporation or association may become grantee whether or not possessing qualifications recognized by a State. (Sec. 1.) Tenure. — One year preparatory; three years for construction; fifty years tenure. (Sees. 9, 10 and 12.) Recapture. — By giving two years' notice, the Government may purchase from the lessee at the end of fifty years "all of the property of the grantee necessary and useful for the genera- tion, transmission or distribution of power, including all property to initial point of distribution." This would leave on the grantee's hands all dis- tribution property dependent for its usefulness and existence on the power production property taken from it by the Government. In the interest of both seller and purchaser, both the power production and distributing property should, if purchased, all pass intact from the grantee to the Gov- ernment. ADAMSON-SHIELDS BILL (H. R. 16053) as reported by the Senate Committee on Commerce. Authority. — The authority given to the Secretary of War to grant permits would make possible the early develop- ment of our water powers, provided the terms of the grant were such as to enable the grantee to obtain capital for development purposes. (Sec. 1.) Capacity of Grantee. — A grantee for public utility uses must possess law- ful qualifications under State laws. (Sec. 1.) Tenure. — Two years preparatory; five years for construction, if actually needed under diligent procedure; fifty years tenure, and pending the decision of the Government as to which course it shall then take (see below under "Recapture"), the original grant shall continue under the same terms and conditions. Recapture. — The Government may take over at any time after fifty years "all the property of the grantee, de- pendent in whole or in part for its usefulness on the rights herein granted which are necessary and appurtenant or acquired and valuable or servicea- ble in the distribution of water or in the generation, transmission and dis- tribution of power." All of the above described property would be necessary for full operation and distribution if taken over by the Government for itself or a new grantee, and any portion of it left on the hands of the original grantee would be value- less to him except for disposition as junk. liS THE WATER POWER PROBLEM ADAMSON BILL — Continued ADAMSON-SHIELDS BILL — Cont'd The Bill provides that if the Govern- ment takes the property, it shall pay actual cost for lands, depreciated value of structures and nothing for "intangi- ble elements." The provision that the Government or a new grantee should assume exist- ing contracts made in good faith is in effect the same as in the Shields Bill. At the end of the 50-year tenure, the Government has four options: a. May purchase the property by authority of Congress and operate it. b. May renew the grant to existing grantee. c. Grant may be transferred to a new grantee. d. May do nothing and leave the original grantee at end of tenure with property on his hands and no franchise or right to operate it. The uncertainty as to what the Gov- ernment would do would prevent capi- tal from entering the water power field. (Sec. 10.) The bill provides that the grantee shall be paid the fair value of the prop- erty, meaning the value of the land at the time it is taken over and the de- preciated value of structures, together with such other elements of value as may be fair and lawful. Contracts which have been entered into in good faith and under reasonable conditions are to be assumed by the Government, but nothing is to be paid for them. If the grantee and the Government can- not agree upon prices for the property, it shall be left to the district Federal court for decision. By authority of Congress, the Gov- ernment may take over the property at any time after fifty years, and a. Renew the grant to the original grantee on such terms as may be authorized by then existing law. b. Grant the privilege to a new grantee on such terms as it may be able to secure; c. Operate it itself. (Sec. 6.) Payments to Government. Payments to Government. a. Such rental charges for privilege as Secretary of War may impose; first rental rate to operate 20 years and then a readjustment, to be followed by subsequent adjustments every ten years thereafter. b. For cost of investigation neces- sary for approval and for supervision of construction. c. For benefits derived from head- water improvements of every kind. d. For lands of United States occu- pied, such charges as may be fixed by Secretary of War. e. For cost of removing structures at any time Secretary of War shall be- lieve navigation has been injured. (Sees. 2 and 4.) a. No rental charge for privilege. b. Same as (b) opposite. c. Same as (c) opposite. d. Same as (d) opposite. e. No provision for destroying the works of the grantee without indem- nity, unless grantee commits an unlaw- ful act. No Federal tax upon the develop- ment of water power is imposed. The taxation, if any, is left to the States to impose. Character of Plans. — The Secretary of War is directed to require that the plans shall be "best adapted to con- serve and utilize in the interest of navigation and water power develop- ment, the water resources of the re- gion." Character of Plans. — The Secretary of War is "directed" to accept the plans of the applicant "best qualified to expedite and realize the maximum useful development of all the water re- sources of the region." An additional requirement not speci- fied in the Adamson Bill requires that the applicant must first comply with the laws of the State. (Sec. 2.) APPENDIX A 69 ADAMSON BILL— Continued Locks. — The bill makes it obligatory upon the grantee to provide locks for navigation facilities whenever, during the term of the grant, the Secretary shall determine that such improve- ments are needed for navigation pur- poses. This holds over the head of the grantee an expenditure, which may be demanded at any time, equivalent in some cases to the entire cost of the power plant. A lessee is entitled to know before he invests his money and that of his backers approximately what his investment is going to be. There can be no surety under the Adamson Bill in this respect. In case Government builds locks, grantee must convey land needed free of cost to Government, and furnish free power to construct and operate same. (Sees. 2 and 3.) ADAMSON-SHIELDS BILL — Cont'd Locks. — Under the Shields Bill, the Secretary of War has ample authority to secure from a grantee all navigation improvements, the only difference be- tween this and the Adamson Bill being that the Secretary of War must specify his demands at the beginning and thereby enable the grantee to have some assured financing. In case Government builds locks, same requirements as in Adamson Bill. (Sec. 2.) Power at Government Dams. — The right to the use of surplus water in Government built and owned dams may be granted for 50 years, subject to payment of reasonable rentals, for an initial period of twenty years, and re- adjustments at the end of each 10-year period thereafter, preference being given to municipal corporations. (Sec. 14.) Power at Government Dams. — The right to develop power at Government built or owned dams may be granted by the Secretary of War under "such terms as may be deemed by the Secre- tary of War for the best interest of the United States and reasonable and fair to both parties," and in awarding such lease, preference shall be given to the applicant whose plans are deem- ed best adapted to conserve and utilize in the public interest the navigation and power resources of the region. Public Lands. — The bill provides that any public lands necessary for power development in connection with improvement of navigation may be ob- tained only through the President withdrawing them for that purpose. The bill gives no right to the exer- cise of eminent domain for securing public lands necessary for power pur- poses in connection with navigation improvement. (Sec. 4.) Public Lands. — The bill provides that the grantee may use public lands certified by the Secretary of War as being necessary for navigation pur- poses upon the withdrawal of the same by the President for such purposes and by payment of such rentals as may be fixed by the Secretary of War. The bill gives no right to the exer- cise of eminent domain for securing public lands necessary for power pur- poses in connection with navigation improvement. (Sec. 2.) Assignment. — Assignment of grant can only be made with the consent of the Secretary of War. (Sec. 8.) Assignment. — No assignment of the grant except for purposes of financing can be made without the approval of the Secretary of War to "any trans- feree not having the qualifications here- 70 THE WATER POWER PROBLEM ADAMSON BILL— Continued ADAMSON-SHIELDS BILI Cont'd in specified for a grantee hereunder," but "any successor or assign of the rights of any such grantee shall be subject to all the conditions of the permit to the same extent as though such successor or assign were the grantee hereunder." (Sec. 1.) Regulation. — Secretary of War given authority to regulate rates and service in interstate business, but whenever a State maintains regulation which shall be equitable as between States, Secre- tary may forego this. No authority given Secretary to regulate intrastate rates in cases where State fails to do this. Publicity of accounting provided. (Sec. 11.) Authority Over Navigation Struc- tures. — This bill may deprive Secre- tary of War of exclusive authority over navigation-power structures, because in cases where public lands are utilized and the President has not withdrawn said land from entry for the sole pur- pose of navigation, the Secretary of the Interior has joint jurisdiction with the Secretary of War. (Sec. 3.) Regulation. — Congress reserves right to regulate interstate rates and service. Secretary of War authorized to regulate intrastate rates in States which have provided no regulatory functions. Regulation of intrastate rates in States that have provided regulatory functions left to those States and nothing shall interfere with rights of States to so regulate or tax. (Sec. 7.) Authority Over Navigation Struc- tures. — Provides for only one author- ity — the Secretary of War — recogniz- ing that the navigation purpose is paramount; that the authority of said Secretary over navigation is, and long has been, exclusive, that the mere in- cident of public land occupation can- not change the real paramount pur- pose, and that it is not productive of real progress to divide jurisdiction. (Sec. 2.) Navigation Interests. — Dam and ac- cessory works operated under control of Secretary of War and navigation is paramount. (Sec. 5.) Navigation Interests. — Same as Adamson Bill. (Sec. 3.) Penal Clause. — Provides full penal- ties for all violations of law and law- ful regulation and gives Secretary of War authority to remove or destroy the works at expense of grantee. (Sec. 7.) Penal Clause. — Provides same full penalties, except in the extreme case, the court may decree the sale of the works and the innocent stockholders of the offending company may secure such residue of their investment as may be derived from said sale. This is quite different from the Adamson Bill, under which the sins of company offi- cers may be punished by totally de- stroying the investment of minority as well as majority stockholders. (Sec. 8.) Repeal. — In reserving the right to alter, amend or repeal, the bill specifies that in such case the lessee shall re- ceive no compensation for damage or Repeal. — In reserving the right to alter, amend or repeal, the bill respects the property rights of the grantee if injured by any change in the law. If APPENDIX A 71 ADAMSON BILL— Continued ADAMSON-SHIELDS BILL — Cont'd confiscation or rendering operation un- profitable through changes in the law. This would prevent the development of water powers and the enlistment of capital more effectively than the rev- ocable feature of the present law, for capital never would invest with such danger of total or partial loss hanging over it. the grantee builds his plant in good faith under a permit issued under the law, he is entitled to this protection in all equity and justice and such a con- dition is a necessity to successful financing. APPENDIX B COMPARATIVE REVIEW OE PUBLIC LANDS WATER POWER H. R. 16673 (FERRIS BILL) as passed by the House of Representa- tives. H. R. 16673 (FERRIS BILL) as reported by Senate Committee on Public Lands. 1. The Lease — How Made. — The Secretary of the Interior is "author- ized and empowered" to lease power site lands — i. e. t he may use his dis- cretion both as to the granting or the refusing of the lease to an applicant and in contested cases as to the selec- tion of the favored applicant. (Sec. 1.) 1. The Lease — How Made. — The Secretary of the Interior is "directed" to lease to any properly qualified per- son who shall comply with the law passed by Congress, and who is author- ized bv the btate to use the water. (Sec. 1.) 2. Specific Terms. — Leases grant- ed "under general regulations to be fixed" by the Secretary, and "under such terms and conditions as he may prescribe, not inconsistent with the terms of the Act." That is, the Secre- tary is given absolute discretion as to specific terms not covered by the Act and mav discriminate between parties. (See. 1.) 3. Public Lands Exempted From Terms of Bill. — National parks and military reservations; in the case of other reservations no lease shall be given unless the chief officer of the De- partment in charge shall certify that the same will not interfere with the purposes of the reservation. (Sec. 1.) 4. Qualifications of Lessee. — Citi- zens of the United States or any asso- ciation of such or any corporation duly organized under State or Federal laws. (Sec. 1.) 2. Specific Terms. — Leases grant- ed "under general regulations to be fixed" by the Secretary "not inconsis- tent with the terms of the Act." That is, the Secretary must treat all appli- cants alike. (Sec. 1. ) 3. Public Lands Exempted From Terms of Bill. — Same as House Bill. (Sec. 1.) 4. Qualifications of Lessee. as in House Bill. (Sec. 1.) -Same 5. Period of Lease. — Discretionary 5. Period of Lease. — Fifty years, with Secretary of the Interior but not unless the applicant and the Sec- longer than 50 years, and at the end retary agree on a shorter period thereof the Government may do one as the applicant may elect, and at the APPENDIX B MEASURES PROPOSED OR CONSIDERED IN 63d CONGRESS S. 6712 (JONES BILL) which was not reported by Senate Committee on Public Lands. S. 7171 (WORKS BILL) which was not reported by Senate Committee on Public Lands. 1. The Grant — How Made. — The bill makes affirmative grant to quali- fied applicants who shall comply with its terms and submit proof of their right to use the water. (Sec. 1.) 1. The Grant — How Made. — Af- firmative grant to qualified applicants who shall submit proof of right to use the water under State laws. (Sec. 1.) 2. Specific Terms. — Set forth in the bill or determined by State laws. 2. Specific Terms. — Set forth in the bill or determined by State laws. 3. Public Lands Exempted From Terms of Bill. — None. 3. Public Lands Exempted From Terms of Bill. — None; except in Na- tional forests, National monuments and Indian reservations, the location shall be such as not to interfere with the purposes of said reservations. (Sec. 1.) 4. Qualifications of Grantee. — Any State or municipal corporation or any mutual or public service corpora- tion or person authorized by the State to conduct power business, except in developments of 1,000 h. p. or less, in which case no special qualifications are necessary. (Sees. 1 and 13.) 