should not be talking about it. We should not need to. As a matter of fact, however, conservation as such is not profitable to the present-day investor. The problem is exactly similar to the road situation in this country when it was left to the private investor. As a result toll roads were built where they were profitable. We have seen the forest situation handled in this country almost entirely by the private investor and we know the awful result, where there has been absolutely no conservation. The coal situation has been handled by the private investor and the damage as yet is not so apparent, but the increasing call for conservation indicates that those with the most insight see what the future has in store for us. As long as we figure the advisability of a waterpower project on the basis of the present price of coal there will be few investors, and yet it is only on this basis that we can have any private investors at all. It is only when we work our problem out from the standpoint of conservation, which means the good of this and succeeding generations, that we see the tremendous value of the development of water powers. This points, however, surely and definitely to the fact that their development cannot be expected by private capital. The Government must act in one or two ways; either it must assume the risk by granting returns to the conservative investor, or it must give the speculative investor almost carte blanche to take the risks of the enterprise and pay himself for them as best he may. The history of the development of electric light, street railway system, railroad and other public utilities, shows that in individual cases the returns may be huge, in other individual cases the losses may be huge, but as a general average the returns are questionably excessive. I must, therefore, regard the present bill as an experiment made in the hope that my conclusions above are wrong. I think this experiment is worth trying, because even a casual observer of the general situation must conclude that, generally speaking, this is the only kind of a bill that would pass. I think it wise to have eliminated all the questions of fair value. I think that every investment ought to be evaluated at the time it is made, whether it is put in as such, or is paid for promotion or other services. The investment ought to be kept according to a system of accounts prescribed in advance and the return at any period of the venture ought always to be based on what the accounts show and not on a value to be determined by appraisers with the help of commissions or courts. The several detail changes that might be suggested are few and relatively unimportant. The discussion by many eminent men in the hearings before the Committee of Public Lands in the second session of the Sixty-third Congress on H. R. 14893, brought out the fact that, in addition to the menace of revocable permits, capital would demand, not only a return of the full investment, but a share of the speculative profits, sometimes called increment in value, if there was no guaranty of interest returns. If it were possible to guarantee a reasonable rate of return on money invested the recapture of a property could be effected on book costs if a standard authorized system of accounting was adopted by the proposed commission, and its provision enforced by them. This guaranty is an extremely difficult thing to obtain and it might work a great hardship on the customers of a utility if there had been an unwise or extravagant investment-further a guaranty of a return by the terms of this bill might infringe on the jurisdiction of the public utility commission of the several States. With the sole purpose of making the bill elastic enough to induce private capital into the development of water powers, we are suggesting certain omissions and substitutions in the wording of the bill, and stating the reasons as they appear to us for such changes. Page 11, line 11: After the word “determines" insert “after considering all evidence offered." This insertion is made as an additional safeguard in order that a commission might not act without proper deliberation and that the charge might not be made that any actual decision they made was without consideration of evidence. Page 14, line 5: After the word “annum" insert "nor more than 50 cents per horsepower per annum.” This is inserted in order that a maximum limit as well as a minimum, may be known before applications for licenses are made. There is no great virtue in the amount of 50 cents any more than there is in the minimum amount of 10 cents. It would probably be much better to have one fixed rate that would be known to all applicants. In the hearings before the Committee on Public Lands in the second session of the Sixty-third Congress on H. R. 14893, a tax of 25 cents per horsepower was suggested, and one of the witnesses stated that a project that could not stand a tax of 25 cents per horsepower per annum should not be developed. This is as true to-day as it was then, It is evident that the expenses of the commission should be met by revenues obtained by licenses and if the development of water powers is made possible by this bill in the amount to be expected a charge of 25 cents would go a long way toward meeting these expenses. This charge should be well considered before being adopted. Page 14: Omit line 16 after the word “Provided"; omit line 17 and line 18 and the first three words of line 19. If the license fee is a charge for defraying all or a part of the expenses of the commission there is no reason why States and municipalities should not bear their share of these expenses. Page 18, line 16: Omit line 16 after the word "pay." Omit first four words of line 17 and insert in place of the commissions "fair and just compensation for the property taken." This change is made in order to simplify the terms of recapture. Unless the title is definitely known, and the terms of recapture by the Government clearly set forth so that there can be no question arise as to possible interpretation of "fair value" and "original cost," at the expiration of the license it would be impossible to finance any development. The following quotations from the referendum of the Chamber of Commerce of the United States of America states this very clearly: "No element of the proposed legislation is more vitally important than the terms upon which the property of