5. Period of Grant. — Fifty years, after which the Government may take over the property at any time, either for itself or for conveyance to a third (8) 4. Qualifications of Grantee. — Same as Jones Bill. (Sec. 1.) 5. Period of Grant.- Runs coter- minous with right of grantee or his successors to use the water under State authority, and if water rights are lost THE WATER POWER PROBLEM H. R. 16673 — Continued of four things: (a) take over the prop- erty; (b) lease to the original lessee; (c) lease to a new party who may be favored by the administrative officer, notwithstanding the fact that the orig- inal lessee may have conducted him- self lawfully and honorably; (d) may do nothing and thereby leave the prop- erty without title. There is absolutely no guaranty that the Government will make any disposition of the lease at expiration. This means an impaired and uncertain investment from the start. (Sees. 1, 5 and 6.) H. R. 16673 (Senate) — Continued end thereof the Government may do one of four things: (a) take over the property; (b) lease to the original lessee who has preference right over any other party upon such terms and conditions as then existing law shall authorize; (c) lease to a new party if original lessee fails to renew; (d) may do nothing, in which event the lease may continue under terms as may then be in force. (Sees. 1, 5 and 6.) 6. Construction and Operation.— Provides for diligent, orderly and rea- sonable development and continuous operation subject to market conditions. (Sec. 2.) 6. Construction and Operation. — Same as House Bill. 7. Leases to States and Munici- palities. — The Secretary may give preference to applications for leases by States and municipalities. (Sec. 1.) 7. Leases to States and Munici- palities. — Same as House Bill. (Sec. 1.) 8. Sales to One Consumer. — The Bill forbids a lessee to contract for the delivery of more than 50 per cent of his output to one person irrespective of whether such a limitation would prevent financing, prohibit large man- ufacturing development, or allow a portion of the product of a developed site to go to waste. (Sec. 2.) 9. Regulation. — Rates and service and the issuance of securities are to be regulated by the Secretary of the Interior in interstate cases; also in intrastate cases where States have not provided for regulatory procedure. (Sees. 3 and 9.) 8. Sales to One Consumer. — The Bill makes no fanciful and artificial limitations on the sale of energy and puts no shackles on commendable in- dustrial enterprise, leaving the deter- mination of offenses against the law of the land to the courts, under pro- cedure prescribed by the sovereign. 9. Regulation. — Interstate rates and service and the issuance of securi- ties are to be regulated by the Inter- state Commerce Commission. Intra- state rates, service and security issues in those States which have provided no regulatory procedure are to be reg- ulated by the Secretary of the Interior. (Sees. 3 and 9.) APPENDIX B 75 S. 6712 — Continued party. In the event that the United States does nothing, the grant contin- ues as originally given. This preserves title to the property and prevents de- pression of investment. (Sec. 2.) S. 7171 — Continued or forfeited so that the water cannot be used in connection with the land, said land reverts to the United States or to such successor in interest as may possess rights to use the water. If ter- minated by State, the land reverts to the United States. (Sec. 5.) G. Construction and Operation. — The grantee is given two years to com- mence construction and five years fur- ther to complete if so much time is necessary under continuous and dili- gent procedure. Extensions may be granted by President when, in his judgment, the public interest will be promoted thereby. The grantee must operate to the extent deemed by the Secretary necessary to supply ade- quately the needs of the available mar- ket. (Sec. 6.) 6. Construction and Operation. — The grantee is given one year to com- mence construction and five years to complete, if so much time is necessary under continuous and diligent pro- cedure. The grantee is required to operate according to the public demand for power. (Sec. 5.) 7. Grants to States and Munici- palities.— The Bill commands that the grant approved by the Secretary shall be the one which "will promote the highest and greatest practicable use of the water resources involved." (Sec. 2.) 8. Sales to One Consumer. — See Ferris Bill (Senate) opposite. 7. Grants to States and Munici- palities. — The matter of preferential grants is settled by the State. The grant is made to the applicant holding water rights from the State. (Sec. 2.) 8. Sales to One Consumer. Ferris Bill (Senate) opposite. -See 9. Regulation. — The Bill does not provide for grants in States which have not provided for regulation of public utilities. Rates and service in other States are to be regulated by such States. The United States reserves the right to regulate interstate rates and service. (Sees. 1 and 7.) 9. Regulation. — Intrastate rates and service are placed under State authority. Interstate rates and service are placed under Interstate Commerce Commission. (Sec. 7.) THE WATER POWER PROBLEM H. R. 16673 — Continued 10. Combin vnoNs ix Restraint of Trade. — The Bill forbids all acts of the lessee which accomplish restraint of trade. (Sec. 3.) 11. Lawful Combinations. — A law- ful combination may be prevented by the Secretary of the Interior if in any particular case it does not please him. (Sec. 3.) H. R. 16673 (Senate) Continued 10. Combinations in Restraint of Trade. — Same as House Bill. (Sec. 3.) 11. Lawful as House Bill. Combinations.- (Sec. 3.) -Same 12. Sales to Distributing Compa- nies. — The Bill forbids, except upon consent of an administrative officer, the sale of power to a distributing company. It is immaterial, according to this bill, whether the lessee, by such sale, does or does not restrain trade, does or does not benefit the public, or whether the producer or the distribu- tor is or is not regulated by a sovereign as to rates, service, etc. The decision of the Secretary, wise or unwise, is final. (Sec. 4.) 13. Assignment of Lease. — No Lease assignable or transferable with- out consent of Secretary of the Inter- ior (Sec. 4). This provision accom- plishes nothing except the further em- barrassment of a company that may be in financial straits. Neither the Gov- ernment nor the people care who holds a lease so long as the holder is under control. 12. Sales to Distributing Compa- nies. — The Bill makes no mention of sales to distributing companies, places no obstacle in the path of proper devel- opment and leaves to the judiciary the duty of determining whether any act of the producer or distributor is in vio- lation of law or prejudicial to the pub- lic interest. The Bill assumes, by in- ference, that both producer and dis- tributor are subject to regulation in the public interest and that an offense is subject to punishment by sovereign. 13. Assignment of Lease. — Leases may be assigned or transferred, but the successor is bound by all the obli- gations to Government of the original lessee. 14. Liens or Mortgages. — No lien can be created on any water power property developed under a lease, whether the land so leased constitutes all or only a minute part of the devel- opment, without the approval of the Secretary of the Interior. (Sec. 4.) 15. How the Property May Be Taken Over by the United States. — At any time after three years immedi- ately prior to lease expiration, United States may give three years' notice and take over all the property acquired by the lessee, dependent in whole or in part for its usefulness on the con- tinuance of the lease. (Sec. 5.) 14. Liens or Mortgages. — No lien can be created on the land leased with- out the approval of the Interstate Com- merce Commission. (Sec. 4.) 15. How the Property May Be Taken Over by the United States.— At any time after three years immedi- ately prior to lease expiration. United States may give three years' notice and take over all the property depen- dent in whole or in part for its useful- ness on continuance of the lease, or upon mutual agreement with the les- APPENDIX B 77 S. 6712 — Continued 10. Combinations in Restraint of Trade. — The Bill forbids all acts of the grantee which result in restraint of trade. (Sec. 3.) 11. Lawful Combinations. — The Bill makes no provision for giving the Secretary authority to permit combina- tions of plants or lines, because as the bill defines the acts and practices which constitute restraint of trade, the violation of the law is left to deter- mination of the local body charged with regulation, or to existing Federal law. 12. Sales to Distributing Compa- nies. — Same as Ferris Bill (Senate). S. 7171 — Continued 10. Combinations in Restraint of Trade. — Covered by existing Federal and State laws. 11. Lawful Combinations. — Same as Jones Bill. 12. Sales to Distributing Compa- nies. — Same as Ferris Bill (Senate). 13. Assignment of Lease. — Left to State regulation. (Sec. 7.) 1.3. Assignment of Lease. — The bill provides that assignment or transfer of water rights under State laws car- ries with it the lands granted by the United States for the use of the water. (Sec. 5.) 14. Liens and Mortgages. — Left to State regulation. (Sec. 7.) 14. Liens and Mortgages. State regulation. (Sec. 10.) -Left to L5. How the Property May Be Taker Over by the United States. — Upon expiration of 50-year period or any time thereafter, Congress may pro- vide for termination of grant and dis- position of all the property dependent for its success on the rights granted. (Sec. 5.) 15. How the Property May Be Taken Over by the United States. — Whenever the right to use the waters for the purposes of the grant shall be forfeited or otherwise terminated by the State wherein the land is situated, or by flnal adjudication in the courts, the land reverts to the United States. i Sec. 5. » 78 THE WATER POWER PROBLEM H. R. 16673 — Continued 16. Compensation foe Property Taken Over. — The Bill provides for payment on taking over, at expiration of lease, lands, water rights, etc., at actual cost, and of improvements at fair value, or, in other words, depreci- ated value, exclusive of intangibles. The lessee is thereby denied the bene- fit of any appreciation of property, but is penalized for full depreciation. (Sec. 5.) 17. Elements of Value Excluded From Compensation. — The Bill ex- cludes: (a) the value of the franchise; (&) good will; (c) profits to be earned on pending contracts; (d) all other in- tangible elements. (Sec. 5.) All the above are fair to the investor except (d) (Sec. 5). Intangible ele- ments cover many things necessary to the business for which legitimate cash expenditure is required. To deprive the investor of these would be nothing but confiscation of a goodly portion of the actual value of the property. 18. Contracts for the Sale of Power Beyond Lease Period. — Con- tracts for the sale or delivery of power for periods not exceeding 20 years be- yond the life of the lease may be made if, in the judgment of the Secretary of the Interior, public interest justifies. No recognition is given to the fact that the States may possess some sover- eignty over contracts executed within them. Furthermore, if at the end of the thirtieth or fortieth year of the lease, an industrial condition should arise which required a 50-year con- tract, or if even at the beginning of the lease a perpetual contract should be required for irrigation, the lessee would be powerless. (Sec. 7.) 19. Federal Tax. — For the occu- pancy and use of Government lands, the Secretary of the Interior may use his discretion in raising revenue (which sovereign authority the Consti- tution gives only to Congress) and may H. R. 16673 (Senate) — Continued see, the United States may take a severable and complete unit of any such power system. (Sec. 5.) 16. Compensation for Property Taken Over. — The Bill provides for payment of fair value of property, which includes reasonable appreciation of property as well as depreciation. (Sec. 5.) 17. Elements of Value Excluded From Compensation. — The Bill ex- cludes: (a) rights of way or other property of the United States under lease; (b) value of the franchise; (c) good will; (d) going concern; (e) fu- ture profits from pending contracts or prospective revenues, profits or divi- dends. (Sec. 5.) "Going concern" has been declared legitimate by the U. S. Supreme Court. It represents legiti- mate cash paid by the business, and to deprive the investor means non-pay- ment for a portion of actual value of property. 18. Contracts for the Sale of Power Beyond the Lease Period. — May extend twenty-five years beyond lease period if approved by State pub- lic service authorities and Secretary of Interior. (Sec. 7.) 19. Federal Tax.- Bill (House). -Same as Ferris APPENDIX B 79 S. 6712 — Continued S. 7171 — Continued 16. Compensation for Property Taken Over. — See Ferris Bill (Senate) opposite. (Sec. 5.) 16. Compensation for Property Taken Over. — Settlement to be in ac- cordance with State laws. 17. Elements of Value Excluded From Compensation. — The Bill ex- cludes as an element of value the use of or the right to use the lands ac- quired under the terms of the Act. (Sec. 3.) For the other elements, Con- gress would provide in each case. (Sec. 5.) 17. Elements of Value Excluded From Compensation. — The Bill allows no compensation or value in connec- tion with the rights obtained or used under the Act. (Sec. 4.) 18. Contracts for the Sale of Power Beyond Lease Period. — Con- tracts for the sale or delivery of power may be made for periods extending be- yond the period of lease when the pub- lic interest requires (not when requir- ed in the judgment of the Secretary) and on the approval of the appropriate State authority. (Sec. 4.) 18. Contracts for the Sale of Power Beyond Lease Period. — Regu- lated by terms of water rights in States. 19. Land Rentals. — The United States is to be paid 5 per cent interest on the appraised fair value of the pub- lic land occupied. 19. Land Rentals. — Provides that fair value of lands including enhance- ment by reason of special adaptability for power purposes, shall be determin- ed. Provision for payment of said value evidently omitted by author through inadvertence. 80 THE WATER POWER PROBLEM H. R. 16673 — Continued base Federal taxes on the amount of power developed by the State's water. (Sec. 8.) 20. Accounts \m> Reports. — Secre- tary of the Interior authorized to ex- amine books and accounts and require statements and reports, notwithstand- ing the fact that a lessee may be oper- ating entirely within one State and thereby is subject to State laws. 21. States" Control of Water. — States' control over use of water af- firmed notwithstanding the fact that many sections of the bill deprive the States of such control. (Sec. 14.) H. R. 16673 (Senate) — Continued 20. Accounts and Reports. as House Bill. -Same 21. States' Control of Water. — Same as House Bill. APPENDIX B 81 S. 6712 — Continued S. 7171 — Continued 20. Accounts and Reports. — The rendering of accounts and reports is left to the States, except that the United States reserves the right to do this in case of interstate service. (Sec. 7.) 20. Accounts and Reports. — All un- der State control. 21. States' Control of Water. — Deference is paid directly to States' authority (Sec. 2), and nothing in the bill seeks to violate or abridge that authority. 21. States' Control of Water. — The whole bill is based on the assump- tion that the States' control of water is the main consideration. APPENDIX C Calendar No. 740 3d Session. 03 CONGRESS H. R. 16053 [Report No. 846.] IN THE SENATE OF THE UNITED STATES. August 5, 1914. Read twice and referred to the Committee on Commerce. December 19, 1914. Reported by Mr. Shields, with an amendment. [Strike out all after the enacting clause and insert the part printed in italic] AN ACT To amend an Act entitled "An Act to regulate the construction of dams across navigable waters," approved June twenty-first, nineteen hundred and six, as amended by the Act approved June twenty-third, nineteen hundred and ten. 1 Be it enacted by the Senate and House of Kepresenta- 2 tires of the United States of America in Congress assembled, 3 Th at th e Act entitled "An Act to regulate the construction 4 of dams- a cross n avigable- waters," a pproved- June twenty - 5 third, nineteen hundred and ten r 4>e r ^nd the sam e is hereby , (J amended to read as follows: 7 "Section 1. That when consent er authority has been 8 or may hereafter be granted by Congress, either direet4y-er 9 indirectly through any duly authorized official or official s-of •i 1 t lit' United Slates, to any persons to cons t ruct and maintain 2 a dam for water power or other purpose across or in any of 3 the navigable waters of the United States, such dam shall 4 not be built or commenced until the plans and specifications 5 for such dam and all accessory works, together with such G drawings of the proposed construction and such map of the 7 proposed location as may be required for a full understanding 8 of the subject, have been submitted to the Secretary of War 9 and the Thief of Engineers for their approval, nor until they 10 shall have approved such plans and specifications and the 11 location of such dam and accessory works; and after such 12 approval it shall noUbe lawful to deviate from such plans 13 o r sp ecificatio ns ei th er before o r after completi on of 4,h% 14 structure sinless the modification of such plans- o r s pe cifics 15 tions has previously- Jbeeu -submitted to and r eceived t he 16 approval of the Secretary of War and the Chief of Engineers, 17 Such plans, specifications, and drawings shall be submitted 18 within two years after the date of the approval of the Act 19 authorizing the construction. 20 "Sec. 2. That as a part of such approval such condi - 21 tions ami stipulations may be imposed as the Secretary of 22 War and the rhief-of- Engineers may deem necessary 4o^pre- 23 tect the present a nd- future— interests o£4he United -States? 24 which may-4Bc4ud e the cond ition that the persons construct- 9K itio- af innin+m'niTia- «rwh flnm ska4j construct^- main tain , and ing-or— maintaining such da 1 operate iu connection th e r e with, witho ut ^spense — to— the 2 Unite d Stat e s, a lock or locks, boom s, sluices , or a n y -other 3 st raetar-e-oiM^tyuctureR wh i eh the See re t a ry of War and th e 4 Chie£ of Engin e er s or Congress at-any-4iffle- may deem n eces- 5 sa r y in the intere s t s of n a vigation, in -ac ce*rdance Av ith such G plans as they may approve^and also that- whenever— Con- 7 gress shall deem such facilities necessary, t he~persons owning 8 such dam shall convey to the United States, free of cost, title 9 to such land as may be^*equired for such constructions and 10 approaches, ^nd shall gran t to the United States free water 11 power or power generated trom water power for^ building 12 and op e rating su ch c onstructions , at the ^liseretkm— of- the 13 and Chief of Engine e rs, may - tired 14 fo maintaln-and-ope rat c such lock without e xpense to the 15 United States. The^Secretary of Wannay- provide, as a 16 condition of such app r o v al, fo r t he payme n t t o Ihe United 1 7 States ^)f reasonab le am iu a U^rharges-for the be i 18 accrue to the grantee by the authoril 1!) and at the end of twenty years and every ten years thereafter 20 the Secretary of War mtrrreadjust the annual charges as may 21 then be just and reasonable. 22 "Skc. 3. That as a part of said app r o v al the Secretary 23 of War and the Chief of Engineers shall require that the 24 plans, specifications, ;ind location for any dam shall be such 25 as shall be best adapted to a compr e h e nsiv e plan for the 1 improv e ment of the waterway 4 n question f o r t he us e s o f 2 navigation and for the full development- of its water power 3 and for other beneticial public-purposes, 4in4- best adapted to 4 con s erve and utilize, in the i ntere st 5 powei* development, the wat er reso i 6 "Sec. 4. That as a part --el 7 tions such approval shall p rovid e — 8 " (-a) — For-^eiinburseme nt to th e Unit e d States of all 9 expenses incurred b y th e Un ited Stat e s with reference 10 project, including t h e cost of any i nv e st igf 11 the approval of the plans as her e tofor e provid e d, and for s uch 12 su pervisi on of—constru ction as may b e n e ce s sary in — the 13 interest of the^United States. 14 " (b) For the"pa yment to the United States of reason- 15 airte-rfrargetr^for ^th e benefits which may accrue to such 1 * > pro j eet tbrougtrtlre fonstru cti o n, operation, and maintenance, 17 in and about such streams, by^he Uni ted States of headwat er 18 improvements of every kind, nature, and description^- in- ersh e ds or land 20 owned, located, or reserve d by th e United States at th e 21 he a d water s of any naviga bl e str ea m for the development, 22 improv e m e nt, or preservation^^ navigat ion in such stream 23 in which such dam mav be-l oeat c d . — Such charges shall b e 24 fixed from time to time by-t hc Secretary of War and Chi e f 25 of — Enginee r s, — based — upon — a — reasonabl e — comp e n s ation 19 eluding storage reservoirs or forestec 1 equitably apportioned among the grantee and others similarly m re c eiving benefits by reason of r water power structures artificially 4 c aus e d by sue] 5 all such ben e fici 6 not to exc e ed in an^ ly such h e adwat e r i mprovement year an amount e qu al to five per 7 ce ntum of the total inv e stm e nt cost, in add ition^ t he n c c c s - 8 sary annual e xpense of the operation of such headwat e r 9 improvement. 10 " (c) That in the cons tr uction, mainten ance, and opera- 11 tion of a ny projec t unde r th is Act for the p romotion of navr- 12 gaticmy the g r an t ee may, wit h t he consent of the Sec retary of 13 War, use and occupy, w hen necessar y f or ca r ry ing^tnrtrtfae 14 pr o j ect, lands acq u i re d by the United States throu gh pur- 15 ch ase or condemnation and any part of the ^pubrre4an ds with- 16 drawn by the President from entry or 17 sole purpose of promoting navi g ation, which tl 18 m ay do, as pro v ided in the Act entitled, 'An Act to^a uthorize 19 the Presi dent of the United States to make withdrawal o f 20 public land s in certain cases/ approved June twenty - fifth, 21 nineteen hundred and ten. For any of such lands so used 22 the grantee shall pay to the United States such charges as 23 may be fixed by the Seeretaryrji^War. 24 "(d) For the payment or securing the payment to the 25 United States of such~ sums and in such manner as^the 1 Secretar y of War and th e Chie f of E ng ineers may d eem 2 reasonable arid just substantially to restore conditions upon 3 such stream as to navigability, "existing : at the time of such 1 approval, whenever the~1SeeTetary"of War and the Chief of 5 Engineers shall determine that navigation has been injured 6 by reason of the construction, maintenance, and operation of 7 such dam and its accessorv works: 8 u St:c.Hj. That the right is hereby reserved ^to the 9 United States-to construct, m aintain, and operate, ^m cotf 10 nection with any daTn^built^in accordance witii the provisions 11 of this Act, a suitable lock or locks, booms, sluices, or any 12 other structures for navigation purposes, and theroperation ~6f 13 navigation facilitres^vhich shall be constructecTas a part of or 1 1 in connection with any dam built^under the provisions of 15 this Act, whether nt — the — expense of ~sxrch grantee or~of 16 the United ^States, shall aL all Limes be~srrbject to suclr 17 reasonable rules and: regulations in the interest of navigation; 18 including the control of the level of the^pbol caused by 19 any such dam, as shall be made by the Secretary of War 20 and Chief of Engineers, and in the use and operation of such 21 navigation faTilitie^~tllerinterests of~iiavigation shall be para7 22 mount to the uses of such dam by such grantee for power 23 purposes: Such rules and" regulations liiay^ include the 21 maintenance and operation by such grantee, at its own 25 expense, of such lights~aTid other signals as may be directed 1 by the Secr e tary of War and Chief of Engineers and such 2 fishways as shall be prescribed by the Secretary of Com - 3 mcrcc, and for failure to comply with any such rule or regula - 4 tion such grante e shall be deemed guilty of a misdemeano r, 5 and upon conviction thereof shall be subject to a fine of not 6 less than $500 f o r each month's default, in addition to other 7 penalties herein prescribed or provided by la w. 8 " Sec. C. — That the persons construc t ing, maintaining , 9 or operating any dam or appurtenant or accessor y works, in 10 accordance with the provisions of this Act, shall be liable 11 for any damage that may be inflic t ed the r eb y upon pr iv a te 12 property, either by overflow or o therwise. 13 "Sec. 7. That any grantee who shall fail or refuse to 11 c omply with the lawful order of the Secretary of War, mad e 15 4b accordance with - th e provisions of th i s Act, shall be d ee m e d 16 guilty of a misdemea n or, and o n conviction thereof shall bo 1 7 punished by a fine not exceeding $1,000, and every month 18 -such grantee shall renrairrin default shall be deemed a new 1 9 uffense and — sirb jert ^u ch grantee — to additional penalties 20 -therefor; nud in addition — to said penalties the Attorney 21 Genera] may; on request of the Kecretarrof— War, institute 22 proper proceedings in the dist rict cou rt o f th e I Tnttedr States 23 lii the district in which such structu re or any of its acc es sory 24 works may, in wh ole or in part, exist, f o r the purpose— of 25 having such violation stopped by injunction, uiandj (9) 1 o th e r proce ss; and anv such di s trict court shall have i u-r-is- 2 diction over all such proc ee d i ng s and s hall have the power t o 3 make and enforce a ll-writs, orders, and decree s necessary t o 1 co mp e l the complianc e with th e r e quirements of this Act and 5 th e lawful ord e rs of th e Se cr etary of War and the perform- (> ance of any condi t io n or s t ipulation imposed under the pro- 7 visi ons of this Ac t; a nd if the unlawful maintenance and 8 opera tion a r e shown to be such as shall require a revoca- 9 tion of all r ights and privileges held under authority of this 10 Act, t he court mav decree su c h revocation. — In case of such 11 a decree, the court may wind up the business of such grantee 12 conducted under th e rights in question, and m a y d e cla re 13 such dam and accessory works to be an unreasonable obstruc - 11 tion to navigation an d cause their removal at the expense of 15 the grantee owning or controlling th e sam e , e xc e pt wh en 16 th e Unit e d Stat e s has b ee n p reviou sly r e imburs e d for such 17 r e moval, or may provid e for the sale of the dam and all 18 accessory and appurt e nant works con s truct ed — under a ^a- 19 thority of this Act fo r The further development of water 20 power, and ma y make and enforce such other and further 21 or de r s and decrees as equity demands ; and in case of such 22 a s a le for the further development of water power the vende e 23 shall — take — the — rights and — privileges — a»d — sh all — perform 24 the duties which belonged to the previous grantee, and shal l 25 assume such — outstanding obligations and liabilities aris - 9 1 ing out of the maintenance and operat ion of said dam -and 2 accessory works for power purposes as the court may deem 3 eqmtable- in the ^pre mises, 4 "- Sec. - 8. That no rights grant e d under the provision s 5 of this Act and no property or project installed a nd operated 6 under— the provisions or benefits of this Act shall be assigned 7 or transferred except upon the written consent of the Sec- 8 r etary of War, e xc e pt by trust d ee d or mortgag e issued for 9 the purp ose of financing the busin e ss o f such owner, and 10 any suc c e ssor or — a ssign of such property or project or of _L J_ ftHV 1*1 ii'l 1 1 S <\ i'V I'll 1 II ii H01't*ll 1 M I t^l% WllOT 1 1 &Y 1 1\ \ 1)4 11 11 IH 1--V- ll'cl 1 \ S- 12 fer, judic ial sal e , or for e closur e s al e or otherwi s e, shall be 13 subject to all the condition s of th e appr o v a l under which 14 s uch right s are held, and also subject to all the provisions 15 and conditions of this Act to the same extent as though 1<> such successor -or -a ssign were the original owner hereunder. 17 -Skc 9^-T hat the rights gran t ed herein shall continue 18 for a - period of fifty years from and after the dat e of th e 19 original appr oval, unl es s sooner revoked or forf e it e d as pro - 20 vided for in Ibis Act. 21 "Sir. 4^7- T hat upon not le s s than two years' no ln-e 22 prior lo l In- expirat ion of any gra nt made hereund er, and at 23 any lime aft e r (lie expiration of such grant, upon six mo nth s' 24 notice, febe Qnitcd S tate s , or a ny person authorized by Con - II. R. 16053 2 10 1 gresSj shall hfrve th e right to tak e over all of th e property 2 ©f the grante e nece ssary and u sefu l for th e g e neration, traiis- 3 mission, or distributio n of pow e r. Such prop e r ty s hall in - 4 ehifle the lands or inter ests in lands acquired or u s ed for 5 fefee purpos es of th e d evel opment and transmission of power, 6 the dam a-nd ---othe r structures, and the equipm e nt necessary 7 and us e ful for the generation of power, and the transmissi o n 8 sy s t e m from g e n e ration plant to i ni tial poinl listribution, 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 ami- th e lock or locks or other aids to navigation, but shall not include any other property whatsoever. — B e for e taking - posses s ion the United Stat es or th e p e rson authorized by Congress shal l pay therefor (fir s t) th e actual cost t o th e grantee of— ky bv the grantee in tl leration and drs and i scrondV^t he fair value of "the wi oi- orh required by tin- I electrical have h; and which were rate. The actual fair value of o ment between the tcrtire-grantee sxumintr ires ratracts for lave th e --approval of the Secretai faith a lauds or Interest s therei n and the 'it \ shall be -- dete r mined by agree - Par and the^svners of suc h 25 property, and in the-evei Pa dure t©--agree then-by 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 L5 16 17 18 19 21 22 23 24 p roceedings instituted by the United States, or by the per- s o n authorized by the United States , in the district court of the United St ates within which an y portion of su ch d am "Tn determining the fair yalne of the property other than l ands or interests in lands allowance shall hp irmdp for dp- teri oration , if any, of thp existing strnctnrps nnd transmission lines, and no value shall bp claimed or allowpd for thp rig hts h ereby gra n ted, for good - will, going conc e rn, profit in p e nd - i ng contract s f o r electrical energy or for other conditions of enr rent o r prospective business or for any other intang ib l e " 'Sec. 11. That in all cases where the - electric current g enerated from or by any-of- the projects provided for in this Art, including leases- un der s e ct io n fourteen hereof, shall enter int o intersta te or foreign commerce, the rates, charges , and s erv ice for the same to the consume r s thereof shall be just and reasonabl e , and-eve ry unjust and unr e a s on a bl e and u n- duly discrimina tory char ge , rat e , or s e rvice th eref or is h e r e by prohibited and declared to he -H le gal; an d whene ver the Secretary of War sha ll be of the opinion t hat the rates or c harges demanded <>r collected oh the ser vic e rendered for Boeh electric current arc unjust, unreasonable, 8* und uly di s- rriuiinatory. upon complain 1 niadp therefor ami full t h e reon, the Secretary of War is hereby authoriz e) 12 1 pow e red t<> det e rmine mid p 2 i\m\ reasonable rates and charges theref o r t o be observed as 3 the niiixk Miii to be charged and the service to be rendered; 4 and i n case of th e^v iolation ^ f any such order of the Secretary 5 o f War the provisions of this Act relative to forfeiture and - 6 failur e to comply shall apply. That in the valuation for 7 ra te-making purposes o f the property existing under said 8 a pprova l of t he project there may be considered any lock 9 or locks, or oth e r ai d s to navigation, and all oth e r capital 10 expenditur es r e quired by th e United Stat e s, but no valu e 11 shall be c laimed or allow e d for the rights hereby grant e d f or 1 2 good will, g o ing concern, or any oth e r intangibl e value. 