the permittee may be taken from him at the expiration of the permit. If he can not be assured that in case his property is taken he will receive "just compensation" therefor, he will invest his money in other enterprises. The words "just compensation" carry an assurance of protection and fair dealing, and a sense of security. Any attempt to amplify or limit "just compensation by definitions and refinements of "fair value," "original cost," and other expressions, and as yet undefined by the courts, leads to uncertainty which is the one thing which must be avoided. All these mooted technicalities will be settled by the courts and the commissions long before any of these permits terminate. It is difficult to see why either the public or the investor should not be satisfied to rely upon the expression "just compensation" and trust to its interpretation and application by the Federal courts in the light of public opinion as it shall be reflected in the law 50 years in the future." Page 19, line 3: Omit the words "fair value" insert "just compensation." Page 19, line 9: Omit line 9 after the word "excess and omit line 10. Insert in place of the ommission "of the actual book costs as shown by accounts kept in conformity with a standard system of accounts adopted by the commission." This change is made in order to remove any doubt as to what reasonable cost" of the value for water rights, rights of way, land or interest in water rights may be. Page 19, line 14: Insert after the word "authorized " to renew the original license." This insertion is made for the purpose of clearing the title. If there is any reason for increasing rentals or if the business of the company may have been slow in development so that increased rentals would create a burden, the licensee should be permitted to continue in possession until such time as the project reaches the point where it would stand additional burdens. Page 19, line 16: Omit line 16 after the word "conditions" and omit first four words of line 17 and insert in place of the omission "as may be mutually agreed upon by the commission and licensee." This change is made in order to clear up the question of title at the expiration of the license. No project could be financed where the title might depend on laws and regulations existing 50 years after the license was granted, but unknown at the time of leasing. Page 19, end of page: At the end of page 19 insert "Provided, That all terms and conditions being equal, the original licensee shall have priority over any new licensee.” This provision is inserted in order that the company leasing the project and developing it through its initial stages may not be forced to relinquish the fruits of their labor without just cause. If they are put on an equal basis with any other application for the same license the interests of the public will be served by allowing them to continue in possession. The suggested changes and the reasons for them are stated briefly for your consideration. The reasons given have been elaborated in the hearings mentioned above, and without doubt the same reasons will be amplified by witnesses at your present hearing, as the fundamental facts are known to everyone connected with hydroelectric development, more particularly those who have been engaged in either financing such development or in studying the reasons why some projects have been impossible of development. Very truly, yours, H. T. CAMPION. (Thereupon, the committee took a recess until 1.30 o'clock p. m.) AFTER RECESS. The committee reassembled, pursuant to the taking of a recess, at 1.30 p. m. The CHAIRMAN. Mr. Weston, there is a gentleman here who desires to make a statement to the committee in reference to this bill, and who has to leave the city this afternoon; and, inasmuch as you are located in Washington, I wanted to ask if you would give way to this gentleman, and conclude your statement a little later? Mr. WESTON. I will be very glad to do so, Mr. Chairman, but I would like to make just one statement to clear up the situation. One of the members of the committee asked me a question which I would like to clear up. There seems to be some confusion in the minds of the members of the committee in reference to the fact that I am apparently talking from the angle or viewpoint of the paper manufacturer. I think, perhaps, I did not make myself quite clear in regard to my personal interest in the proposed paper mill. It is a cooperative proposition in the sense that we have contracts with some 40 or 50 newspapers to absorb the entire output of this mill, and I was just using that as an example. I am not appearing as a manufacturer; I am appearing simply for the paper committee of the American Newspaper Association, to express the desire of the newspapers of the country; and, so far as possible, their attitude with regard to the legislation. This other matter was simply contributory evidence as to the application of the proposition to an industrial unit in which the committee, together with myself, are in cooperation. AMERICAN NEWSPAPER PUBLISHERS' ASSOCIATION, Mr. WILLIS J. DAVIS, COMMITTEE ON PAPER, Secretary Committee on Water-Power Legislation, Washington, D. C. MY DEAR MR. DAVIS: Inclosed please to find the signed letter from Mr. A. G. McIntyre, special representative of the committee on paper, American Newspaper Publishers' Association, which we desire to have included in the record of the water-power hearings. I wish to thank you for your courtesy in the matter. Yours, very truly, S. P. WESTON. AMERICAN NEWSPAPER PUBLISHERS' ASSOCIATION, Hon. T. W. SIMS, CHAIRMAN, AND MEMBERS OF CONGRESSIONAL COMMITTEE ON WATER-POWER LEGISLATION. GENTLEMEN: Owing to being called before a special hearing of the Federal Trade Commission, I was unable to appear before your committee at the time designated for me last week. I therefore take the liberty of presenting to you in this letter the attitude of the commitee on paper of the American Newspaper Publishers' Association with regard to the water-power legislation and its indorsement of the corrected draft of the administration water-power measure now being considered by you. The interest of members of the American Newspaper Publishers Association in water-power legislation is twofold. First, it is our firm belief that the present and future necessities of the Nation require the development of this wasting resource at the earliest possible