13 "The — S e cretary — of — War — is — furth e r — authorized — andr 14 di r e cted to include among the conditions for his a pproval o f 15 any plans or any proj e ct h e rein provided, including leas es 16 und e r — sec ti o n — fourteen — hereof, — as — an — express — condition 17 t her e of, a clause reserving to the Secretary of War the 18 same rights, powe r s, and duties s et forth in this section, 19 t ogether with the same penalty for violation thereof : Pro * 20 rided, That whenever the State in which such current shall 21 be used shall have provided by law adequate regulation for 22 r ates, charges, and service to t he consumers for such el e ctric 23 c urr e nt and such r e gulation shall not b e undu l y discrimina - 24 t ory or unjust aga i nst th e s e rvice or charges in any oth c r - 25 S tat e «-rising-4r om the use of the pow e r f r om the sam e In O 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 23 24 25 project, and such facts shall be established to the satisfaction o f the S e cretary of War , then in such case the prov i sions of t his section shall no t apply to the rates, ch ar ges, and service i n and for such State . "That, except upon the written consent of the Secretary of W ar, no s ale or d eliv ery o f power sh all b e m ad e to a d i s- tributing c ompan y , excep t in c a se o f an em e rgency ., "The Secretary of War shall have the right to provide rules and regulations for uniform accounting, to examine all books and accounts of grant e es under the terms of this Act, to require them t o submit statements, representations, or re p o rts, annual or special, including full inf o rmation as to ; i sse ts and liabil 4tie%- capitali%ation, cost of project, cost of o p e ration, the production, u se. — transmission and — s ale of power. All such statement s, r e presentations — and — reports s hall be up o n o a th unless otherwise s p ecified, and in such form and on - such blanks as the Secretary of War may requi re , and an y person mak i ng any false entry , statement , r epresentati on or r e port und c r - oath s h a ll b e subj e ct to pun - ishmcnl as for p e rjury. "Si:r. 1i\ That I lie grantee shall --c omm e nc e th e i-im- struetion of the dam and acc e ssory wor ks withi -n o ne year from the date oi' the approval hen-m provided, and sha41 thereafter, in good faith and with due diligence, pro s ecute such con s truction, and shall, within tin* further term of thr-e** II 3 5 i\ 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 21 years, complete the dam and afterwards shall, within such times as the Secretary of War and the Chief of Engi nee rs shall prescrihe, put in commercia l operation such part of the , ultimate development as the Secretary of .War, and the Chief of Engineers shall d eem necessar y t o supply the reasonable needs ofLihe then available-market, and, shall, from time to time-thereafter, construct such portion of the balance of such ultimate development as said Secretary of War and Chief of Engineers ma y direct and within the time specified by said Sec retary of War tind Chief of Engineers so as to supply adeq uately the reasonable market d emand s u ntil s uch ulti- mate de velop me nt shall b e com pleted; and extensions of the periods herein sp ecified , not to exceed two years, may be granted by the S e cr e tary of War, on recommendation of th e ( 'hi c f of Engineer s , when, in hi s judgment, the publ i c interest will be promoted thereby. — In ca se th e grantee shall not c ommen ce actual construction within th e time herein pre- s cribed, or as extended by th e Secr e tary of War, then the a uthority as to s uch grant ee s hall terminate, and in case any dam and acc e ssory works bo not completed wit h in the time he rein specified or extended as her e in provided, then the At- t orney Gen e ral, upon th e r e que s t of the S e cr e t a ry of War, s hall institut e proper proc e edings in the proper district court o f the United States for the r e vocation of s aid authority, the s ale of the work s construct e d, and s u c h other equitable relief 15 provided for iii section seven of . 1 a s the cas e may dcnn 2 thi s Act. 3 " Sec. 13. That the right to alter , amend , or repeal this 4 Act is hereby expressly reserved as to any and all dams 5 which may be authorized in acc o rdance with the provisions 6 o f this Act. — In such case the United States shall incur 7 n o liability for t h e alteration , amendment, or repeal thereof 8 t o the owner or owners or any other persons interested in 9 s uch dam. 10 " Sec. 14. That the Secretary of War be , and he is 11 hereby, authorized to enter into leases for the use of surplus 12 water and water power generated at dams and w orks con- 13 s tructed wholly or in part by the United Stat e s in the intcr - 11 e sts of navigation at such rates, on such t e rms and con - 15 d itions, and for such periods of time not to e xc ee d fifty years, 16 and with such provision for the periodical r e a d justm e nt of IT r entals as may s ee m to him just, e quitabl e , and e xp e di e nt , 18 su bj e ct, however, to th e provisions of this Act governing 19 the authori zation^ — maintenance, — and op e ration — of power 2(1 phmis and --to- all r e gula ti ons gov e rning the us e and clispo - 21 sit ion of t in- power, --so-far- aa the sam e may be - -ap plicable; 22 a nd all su( 4t-l cnscs, th e parties thereto, and the terms and 23 c onditions thereof, shall be reported annually to < 1 ongres*K- 24 Provided, Thai said Secretary of War, in making sueh leasee 16 1 s hall give preference to any municipal corporation or o t h e r 2 pub lic corpH mt4•> evious Act of Congress granting consent 23 for the con s truction, maintenance, ami opera tion of any 24 dam in the navigable waters el the United States in th e H. R. 16053 3 18 1 construction, maintenance, and oper ation of wh i ch the a p- 2 proval and supervision of tn e-Secr etary of W a r a nd the Ch ief 3 of Engineer s, were req ui red are hereby -r epealed , a n d all 4 su ch p revious-authorizatio ns are so altere d, ame n de d, and 5 modified hereby a s to conform to all the conditions and pro- 6 visions in said section s two, three, four , five , nine, ten, 7 eleven and fifteen of this Act . 8 "Seo IS. That the provi s ions of this Act shall not 9 app ly to irrigation or power dam s or gr a nts to municip al 10 corporations aflWting t hp nsp of water or water power f or 11 municipal purpose s , ™» n f hpr prnjp p ts under the jurisdictio n 12 of the SecTPtflTy nf t h p Interior or the Secretary of A gricnK 13 ta re u pon t he pu bli c lands of the Un it ed State s " 14 That the Act entitled "An Act to regulate the construction 15 of dams across navigable waters/' approved June twenty- 16 third, nineteen hundred and ten, be, and the same is hereby, IT amended to read as follows: 18 "Section 1. That the consent of Congress is hereby 19 given to any persons, as hereinafter defined, after obtaining 20 the permit of the Secretary of War as hereinafter pro- 21 vided, to construct, maintain, and operate a dam or 22 dams or diversion structures, and accessory works, for 23 water power or other purposes across, in, or along any of 24 the navigable waters of the United States; and such grantee 25 and such permit shall at all times be subject to the pro- 19 1 visions of this Act and also subject to such conditions as 2 tlie Secretary of War shall, in accordance with the provisions 3 of this Act, make a part of such permit. Thai the word 4 'persons" as used in this Act shall be construed to mean both 5 the singular and plural as the case demands, and shall also G include States, political subdivisions of States, municipal cor- 7 porutions, corporations, companies, and associations ; and the 8 term 'grantee' herein shall mean any such persons to whom 9 shall be granted a permit as herein provided: Provided, That 10 whenever the primary purpose of the grant or permit is to 11 furnish power for a public-utility purpose the grantee must 12 be a State, or a municipal corporation, or a political 13 subdivision of a State, or a public-service agent of a 14 State, or a public-utility corporation organized and consti- 15 tuted under the laws of a State or the United States, author- 16 ized to engage in the business of furnishing water, heat, 17 or electric energy for public or private use, and whose 18 rates and charges and service shall be subject to regulation 19 by a duly constituted commission or other agency of said 20 Stale or Slates; but in any case where any State has not 21 made provision for authorizing municipal corporations, po- 22 lilieul siihdirisioiis of the Slate, or public-utility corporations 23 or agencies to engage in said business or has not provided for 21 regulating their rales, charges, and service, the qualifications 25 Of Hie grantee prescribed in this proviso shall not apply. 20 1 dud iii such cases the gran tee shall hare the qualifications 2 prescribed elsewhere in this section, and the rates, charges, 3 and service of such gran lee shall be subject to regulation by 4 the Secretary of War, as provided in section seven of this .") . let ; and no transfer of any such permit or of the rights there- to under granted, except by trust deed or mortgage issued for 7 ihc bona fide purpose of financing the business of such 8 grantee, shall be made by any grantee, without the approval 9 of the Secretary of War, to any transferee not having the 10 qualifications herein specified for a grantee hereunder, and 11 any successor or assign of the rights of any snch grantee, 12 whether by voluntary transfer, judicial sale, or foreclosure 13 sale or otherwise, sliull be subject to all the conditions of the 14 permit under which such rights are held by such grantee, and 15 also subject to all the provisions and conditions of this Act to 1G the same extent as though such successor or assign were the 17 grantee hereunder. 18 "Sec. 2. That the Secretary of War may grant a per- 19 mit or permits for such dam or dams and accessory works 20 upon the following conditions: 21 "First. The plans and specifications for such dam and 22 all accessor// works, together with such drawings of the 23 proposed construction and such maps of the proposed loca- 24 lion as may be required for a full understanding of the sub- 25 ject, shall be submitted to the Secretary of War and the 21 1 Chief of Engineers, and when approved shall be made a 2 part of such permit; and thereafter no change in such plans 3 or specifications shall be made except as such change shall 4 be approved and made a part of such permit by the Secre- 5 tary of War and the Chief of Engineers. 6 "Second. The plans, specifications, and location for 7 any dam shall be such as in the judgment of the Secretary 8 of War shall be best adapted to a comprehensive plan for 9 the improvement of the waterway in question for the uses of 10 navigation and for the full development of its water power 11 uu navigation purposes, in accordance with plans, specifica- 22 1 tions and condition* approved by the Secretary of 2 War (Hid made a pari of such per mil; (b) that such 3 (/ran lee shall furnish free of cost power for the operation of 1 the same; (c) that in case such navigation facilities shall 5 not lie made a part of such original construction at the 6 expense of the grantee, then, whenever the United States 7 shall deem such navigation facilities necessary, the grantee 8 shall convey to the United States, free of cost, such of its land 9 and its right of wag and permit such control of pools as mag 10 be required for such navigation facilities, and shall furnish 11 free of cost power for the operation of the same; (d) that 12 such grantee shall reimburse the United States for the cost of 13 aug investigation necessary for the approval of the plans as 11 herein provided and for such supervision of construction as 15 may be necessary in the interest of the United States; (e) that 16 such grantee shall pay to the United States reasonable charges 17 in consideration of the benefits accruing to and used bg such 18 grantee through the construction, operation and maintenance 19 by the United States of headwater improvements, includ- 20 iug storage reservoirs, on any such stream, such charges to 21 be fixed from time to time bg the Secretary of War and to, 22 be based upon a reasonable compensation proportionate to the 23 benefit actually received by the grantee bg reason of any in- 24 crease of flow past or over the water-power structures arti- 25 fieialig caused bg such headwater improvement; and all 23 1 moneys received from such charges are hereby reserved and 2 appropriated as a special fund in the Treasury to be known 3 as 'The headwater improvement fund/ from which fund ex- 4 penditures for headwater improvements and maintenance may 5 be made by and in the discretion of the Secretary of War; (f) 6 that such grantee in ttie construction, maintenance, and opera- 7 Hon of such dam or diversion structure and accessory works 8 may, with the authority of the Secretary of War, occupy 9 and use, to the extent necessary for the project, any lands 10 of the United States, including the public lands; and any part 11 of the public lands may, on certification by the Secretary 12 of War that the same is required for navigation purposes, 13 be withdrawn by the President for said purpose as provided 14 in the Act entitled 'An Act to authorize the President of the 15 United States to make withdrawal of public lands in certain 16 cases, approved June twenty-fifth, nineteen hundred and 17 ten;' and for any land of the United States so used and oc- 18 eupied tJie gran lee shall pay to the United, Stales such 19 reasonable charges as may be fixed by the Secretary of War; 20 and in fixing such charges consideration shall be taken of 21 the benefits accruing from the use and occupation of such 22 lands to the interests of uavigut ion . as well as to the business 23 of said grantee. 24 "In firing such conditions, or any of them, the Secre- 25 tary of War shall also take into consideration the (10) 1 probable cost (<> such grantee of construction and 2 maintenance and operation and the probable consumers' 3 rate required to produce a reasonable return upon 1 the investment required of such grantee. As between 5 con test in;/ applicants for a permit hereunder having the 6 legal qualifications required by this Act, preference shall 7 be given to that applicant which is best qualified to expedite 8 and realize the maximum useful development of all the water 9 resources of the region; and as between such contesting ap- 10 plicants which appear equally well qualified in such respect, 11 then preference shall be given to that applicant ivhich has 12 first complied with the laws of the State or States in which 13 the dam or diversion structure is to be constructed. In grant- 11 ing permits hereunder and fixing conditions thereof, and in 15 prescribing rules and regulations levying of taxes, with respect to the property or business of 7 such grantee. 8 "Sec. 8. That any grantee who shall fail or refuse to 9 comply with any of the provisions of this Act or any of 10 the conditions made a part of any permit issued hereunder 11 or any regulation or lawful order of the Secretary of War, 12 made in accordance with the provisions of this Act, shall 13 be deemed guilty of a misdemeanor, and on conviction 14 thereof shall be punished by a fine not exceeding $1,000, 15 in addition to other penalties herein prescribed or provided 16 by law, and every mouth such grantee shall remain in 17 default shall be deemed a new offense and subject such 18 grantee to additional penalties therefor; and in addition 19 to said penalties the Attorney General may, on request of 20 the Secretary of War. institute proper proceedings in equity 21 in the district court of the United States in the district in 22 which such structure or any of its accessory works are, 23 in whole or in part, situated, for the purpose of having such 24 violation stopped l>y injunction, mandamus, or other process; 25 and any such district court shall hare jurisdiction over all 30 1 such proceedings and shall have the power to make and 2 enforce all writs, orders, and decrees necessary to compel the 3 compliance with the lawful orders and regulations of the Sec- •4 retary of War and the performance of any condition imposed 5 under the provisions of this Act; and if the unlawful main- 6 tenance and operation be deemed by the court to be such as 7 shall require, in the public interest, a decree revoking all 8 rights and privileges held under authority of this Act, the 9 court may decree such revocation, and in case of such a 10 decree the court may wind up the business of such grantee 11 conducted under the rights in question and may decree the 12 sale of the dam or diversion structure and all appurtenant 13 property constructed or acquired under authority of this 14 Act, and distribute the proceeds to the parties entitled to the 15 same, and may make and enforce such other and further 16 orders and decrees as equity and justice may require; and in 17 case of such sale the vendee shall take the rights and privileges 18 and shall perform the duties which belonged to the grantee, 19 and shall assume all outstanding obligations and liabilities of 20 the grantee which the court may deem equitable in the prem- 21 iscs; and in case no purchaser be found the court shall, by 22 the appointment of a receiver or otherwise, exercise all juris- 23 diction necessary for the protection and administration or 24 disposition of the property and, for the equitable execution 25 of this Act. 31 1 "Sec. 9. That the grantee shall commence the con- 2 struction of the dam and accessory works within two years 3 from the date of the permit herein provided, and shall therc- 4 after, in good faith and with due diligence, prosecute such 5 construction, and shall, within the further term of five years, G complete and put in commercial operation such part of the 7 ultimate development as the Secretary of War shall deem 8 necessary to supply the reasonable needs of the then available 9 market, and shall, from time to time thereafter, construct 10 such portion of the balance of such ultimate development as 11 said Secretary of War may direct and within the time 12 specified so as to supply adequately the reasonable mar- is ket demands until such ultimate development shall be com- 14 pleted; and extensions of the periods herein specified 15 may be granted by the Secretary of War when, in his 16 judgment, the public interest will be promoted thereby. In 17 case the grantee shall not commence actual const ruction 18 within the time herein prescribed, or as extended by the 19 Secretary of War, then the authority as to such grantee shall 20 terminate, and in case any dam or diversion structure and 21 accessory works be not completed within the time herein speci- 22 fied or extended as herein provided, then the Attorney General, 23 upon the request of the Secretary of War, shall institute 24 proper proceedings in the proper district court of the United 25 Stales for the revocation of said authority, the sale of the 32 1 works constructed, ami such other equitable relief as the case 2 may demand, as provided for in seel ion eight of this Act. 3 "Sec. 10. The Secretary of War may lease to any 4 applicant having the capacity of grantee as herein defined, 5 who has acquired and owns the right to use the water for 6 power and other purposes under the lairs of the State in 7 which a dam is constructed or to be constructed by the United 8 States, the right to utilize the surplus water over and above 9 that required for navigation at any navigation dam now or 10 hereafter constructed, either with or without contribution by 11 the applicant, and owned by the United States, and on such 12 terms as may be deemed by the Secretary of War for the 13 best interests of the United States, and reasonable and fair 14 to both parties, and in awarding such lease preference shall 15 be given by the applicant whose plans are deemed by the Sec- 16 retary of War to be best adapted to conserve and utilize in 17 the public interest the navigation and water resources of the 18 region, and all such leases a)id the parties thereto and the 19 terms and conditions thereof shall be reported annually to 20 Congress. The charges and rents arising from such lease or 21 leases are liereby reserved and appropriated as a special fund 22 in Hie Treasury to be expended for the maintenance of said 23 dams and the further improvement of the waterway in which, 21 the same may be situated under the direction of the Secretary 25 of War. 33 1 "Sec. 11. That this Act shall not affect the rights of any 2 person, company, or corporation as to the construction, main- 3 tenance, or operation of any structures heretofore constructed 4 or upon which construction has been begun, under permit or 5 approval of the Secretary of War and Chief of Engineers or 6 other authority heretofore lawfully granted: Provided, That 7 in the operation of any such structures and accessory works 8 the provisions of sections three, seven, eight, twelve, and thir- 9 teen of this Act shall apply to the same extent as if such struc- 10 tures had been authorized under this Act, and all conflicting 11 provisions relating to the operation of said structures and 12 accessory ivories contained in any authority heretofore law- 13 fully granted are hereby altered, amended, or repealed so 14 as to conform with the provisions of said sections three, 15 seven, eight, twelve, and thirteen of this Act: And provided 16 further. That upon application by any person, company, or 17 corporation having the capacity of grantee as herein defined, 18 which is now constructing or operating any structures herein 19 specified, across, in, or along any navigable waters of the 20 United States under authority heretofore lawfully granted, 21 the Secretary of War may issue to such applicant a permit in 22 accordance with the provisions of this Act. -no-4ime-c ontract for the delivery to any one consumer of 20 el e ctrical energy in excess -of- fifty per centum of the total 21 output. 22 Sec. 3. That in case of the development, generation, 23 transmission, a-f+d-or use of power or energy under such a lease 24 in a Territory, or in two or more States, the regulation and 25 control of service and of charges for service t<> consumers and 1 9 o o 4 5 6 7 8 9 10 11 12 13 11 15 16 17 18 19 20 21 •>.) 23 24 25 of the issuance of stock and bonds by the lessee is hereby conferred upon the Secre t ary -of-the-I nterio r or com niittecUto suc-U body a s may be p rovided by Federa l statut e Interstate Commerce Commission: Provided, That the physical combi- nation of plants or lines for the generation, distribution, and use of power or energy under this Act or under leases given hereunder not in violation of law may be permitted, in the discretion of the Secretary of the Interior, but combina - tion s, agreements , arrangements, — or — unders tandings, — ex- press --or-4m-pU ed, to I m H4^4he— out put of el to-restrain^t rade wit h- foreign nation s kwee n two or more States or within any one State, or to f i x, maintain, o r increase prices for electrical energy or servic e arc h e reby forbidden. Sec. 4. That except u pon- the written cons e nt of the S e cretary of th e Interior no sal e or deliv e ry of power shall b o mad e to a - distributing company, except in case of an e m e rg e ncy and th e n only for a p e riod not exceeding thirty days, nor shall any l e ase issu e d under this Act be assignabl e o r transf e rabl e without such written cons e nt : Provided, how ever-, That no lessee under this Act shall create any lien upon any power project the land leased nor upon any power project within a Territory, or in I ended for use in the genera- tion anil transmission of water power or energy in two or more States and developed under a permit issued under this 1 Act by mortgage or trust deed, except approved by the 2 Se cr e tary of the Interior Interstate Commerce Commission 3 and for the bona tide purpose of financing the business of the 1 4essee construction or operation of said project. Any succes- 5 sor or assign of such property or project, whether by volun- 6 tary transfer, judicial sale, foreclosure sale, or otherwise, shall 7 be subject to all the conditions of the approval under which 8 such rights are held, and also subject to all the provisions 9 and conditions of this Act to the same extent as though such 10 successor or assign were the original lessee hereunder. 11 Sec. 5. That upon not less than three years' notice , 12 which ma y be issu c d -a^any-time-itfter" three years immedi - 13 ately prior to the expiration of any lease under this Act, the 14 Unit e d. S tat e s shall -have-the-ri ght to take over the propertie s 15 which-are-depondent^4n-w holc or in part, f o r their usef ul- 16 ness on the continuance t) f the lease herein — pr ovided for , 17 ami which may have^ ueen a cquir ed by any lessee acting L8 under the provisiom^of-thiirAct, u pon conditio n: that it shall 19 pay, before taking possession, tirst,^t he actua l^costs of rights 20 of way, water rights, lands, and interests therein purchased 21 and used by the lessee in the generation and distribution of 22 electrical energy under the lease, and, second, the r easonable 2:5 value of all other property taken over, including struc- 24 ta r e s and fixtures acquired, erected, o r plac ed upon the lands 2.") and included in the generation or dist r ibution plant, and 1 3 which are d e p e nd hereinaboA rth, such reason^- able value t o b e d eter the Secre tary o f the 4 tliev can n< reer-by^: 6 * 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 States distriet-eo reasonable value shall u tual r --agreement— bete tesee, an d,— in— c ase itn ted in the -United- i I * * I' 'I value of the franchise or -g ood wi l l or pr o fi t s to be ea rned - o n p e n ding- con tract s-er an^ other intangible-element.- That ii pon not less than three years notice, which may be issued at any time after three years immediately prior to the ex- piration of any lease under this Act, the United States shall have the right to take over all the properties which are de- pendent in whole or in part for their usefulness on the con- tinuance of the lease herein provided for, which may have been acquired by any lessee under the provisions of this Act, or the right to take over, upon mutual agreement with the lessee, a severable and complete unit of any such power system, upon condition that it shall pay in a lawful warrant drawn on the Treasury of the United States, or otherwise, be- fore taking possession the fair value of such property, such value to be det evmi ned by mutual agreement between the Sec- retary of the Interior and the lessee, and, in case they can not agree, by proceedings instituted in the United States district court for that purpose: Provided, That such fair value shall not include or be affected by the value of any public lands, rights of way, or other property leased or granted under this I 1 Act by the United States or by the value of the franchise, good 2 will, value as a going concern, future profits from pending 3 contracts, or prospective revenues, profits, or dividends. 4 Sec. 6. That in the event the United States does not 5 exercise its right to take over, maintain, and operate the 6 properties as provided in section five hereof, or does not 7 renew the lease to the original lessee upon such terms and 8 conditions and for such periods as may be authorized under 9 the then existing applicable laws, the Secretary of the Inte- 10 rior is authorized, upon the expiration of any lease under 11 this Act, to lease the properties of the original lessee to a 12 new lessee upon such terms, under such conditions, and 13 for such periods as applicable laws may then authorize, and 14 upon the further condition that the new lessee shall pay for 15 the properties as provided in section five of this Act. In 10 the event the United States does not exercise its right to take 17 over flu- properties, as provided in section five, and a reneioal 18 of the lease l<> the original lessee is not made, and no lease is 19 made of the properties to a new lessee, then the lease at the 20 Option of the lessee shall continue in existence upon the fevms 21 and conditions in force at the lime fixed for Us expiration 22 until such lime us the property is taken over by the United 23 Stales, as provided in section five, or by a new lessee, as 24 provided in .section six, ov the least is renewed: Provided, 2.~> That Ho original le8See shall have a preference right to 8 1 renewal over and above any new lessee upon such terms 2 and conditions as the law and regulations then in force shall 3 authorize. 4 Sec. 7. T-hat wh ere, in tb ^-^adgment o f the Secr etary- 5 o f the Interior, the public interest-req uires or ju stifies the 6 e xecution by any lessee of contracts for^liie-sale^fcnd delivery^ 7 of electrical energy 4oj^periods extending-neyond the life- 8 of^the-lease^-but^for trs- thereafter-, 9 su^-h contr acts may be en tered into upo^ 10 t he said Secre4ary y -and— thei^eaftei^n tl 11 cise-by the4Jnited-& tates o f the option^ 12 in— the manner provid ed in sections 13 United St ates or its n e w l es s ee-s hall a s sum e-ai 11 such- contracts e nter e d into by th e first l e ss ee That where 15 the public interest requires or justifies the execution by the 16 lessee of contract* for the sale and delivery of electrical energy 17 for periods extending not to exceed twenty-five years beyond 18 the fifty-year period herein named, such contracts may be 19 entered into upon the approval of the Public Service Com- 20 mission or similar authority in the State in which the sale or 21 delivery of power is made, and upon the approval of the 22 Secretary of the Interior of the United States; or if sold or 23 delivered in a Territory or in a State without a regulating 24 authority, then upon the approval of the Secretary of the 25 Interior; and thereafter, in the event of the termination of the 9 1 lease as herein provided, the United States or any subsequent 2 lessee shall assume and fulfill all such contracts entered into 3 by the original lessee. 