moment. Second, it is of specific direct importance to every publisher of the United States that the extensive pulp-wood stands in the Pacific States be made available for the manufacture of news print as in the manufacture of paper large amounts of cheaply developed water powers are essential. The development of the possible paper-mill undertakings in this territory are not now feasible, as under the existing laws the necessary water powers can not be financed. In June of last year the committee on paper appointed Mr. S. P. Weston as their representative in Washington on the matter of water-power legislation, instructing him to use every legitimate effort to secure remedial legislation which, while adequately protecting the rights of this people in this resource, would at the same time afford capital security and inducement to invest in this type of development. The effort of our committee and representative has been directed along the lines of showing the widespread interest and demand for such legislation and to place in the hands of Congress and the administration specific information along these lines. In this connection, we have issued from time to time bulletins reproducing editorial and newspaper comment from all sections of the country as well as supplying other information in connection with this subject. In his argument before your committee Mr. Weston brought out certain points in connection with the present situation regarding manufacture of news print in this country and our dependence on other countries for a large proportion of the paper supplies used in the United States. We believe the points suggested by Mr. Weston in connection with this matter are worthy of your very careful consideration, more especially as it seems possible, through the utilization of the enormous stands of pulp-wood timbers in the West, to manufacture an adequate supply of paper within the boundaries of this country. This will not be possible, however, unless necessary water-power developments can be secured. The committee on paper has indorsed and asked the members of the American Newspaper Publishers Association to give their indorsement to the corrected administration bill now before you. It is our opinion that the basic principles of this bill are adequate and imperatively necessary if any degree of development is to be secured. We believe that (1) there should be a definite basis of a term of lease and that a 50-year period as indicated in the bill is essential, and (2) that the terms of recapture should definitely assure capital that there shall be no impairment of their investment and that they should be entitled to earn a fair return thereon. We assume that certain amendments, perfecting and strengthening the bill, will undoubtedly be made, and it is our judgment that such amendment should not be restrictive in their character. The main essentials, however, in our judgment, is that the bill must include the irrevocable 50-year term and the definite satisfactory provisions with regard to recapture. We would also urge for your consideration the great desirability of the early passage of the water-power measure. In case the law is passed under which financing will be made possible it is most desirable that engineering crews and development work be started in the early spring, as from an engineering standpoint such work may not be as advantageously inaugurated in the late summer and fall months. In this particular we have in mind certain proposed paper-mill developments which are before this committee and whose establishment has been delayed as a result of the Utah case decision, and the attitude of the financial houses subsequent thereto with regard to water-power development financing. Very respectfully, COMMITTEE ON PAPER, AMERICAN NEWSPAPER PUBLISHERS' ASSOCIATION, The CHAIRMAN. We will now hear Mr. Houghton. Mr. Houghton, will you please state your name, your address, and whom you represent? STATEMENT OF MR. AUGUSTUS S. HOUGHTON, 111 BROADWAY, NEW YORK, REPRESENTING THE CONSERVATION COMMISSION OF THE STATE OF NEW YORK. Mr. HOUGHTON. My name is Augustus S. Houghton; my address is 111 Broadway, New York City; and I represent the Conservation Commission of the State of New York. I may say, Mr. Chairman, for the last three years I have been the secretary of the conservation commission. I am not now the secretary of that commission, having resigned that position three weeks ago to resume my practice. The commissioner asked me to appear before your committee as the representative of the conservation commission. As I understand the question of boundary waters is not before this committee, I shall confine myself as to what is the State law in regard to the development of water power and ask that, if possible, the bill be changed in one or two particulars without impairing the purposes of the bill, so that it will conform with our law, as regards New York State only, so that there will not be that conflict that might arise by reason of the variations of the provisions of this bill with the present law of the State regarding its inland waterways. The CHAIRMAN. I will state, Mr. Houghton, in order to make it perfectly clear, that we will favor an amendment to the bill which will make it perfectly clear that this bill does not intend to deal with boundary waters. That is the purpose of the committee. Mr. HOUGHTON. I also understand it does not include the taking of the water from Lake Michigan for the Chicago Canal. We are very much interested in that. The CHAIRMAN. Lake Michigan, I suppose, is somewhat of a boundary water. Mr. HOUGHTON. Under the treaty with Great Britain it becomes a boundary water. Under the treaty with Great Britain Lake Michigan is included in the boundary stream. The CHAIRMAN. Although it is not physically a boundary water. Mr. HOUGHTON. Although it is not physically a boundary water; yes. The Conservation Commission of the State of New York has jurisdiction, among other things, over the inland waters of the State. It has jurisdiction over hydroelectric development, over river regulations, and over the impounding of waters for the regulation of floods. The State of New York has been very slow in favoring any policy for the development of the water powers of the State. It is estimated that there is about 2.500.000 potential horsepower water power in the State of New York, of which about 650,000 has been developed. |