4 Sec. 8. T hat for the occupancy and use of lands and 5 o ther prop e rty of th e Unit e d States permitt e d under this G Act the S e cr e t ar y of th e I nte rior is authorized to specify in 7 t he lease and to --eoHeefr- charg e s or rentals for — aH power 8 developed and ^o ld or us e d by th e less ee for any purpos e 9 o the r than the operation of th e plant, and th e proc ee ds shall 10 be paid i nto, reserve d^ and appropriat e d as a part of th e 1 1 ree lam a lion fund created by the Act of Congress approv e d 12 June seventeent h^, — nineteen hundred and — two^ — known — a& 13 th Initiation -a nd after use there o f in the construction 14 o f reclamat ion works and upon r etur n to the reclamation 15 f und of any such niotn-vs4n-t he manner provided by the rec- 1 6 lamafitffl— Act — an d Acts -amendatory- thereof and — suppl e - 17 mental thereto, fift y per -ventnm- of the am 18 and returned to the reclamation fund shall 19 Secreta r y of the Treasury after the expira 20 year to the State within the boundaries of which the hydro- 21 electric power or energy is generated and developed, said 22 moneys to be used by SUCh Stale for the support of public 23 schools or other educational institutions or for (lie construc- 24 lion of public imp r o v emen t s, or both, as the legislature of the II. R. L6673 2 10 1 Ktnto iiiny "direct^— YVor/rfocfr—Thr tt le a ses for the develop - 2 m out of power by muni ci pal co rp orations solely for munici- 3 pal use shut! be issiretl^wit hout r en t al c harge, and that lease s 1 for development of p ower not in excess of twenty- 5 power may be issued to indi vid uals or association 6 mes t ic, mining or irrigation use without such charg e . That 7 for the occupancy and use of lands and other property of the 8 United States permitted under this Act, the Secretary of the 9 Inferior is authorized to specify in the lease and to collect 10 charges or rentals for all land leased, which charges or 11 rentals may in the discretion of the Secretary he measured 12 by the power developed and sold or used by the lessee for 13 any purpose other than the operation of the plant, and of 11 the proceeds fifty per centum thereof shall be paid by the 15 Secretary of the Treasury after the expiration of each fiscal 16 year to the State within which the hydroelectric energy is 17 generated and developed. The remaining fifty per centum 18 shall be paid into, reserved, and appropriated as a part of the 19 reclamation fund, created by the Act of Congress approved 20 June seventeenth, nineteen hundred and two, known as the 21 reclamation Act: Provided, That if leases shall be made of 22 taints within Indian reservations the proceeds of charges or 23 rentals of lands leased which are situated within Indian 21 reservations shall be placed in the Treasury of the United 25 Stales to the credit of the Indians of the reservation in which 11 1 the lands so leased are situated: Provided further, That 2 leases for the development of power by municipal corpora- 's tions for municipal use shall be issued without rental charge 4 and that leases for development of power not in excess of 5 twenty-five horsepower may be issued to individuals or asso- 6 ciations for domestic, mining, or irrigation use without 7 charge. 8 Sec, 9. That in case of the development, generation, 9 transmission, or use of power or energy under a lease given 10 under this Act in a State which has not provided a commis- 11 sion or other authority having power to regulate rates and 12 service of electrical energy and the issuance of stock and 13 bonds by public-utility corporations engaged in power 11 development, transmission, and distribution, the control of 15 service and of charges for service to consumers and stock 1G and bond issues shall be vested in the Secretary of the IT Interior or committed to such body as may be authorized by 18 Federal statute until such time as the State shall provide a 19 commission or other authority for such regulation and control. 20 Sec. 10. That where the Secretary of the Interior 21 shall determine that the value of any lands, heretofore or 22 hereafter reserved as water-power sites or for purposes in '2'.\ connection with water-power development or electrical trans- 24 mission, will not lie materially injured for such purposes by 25 either location, entry, or disposal, the same may he allowed 12 1 under applicable land laws niton the express condition that 2 all such locations, entries, or other methods of disposal shall 3 be subject to the sole right of the United States and its 4 authorized lessees to enter upon, occupy, and use any part 5 or all of such lands reasonably necessary for the accomplish- es ment of all purposes connected with the development, gen- 7 eration, transmission, or utilization of power or energy, and 8 all rights acquired in such lands shall be subject to a reserva- 9 tion of such sole right to the United States and its lessees, 10 which reservation shall be expressed in the patent or other 11 evidence of title: Provided, That locations, entries, selec- 12 tions, or filings heretofore allowed for lands reserved as 13 water-power sites or in connection with water-power devel- 14 opment or electrical transmission may proceed to approval 15 or patent under and subject to the limitations and conditions 16 in this section contained, but nothing herein shall be con- 17 strued to deny or abridge rights now granted by law to those 18 seeking to use the public lands for purposes of irrigation or 19 mining alone. 20 Sec. 11. That the Secretary of the Interior is hereby 21 authorized to examine books and accounts of lessees, and to 22 require them to submit statements, representations, or 23 reports, including information as to cost of water rights, 24 lands, easements, and other property acquired, production, 25 use, distribution, and sale of energy, all of which statements, 13 1 representations, or reports so required shall be upon oath, 2 unless otherwise specified, and in such form and upon such 3 blanks as the Secretary of the Interior may require; and 4 any person making any false statement, representation, or 5 report under oath shall be subject to punishment as for 6 perjury. 7 Sec. 12. That any such lease may be forfeited 8 and canceled, by appropriate proceedings, in a court of 9 competent jurisdiction whenever the lessee, after reasonable 10 notice, in writing, as prescribed in the lease, shall fail to 11 comply with the terms of this Act or with such conditions 12 not inconsistent herewith as may be specifically recited in the 13 lease. 11 Sec. 13. That the Secretary of the Interior is hereby 15 authorized to perform any and all acts and to make such 16 rules and regulations as may be necessary and proper for 17 the purpose of carrying the provisions of this Act into full 18 force and effect. 11) SEC. 14. That nothing in this Act shall be construed 20 as affecting or intended to affect or to in any way interfere 21 with the laws of any State relating to the control, appro- 22 priation, use, or distribution of water. 23 SEC. 15. Thai all Acts or pails of Acts providing for 24 the use of the lands of the United States for any of the pur- 25 poses to which this Act is applicable are hereby repealed II 1 to the extent only of any conflict with this Act: Provided, '1 however, That the provisions of the Act of February fifteenth, 3 nineteen hundred and one (Thirty-first Statutes at Large, 1 page seven hundred and ninety), shall continue in full force 5 and effect as to lands within the Yosemite, Sequoia, and G General Grant National Parks in the State of California: 7 And provided further, That the provisions of this Act shall 8 not be construed as revoking or affecting any permits or 9 valid, existing rights of way heretofore given or granted pur- 10 suant to law, but at the option of the permittee any permit 11 heretofore given for the development, generation, transmis- 12 sion, or utilization of hydroelectric power may be sur- 13 rendered and the permittee given a lease for the same prein- 11 ises under the provisions of this Act. 15 Sec. 16. That this Act shall not apply to navigation 16 dams or structures under the jurisdiction of the Secretary 17 of War or Chief of Engineers, or to lands purchased or 18 acquired by condemnation by the United States, or with- 19 drawn by the President under the Act approved June 20 twenty-fifth, nineteen hundred and ten, entitled "An Act 21 to authorize the President of the United States to make with- 22 drawals of public lands in certain cases," where such lands 23 are purchased, acquired by condemnation, or withdrawn by 24 the President for the sole purpose of promoting navigation. 15 1 Sec. 17. That in instances where only five per centum or 2 less of the lands actually necessary and required for the con- 3 struct ion. maintenance, and operation of dams, water con- 4 duits, reservoirs, power houses, transmission lines, and other 5 works for the development, generation, transmission, and 6 utilization of hydroelectric power in any one proposed sepa- 7 rate, distinct, and complete plant or project arc lands of the 8 United States Government and such Government lands are 9 to be used only for ovcrpowagc, reservoir, or transmission 10 purposes and not in whole or in part as a dam site or the site 11 of a power house nor for the erection of buildings or opera- 12 Hon of machinery, the Secretary of the Inferior may, in his 13 discretion, lease such lauds to an applicant for not more than 14 fifty years, at such rental price and upon such terms as lie 15 may deem just, free from all or any other of the terms, con- 16 ditious. provisions, and requirements of this Act which the 17 Secretary of the Interior may see fit to waive. 18 Sec. 18. That authority is hereby conferred upon the 19 Stut( of Colorado or any citizen or citizens directly interested, 20 or both, to institute and prosecute an action at law or in '1\ equity against the Secretary of the Interior, or the ('om- 22 missioner of the Central Land Office, or both, to determine 23 its right and the rights of its citizens to appropriate and 24 apply to bent ficiul uses the waters of the b'io Crande Rirer 25 and its tributaries within its geographical boundaries. Such 16 1 action may be instituted in the district court of the United 2 States within the Stall 1 of Colorado, and any judgment or 3 decn ■(• therein shall be subject to review by writ of error or 4 a ppial as provided by law in other cases. 5 Sec. I!>. That authority is hereby conferred upon the 6 stale of Nebraska or any citizen or citizens directly interested, 7 or both, to institute and prosecute an action at law or in 8 equity against the Secretary of the Interior or the Director 9 of the Reclamation Service, or both, to determine its right 10 and the rights of its citizens in and- to the water of the North 11 Platte River stored by the Pathfinder Dam in the Pathfinder 12 Reservoir in the State of Wyoming. Such action may be 13 instituted in the district court of the United States within the 11 State of Nebraska, and any judgment or decree therein shall 15 be subject to review by writ of error or appeal as provided 16 by law in other cases. 17 Sec 20. That the lands leased under this Act may be 18 used and the works constructed, maintained, and operated 19 thereon may be used, added to, or enlarged by the lessee 20 or any other person, association, or corporation, for the pur- 21 pose of impounding and conveying water for irrigation, 22 mining, municipal, domestic, and other beneficial purposes, 23 whenever such use of the water is authorized by the State 24 wherein said project is situated: Provided, however. That 25 if said lands and works are so used by any other than tJie 17 1 lessee, such use must be without expense or damage to the 2 said lessee. Passed the House of Representatives August 24, 1914. Attest : SOUTH TRIMBLE, Clerk. APPENDIX E 63d CONGRESS, ^ a 7 |a 3d Session. 0» D / I A IN THE SENATE OF THE UNITED STATES. December 7, 1914. Mr. Jones introduced the following bill, which was read twice and referred to the Committee on Public Lands. A BILL To aid and to regulate the development, operation, and main- tenance of water powers on lands of the United States, and for other purposes. 1 fit it enacted by the Senate and House of Representa- '2 tines of the United States of America in Congress assembled, 3 That in order to utilize for the benefit of the public the 4 water-power resources dependent in whole or in part for 5 their proper development upon the use of public lands of 6 the United States (including Alaska), and in order to 7 prevent the unregulated monopoly of said water powers, and 8 for the purpose of developing, generating, transmitting, ( .» ami utilizing hydroelectric power, the right to construct, (12) 1 develop, maintain, and operate dams, reservoirs, canals, con- 2 (Inits, pipe lines, tunnels, water-power or hydroelectric plants, 3 transmission and distributing lines, and all other appurtenant 4 constructions, structures, and appliances necessary or con- 5 venient for the development, generation, transmission, and 6 utilization of hydroelectric power on, over, under, and 7 across any part of the public lands of the United States 8 (including Alaska), reserved or unreserved, including na- 9 tional forests, national monuments, and Indian reservations, 10 is hereby granted, upon compliance with the conditions here- 11 inafter imposed, to any State or municipal subdivision 12 thereof or to any mutual or public-service corporation or- 13 ganized for the purpose, or to any person or persons author- 14 ized by the State or States in which any portion of such 15 dam, storage reservoir, water-power or hydroelectric plant, 16 or transmission or distributing lines may be located, to 17 engage in the business of furnishing water for domestic uses, 18 irrigation, transportation, or any other purpose, or light, 19 heat, power, or energy generated by electricity or other- 20 wise: Provided, That the State in which such lands may be 21 located shall have provided for the regulation and control of 22 mutual and public-service corporations and persons engag- 23 ing in such business. Such State, municipal subdivision, 24 mutual or public-service corporation, person or persons is 25 hereinafter referred to as the ''grantee." 1 1 Sec. 2. That any grantee hereunder may construct, 2 develop, maintain, and operate dams, reservoirs, canals, 3 conduits, pipe lines, tunnels, water-power or hydroelectric 4 plants, transmission and distributing lines, and all other ap- 5 purtenant structures and appliances on, over, under, and 6 across any part of the public lands of the United States (in- 7 eluding Alaska), reserved or unreserved, including national 8 forests, national monuments, and Indian reservations, upon 9 filing with the Secretary of the department having jurisdic- 10 tion over such lands proof of its right to the use of water 11 and plans and specifications for such works, together with 12 such drawings of the proposed construction and such map of 13 the proposed location and flooded area as may be required 14 for a full understanding of the subject, which plans, speci- 15 fications and drawings shall be approved by such Secretary 16 if it appears to him that the proposed development will pro- 17 mote the highest and greatest practicable use of the water 18 resources involved. Within ninety days after the approval 19 of such plans, specifications, and drawings said grantee and 20 such Secretary shall agree upon the then fair market value 21 of the lands proposed to be occupied which are owned or 22 controlled by the United States, and in the event of their 23 failure to agree within such time, then such grantee shall 24 have the right to, and may, begin proceedings in the dis- 25 trict court of the railed Stales for the district in which 1 such lauds or any part thereof aiay be located for the 2 purpose of determining the then fair market value thereof. 3 Such district court is hereby given jurisdiction of said pro- 4 ceedings for such purpose, and service of process may 5 be had upon the clerk of said court, and upon such (i service being made the Attorney General of the United 7 States shall enter his appearance for the United States. 8 Such proceedings shall be conducted according to the laws 9 and rules in force in said jurisdiction at said time for the 10 exercise of the right of eminent domain for public pur- 11 poses, with the right of appeal as in other cases. Upon 12 an agreement being reached as to the fair market value 13 of said land between said Secretary and the grantee, or 11 in the event of their failure to agree, then upon the 15 final adjudication of the value of said land the grantee 16 shall have the right to occupy the same for the pur- 17 poses above set forth for a period of fifty years after 18 such agreement or final adjudication, and after the expira- 19 tion of said period of fifty years such right shall continue 20 until terminated and compensation has been made to the 21 grantee for the fair value of its property, as herein pro- 22 vided. During the occupancy of said land by the grantee 23 it shall pay into the Treasury of the United States an- 24 nually, in advance, a sum equal to five per centum 25 upon the fair market value of such land as so deter- 1 mined by agreement or final adjudication, and the lia- 2 bilitv for such payment shall constitute a preferred claim 3 against all the assets of the grantee and may be collected by 4 suit brought in the name of the United States, and in the 5 event of the failure of the grantee to pay any judgment and 6 costs recovered in such suit, then such judgment may provide 7 for ejecting said grantee from said premises and for the 8 forfeiture of the grant. 9 Sec. 3. That in the acquisition of the property of the 10 grantee, as hereinafter provided, no value shall be claimed 11 by or allowed to the grantee for the use of or the right to 12 use the lands acquired under the terms of this Act. 13 Sec. 4. That where the public interest requires or jus- 14 titles the execution by the grantee of contracts for the sale 15 and delivery of electrical energy for periods extending be- lli yond the fifty-year period herein named, such contracts may 17 be entered into upon the approval of the Public Service Com- 1S mission or similar authority in the State in which the sale 19 or delivery of power is made 1 , or if sol under construction, dams, reservoirs, canals, conduits, pipe 8 1 lines, tunnels, water-power or hydroelectric plants, trans- 2 mission or distributing lines, and appurtenant structures and 3 appliances, on, over, under, or across any part of the public 1 lands of the United States, reserved or unreserved, as defined 5 in section one of this Act, and said grantee shall have the 6 right to have the then fair market value of the lands so occu- 7 pied and used determined, as in said section two provided, 8 and shall thereupon be entitled to all the rights, privileges, 9 and benefits of this Act, and subject to its terms and pro- 10 visions. Upon a determination of the fair market value of 11 said land, by and between the Secretary of the department 12 having jurisdiction over such lands and the grantee, or, in 13 the event of their failure to agree, then upon the final adjudi- 11 cation of the value of said lands, as provided in section two 15 of this Act, and upon such modification of its plans and speci- 1G fications for development as the Secretary may deem neces- 17 sary to promote by such proposed development the highest IS and greatest practical use of the water resources involved, 19 such grantee shall have the right to ask, demand, and receive 20 the cancellation of any and all agreements theretofore made 21 with the Department of the Interior or the Department of 22 Agriculture having reference to any of the rights of way or 23 lands of the United States so occupied or used, and upon 24 the payment by said grantee into the Treasury of the United 25 States of the first annual payment for the use of said lands, 9 1 as herein provided, all such agreement or agreements shall 2 be canceled and annulled and be of no further force or effect. 3 Sec. 9. That all water-power reserves may be opened 1 by the President to location, settlement, entry, and disposal 5 under the appropriate public-land laws, so far as the same 6 will not impair, prejudice, or destroy the use of the land for 7 water-power development, generation, transmission, or 8 utilization, it being the intent of this section that so far as 9 possible lands available and necessary for water power and 10 for other purposes shall be used for all purposes, the water 11 power, however, being the dominant use, which reservation 12 shall be expressed in all patents issued for such land. 13 Sec. 10. That the works constructed and maintained 11 under authority of this Act shall not be owned, leased, 15 trusteed, possessed, or controlled by any device or in any 1G manner so that they form a part of or in any way affect any 17 combination in the form of an unlawful trust, or form the 18 subject of any contract or conspiracy to limit the output of 19 electric energy or in restraint of trade with foreign nations 20 or between two or more States or Territories in the genera- 21 tion, sale, or distribution of electric energy. 22 Sec 11. That any grant made hereunder may be 23 forfeited ami canceled before the expiration of tin 1 fifty-year 24 period herein named, by appropriate proceedings in a court S. 6712 2 10 1 of competenl jurisdiction, whenever the grantee shall fail to 2 comply with the terms of this Act. 3 SEC. 12. That the Secretary having control and juris- 4 diction over any lands subject to the provisions of this Act 5 may make such rules and regulations as may be necessary 6 and proper for the purpose of carrying out the provisions 7 of this Act in relation to the lands under his control and 8 jurisdiction. 9 Sec. 13. That the provisions of section one of this Act 10 defining the qualifications necessary for a grantee hereunder 11 shall not apply to any water-power developments or pro- 12 posals for development of a capacity of one thousand horse- 13 power or less, and in such cases the benefits of this Act shall 14 extend to any person, corporation, or association of persons 15 which shall comply with the other terms and requirements 10 hereof. 17 Sec. 14. That all Acts and parts of Acts inconsistent 18 with this Act are hereby repealed, and the right to alter, 1!) amend, or repeal this Act is hereby expressly reserved: 20 Provided, That in case any grantee hereunder shall, at the 21 time of such alteration, amendment, or repeal, have exercised 22 rights in accordance with this Act, such rights and property 23 used thereunder shall be deemed property rights of such 24 grantee, of which such grantee shall not until the time herein 11 1 fixed for termination be deprived by such alteration, amend- 2 ment, or repeal, and then only upon the conditions provided 3 in case of termination by section five of this Act. APPENDIX F 63d CONGRESS, q *7 A T 1 3d Session. ^5« / \J / IN THE SENATE OF THE UNITED STATES. December 29, 1914. Mr. Works introduced the following bill; which was read twice and referred to the Committee on Public Lands. A BILL To provide for the disposition of the public lands for the supply of water for irrigation and the generation of power. 1 Be it enacted by the Senate and House of Representa- 2 tives of the United States of America in Congress assembled, 3 That subject to the limitation and provisions in this Act 4 contained, the right of way is hereby granted to construct, 5 develop, maintain, and operate all necessary or convenient 6 dams, reservoirs, canals, conduits, pipe lines, tunnels, trans- 7 mission lines, roads, power houses, and all other works or 8 structures necessary or convenient for the appropriation and 9 beneficial use of water and the power or other products 10 generated thereby and for the utilization and beneficial use 11 of the same on, over, under, and across any part of the 2 1 public hinds of the United States (including Alaska) re- 2 served or unreserved, including national forests, national 3 monuments, and Indian reservations, to any State or munici- 4 pal subdivision thereof, or to any mutual or public-service 5 corporation organized for the purpose or to any person or 6 persons authorized by the State or States in which any 7 portion of such works, structures, or appurtenances are situ- 8 ated : Provided, That as to any such rights or uses that are 9 located within any national monuments or Indian reserva- 10 tions the same shall be located subject to the approval of and 11 under the direction of the Secretary of the Interior, and in 12 such a way as not to interfere with said national monuments 13 or Indian reservations or the uses or purposes for which the 11 same are created. 15 Sec 2. That any applicant for a grant hereunder may 16 file with the Secretary of the Interior, or of the department 17 having jurisdiction of such lands, proof of his right to the 18 appropriation or use of water, together with plans and speci- 19 flcations for such works, together with such maps and draw- 20 ings of the proposed canals, works, reservoirs, and other 21 structures as may be required for the full understanding of 22 the same, which plans and specifications and drawings shall 23 be approved by the Secretary, subject to the laws of the 24 State with respect to and controlling the appropriation and 25 beneficial use of water for the purposes for which the same 1 is being appropriated. If said proposed canals, works, 2 reservoirs, or other structures are located within any national 3 monument or Indian reservation, no work upon or in con- 4 nectiou therewith shall be commenced or proceeded with 5 until the location of the same is approved by the Secretary 6 of the department having - jurisdiction thereof, as herein- 7 before in this Act provided, and, if within a forest reserve, 8 inav be required to be so located as not unnecessarilv to 9 interfere with the purposes for which such reserve is created : 10 Provided, That no grant shall be made under this Act until 11 the applicant shall have obtained and tiled with the officer 12 to whom the application is made a certificate from the State 13 board, commission, or other body or officer having jurisdic- 14 tion over the use of the waters of the streams of the State 15 that such applicant has the lawful right to divert and use the 16 water for the purpose or purposes for which the applica- 17 tion is made. If no such body or officer exists in any State, 18 then the officer to whom such application is made shall, in 19 case of conflict, make the grant to the person having the 20 legal right to the use of the water: Provided further, That 21 within ninety days after the approval of such plans, speci- 22 fications, and drawings said grantee and said Secretary shall 23 agree upon the then fair market value of the lands proposed 24 to be occupied or used and which are owned <>r controlled 25 by the United States; and, in the event of their failure to 1 agree within such time, (hen such grantee shall have the 2 right to and may bring proceedings in the district court of 3 the United Stales for the district in which such lands are 4 situated, or in which any part thereof may be located, for 5 the purpose of determining the then fair market value 6 thereof. Such district court is hereby given jurisdiction of 7 such proceedings for such purpose and service of process may S be had on the clerk of said court, and, upon service being 9 made and within thirty days thereafter, the Attorney General 10 of the United States shall enter his appearance for the 11 United States. Such proceedings shall be conducted ac- 12 cording to the laws and rules in force in such jurisdiction 13 at such time for the exercise of the right of eminent domain 14 for public purposes, with the right of appeal as in other 15 cases. Upon an agreement being reached as to the fair 16 market value of said land between said Secretary and the 17 grantee, or, in the event of failure so to agree, then upon 18 the bringing of such action in said court of the United States 10 and upon the giving of a sufficient bond by the grantee, 20 required and conditioned upon his complying with the order 21 and judgment of the court and approved by the court, or 22 upon the final adjudication of the value of said land, the 23 grantee shall have the right to occupy the same for the 24 purposes above set forth so long as and during such period 25 or periods of time thereafter as the said grantee, its sue- 1 cessors or assigns, shall be possessed of the right of appro- 2 priation and beneficial use of the waters appropriated and 3 used in connection with said rights of way: And provided 4 further, That if, and whenever, the right of appropriation 5 and beneficial use of said waters and the right to use and 6 enjoy the products thereof shall be assigned, transferred, 7 conveyed, forfeited to, or vested in any other corporation or 8 person or State or municipal subdivision thereof, then and 9 thereupon the rights of way and all of the rights and privi- 10 leges hereby granted to the grantee shall belong to and shall 11 be vested in such successor in interest or right of the grantee 12 or its successors or assigns, so that said right of way shall 13 continue with, appertain to, and shall be used and enjoyed 14 only by the grantee or its successors in interest, or in any 15 State or municipal subdivision thereof having the right or lfi being charged with the duty of appropriation and beneficial 17 use of the waters diverted and used in connection with the 18 rights of way so granted, and having the right to engage in 19 ami being charged with the duty of carrying on the service 20 connected with the appropriation ami beneficial use of said 21 water or the electric power or products generated thereby 22 or produced therefrom. 23 SEC. 3. That in arriving at (lie fail- market value of 21 such land the parties, or, in case of disagreement, the court, 25 shall take into account the enhanced value of said land for (13) 1 power planl or reservoir or other special purpose or 2 purposes. 3 Sec. 4. That in the event of the acquisition of the 4 property of the grantee, including or ^onneried with the .-» rights and privileges obtained under this Act, under the 6 authority of the United States, or by or under the authority 7 of any Stale or municipal subdivision thereof, the grantee 8 shall not be entitled to claim or receive any compensation 9 or value or in connection with any of the rights obtained or 10 used under the provisions of this Act. And the grantee 11 and its successors in interesi shall nor be entitled, in the 12 fixing - of any rates by competent public authority, or by 13 any State or legal subdivision thereof, to have or receive 14 any allowance or earnings on account of any of the rights, 15 uses, or privileges granted or received under this Act, 16 except such amounts, if any. as have been paid for the uses 17 and privileges hereby granted and allowed. 18 Sec. 5. That the grantee shall commence the construc- 1!> tion of the proposed works within one yi-jv from the date 20 of the agreement or final adjudication, or the approval of 21 the bomb as in this Act provided for, and shall thereafter, 22 in good faith, continuously and with due diligence prosecute 23 such construction, and shall within the further term of five 24 years complete and put in commercial operation such de- 2.") velopment or such substantial pari or portion thereof, as 1 the public needs shall demand, and shall complete and put 2 in operation said entire development with due and reason- 3 able diligence: Provided, That the rights of such grantee, 4 its successors or assigns, shall not be forfeited or terminated 5 so long as the grantee, his successors or assigns, remain G vested with the right or duty to appropriate and beneficially 7 use the waters or products thereof to be appropriated and 8 used upon or in connection with said rights of way and 9 shall be duly and reasonably exercising that right and dut v : 10 Provided, hoioever, That whenever the rights of the grantee, 11 its successors or assigns, are lost, forfeited, or transferred 12 so that the water or the products thereof can not be appro- 13 priated or used upon or in connection with said rights of 14 way, then ami thereupon such rights of way or the parts or 15 portions thereof which can not be so used or enjoyed shall 16 revert to ami be revested in the Government of the United 17 Slates, or in the successor in interest of the said grantee is entitled to and having the right to appropriate or bene- 19 finally use said waters or the products thereof: Pro- 20 ritlcd farther, That whenever the right to use the waters 21 of the stream for the purposes of the grant shall be forfeited L'l' or otherwise terminated by the State wherein the land is 23 situated or by final adjudication of the courts, then all the 24 rights under the grant shall cease and terminate and the 25 hind revert to the I'nited States. 1 Sec. 6. That the rates and service of the grantee, its 2 successors and assigns, shall be subject to regulation and 3 control under the Constitution and laws of the United States 4 and under the constitution and laws of the State or States 5 within which the same are situated or used, and, in the <» event of forfeiture of any of the rights, privileges, or prop- 7 erties of the grantee, its successors or assigns, by reason or on 8 account of the violation of any law of the United States or !> of any State, the rights hereby granted shall be forfeited 10 therewith and shall revert to or be vested in the State or 11 States, or municipal subdivisions thereof, or corporations or 12 person or persons in whom the right or duty of appropria- 13 tion and beneficial use of said waters or the products thereof 11 shall be vested, and, in such event, without compensation to 15 the grantee, its successors, or assigns, for or in connection 16 with any of the rights, uses, or privileges obtained, granted, 17 or received under this Act. 18 Sec. 7. That rates and charges for power, or water 10 furnished for irrigation or other use, shall be fixed and de- 20 termined by the State in which the same is supplied: Pro- 21 uided, That where the power plant or reservoir site acquired 22 under this Act is in one State and power or water is supplied 23 in another State any person supplied therewith in the latter 24 State may apply to the Interstate Commerce Commission, 1 or other body authorized by Act of Congress, to fix such 2 rates and charges for power or water supplied in such State. 3 Sec. 8. That any qualified grantee or grantees under 4 the terms of this Act engaged in the appropriation and 5 beneficial use of water or the products thereof, as in this Act 6 set forth under revocable permits or otherwise may come 7 under and avail themselves of the privileges of this Act 8 upon application to the head of the department having juris- 9 diction of the administration of this Act and, upon such 10 application and the filing of the required plans, speeifica- 11 tions, maps, and other data required, such qualified grantee 12 shall come under and have and enjoy and be subject to all 13 of the terms, rights, grants, conditions, limitations, and pro- 14 visions of this Act, upon compliance with its terms, as herein 15 provided: Provided, That if any of its works or structures 1G are in course of construction, or completion, at the time of 17 so coming under the provisions of this Act, the same shall 18 be considered completed, used, operated, and enjoyed wholly 19 under and in accordance with the terms and provisions and 20 limitations of this Act and as though originally authorized, 21 granted, and constructed hereunder, and such grantee shall 22 and may have the value of the rights and properties used 23 and enjoyed under the terms of this Act agreed upon or 24 adjudicated and valued as in this Act provided, and there- S. 7071 2 LO 1 after shall make payments to the Government of the United 2 Slates in accordance with the terms of this Act: Provided, 3 also, Thai in the event of the rights and privileges of the 1 grantee in connection with any existing uses or permits being 5 brought under this Act, thereupon and in connection there- 6 with all of the other existing permits, rights, privileges, or 7 claims of the grantee as to the rights and property so brought 8 under this Act shall be surrendered, canceled, nullified, and 9 at an end, and the sole rights of the United States and the 10 grantee as to such property shall be under and in accordance 11 with this Act. 12 Sec. 9. That the Secretary of the Interior, or other 13 Secretary having jurisdiction and control over any lands sub- 11 jeet to the provisions of this Act, shall make such rules and 15 regulations as may be necessary and appropriate and for the 16 purposes of and having the effect of carrying out the provi- 17 sions of this Act. 18 Sec. 10. That the rights and privileges herein granted 19 may be transferred, assigned, conveyed, mortgaged, or 20 otherwise disposed of by the grantee, but only under and in 21 accordance with and subject to the provisions of this Act 22 and under and in accordance with the laws of the United 23 States and of any State or States within which such said 24 works arc situated and any assignee or successor in interest 11 1 of the grantee hereunder shall be subject to all of the terms 2 and conditions of this Act and to the laws of the United 3 States and of the State or States within which said property 4 or works are situated in all respects and to the same extent 5 as the original grantee hereunder. 6 Sec. 11. Thar the United States shall at all times have 7 the right to reserve, sell, assign, lease, trausfer, or otherwise 8 dispose of all or any part of the lands or the products thereof 9 upon, over, or in connection with which the rights, privi- 10 leges, structures, and uses hereunder provided for are situ- 11 ated, subjed to all of tin- rights of way, uses, occupancies, 12 and privileges hereunder granted, including the right to all 13 necessary means of ingress and egress used or reasonably 14 required in the use and enjoyment of the rights and privileges 1.") granted hereunder. 16 Sec. 12. That nothing in this Act shall he construed 17 as affecting or intended to affect, or to in any way interfere 18 wiili ili<- laws of any State relating to the control, appropri- 1!) ation, use, or distribution of water. 20 Sec. 13. Thai all Arts and parts of Acts inconsistent 21 with this Ad are hereby repealed, and the right to alter, 22 amend, or repeal this Act is hereby expressly reserved: 2.". /'roriiJt tl. That in case any grantee hereunder shall, al the 21 lime of such alteration, amendment, or repeal, have exercised 25 rights in accordance with this Act, such rights and property 12 1 used thereunder shall be deemed property rights of such i* grantee, of which such grantee shall not be deprived by such 3 alteration, amendment, or repeal, and only upon the con- 4 ditions provided in this Act. APPENDIX G 63d CONGRESS, ^ *7 1 A 1 3i> Session. 0« / 1 \) 1 IN THE SENATE OF THE UNITED STATES. December 29 (calendar day, December 31), 1914. Mr. Smoot introduced the following- bill; which was read twice and referred to the Committee on Public Lands. A BILL Providing for the acquisition by a State, under certain conditions, of any lands therein which are or may become chiefly valu- able for the development of water power. 1 Be it enacted by the Senate and House of Bcprcsenta- 2 tives of the United States of America in Congress assembled, 3 That in the manner and subject to the limitations herein pre- 4 scribed, a State may enter and acquire title to lands within ." said State which are or may become chiefly valuable for the 6 development of water power. 7 Sec. 2. That any State desiring to avail itself of the pro- 8 visions of this act shall make application therefor in the !t manner following : 2 1 Such State shall, through its regularly created board, 2 commission, or other regularly constituted public authority 3 of said State duly vested with the power to regulate and 4 control the rates and service of public utility corporations, 5 including authority to regulate the rates and service of any 6 person, persons, associations, or corporations engaged in 7 the business of developing, distributing, furnishing, selling, 8 and renting electric power, file with the Secretary of the 9 Interior an application setting forth the description of the 10 lands sought to be acquired, accompanied by a map or plat 11 thereof, together with proof that the lands described are 12 chiefly valuable for the development of water power, that 13 the entire area of the land described is necessary to accom- 14 plish development of the largest available power at the 15 place designated, and that said application is made for the 16 development of water power in accordance with the pro- 17 visions of this Act. 18 Sec. 3. That such State shall submit proof with such 19 application establishing that the lands described are chiefly 20 valuable for the development of water power and are neces- 21 sary therefor and are being sought for that purpose, and upon 22 such matters and facts being established, patent therefor or 23 for such portion thereof as is necessary for the purpose afore- 24 said shall issue as hereinbefore provided to such State. Such 25 patent shall include such lands or all portions thereof as are i chiefly valuable for the development of water power and are 2 necessary therefor, including all necessary or convenient 3 dams, reservoirs, canals, conduits, pipe lines, tunnels, trans- 4 mission lines, roads, power houses, and all other works or 5 structures necessary or convenient for the appropriation and 6 beneficial use of water and the power or other products gen- 7 erated thereby and for the utilization and beneficial use of the 8 same. 9 Sec. 4. That the provisions of this Act, where appli- 10 cation is made by the duly constituted authority of the 11 State, as hereinbefore set forth, shall apply to any part of 12 the public lands of the United States, reserved or unre- 13 served, including national forests, national monuments, and 11 Indian reservations: Provided, That where such lands are 15 located within any national monuments or Indian reserva- 1G tions, the same shall be located under the direction of the 17 Secretary of the Interior and in such a way as not to inter- 18 fere with such national monuments or Indian reservations 1 !> or the uses or purposes for which the same are created. 20 Sec. 5. That such patent issued under the provisions of 21 this Act shall contain and be subject to the following con- 22 dit ions, limitations, and restrictions, to wit: 23 First. That said State or Territory shall not alienate 24 the fee simple title to said lands and shall retain the same 25 for the uses and purposes in this Act set forth, granting 1 the use thereof for such purposes and subject to the laws 2 of said Stale and the United Slates applicable to and adopted 3 for the purpose of controlling and regulating such business 1 and the charges and services thereof so that the State, or ."> those authorized under its laws to appropriate and bene- (i ticially use such waters, will carry on and continue the 7 service of generating and distributing such electric power. 8 Second. That each tract of land so patented shall be 9 held by said State and devoted primarily to the development 10 of water power either by said State or Territory or by a 11 municipal corporation or corporations therein or by some 12 person or persons, association or associations, corporation or 13 corporations thereto duly authorized and that said State or 11 Territory shall not devote or permit the same to be devoted 15 To any other purpose or purposes in conflict therewith. 16 Third. That all power generated, sold, rented, or dis- 17 tributed under authority of said State by any person or per- IS sons, association or associations, corporation or corporations, l!) and the rates therefor and the service therefor shall at all 20 rimes be subject to and shall be regulated and fixed by and 21 under the authority and laws of said State, or in cases in- 22 volving interstate commerce under and pursuant to the laws 2:5 of the United States, and that such power so generated shall 21 never be the subject of any combination or consolidation in 1 restraint of trade contrary to or in violation of any law of 2 said State or applicable law of the United States. 3 Fourth. That none of the properties, rights, uses, or 1 privileges patented under the provisions of this Act, where 5 the same are assigned or transferred to or permitted to be 6 used or enjoyed under the provisions of this Act, shall ever 7 be valued or allowed to be charged for in connection with 8 any service to the public in excess of such amounts, if any, 9 as the person or persons, association or associations, corpora- 10 tion or corporations shall have actually paid for the same, 11 and in the event of the acquisition of such property, rights, 12 uses, or privileges by such State or any municipality or sub- 13 division thereof, no amount whatever shall be allowed or 14 paid by said State, municipality, or subdivision thereof for 15 such transfer or acquisition in excess of such amounts, if 1C> any. as shall have been paid therefor and which shall not 17 have been repaid or reimbursed prior to such acquisition 18 of the same. 19 Sec. '">. That upon any sale or disposition or attempted 2(1 sale or disposition of such lands by any State for any other 21 purpose or in any other manner than as herein provided, or 22 upon failure to require said lands to be devoted to the uses 2.". required by this Act, or upon any violation of tin 1 provisions 21 of this An, or of the patent to be issued hereunder, the same 2.~i shall be forfeited to the United States, and the Attorney 1 General, upon the direction of the President of the United 2 States, is authorized to institute such judicial proceedings as 3 may l>c necessary for the purpose of ascertaining, declaring, 4 and enforcing such forfeiture. 5 Sec. 7. That the Secretary of the Interior shall make 6 such rules and regulations as may be necessary and appro- 7 priate for the purpose of and having the effect of carrying 8 out the provisions of this act. 9 Sec. 8. That nothing in this act contained shall be con- 10 strued as affecting or intended to affect or to in any way 11 interfere with the laws of said State relating to the control, 12 appropriation, use, or disposition of water or the right or 13 priority of right to the use of the same now or hereafter 11 vested under and in accordance with the laws of said State. UNIVERSITY OF CALIFORNIA LIBRARY Los Angeles This book is DUE on the last date stamped below. an MAP FEB 1 7 1981 FormL9 — 15m-10,'48 (B1039)444 Wgr •' ^ T) ! "Y IXKIVES1> UFORNM U£ HD 1694 A5P61 3 1158 01245 6033 UC SOUTHERN REGIONAL LIBRARY FACILITY A A 000 212 392 5 s