aid the committee all you can trying to shape the hearings in such a way as to have a complete hearing and yet not one of the endlesschain variety, one hearing bringing on another.

It was expected that the three Secretaries who are mentioned in the proposed substitute bill as the commission and who prepared the substitute would be heard first. Secretary Baker is in Europe, Secretary Houston is out of the city; and while we expected Secretary Lane to open the hearings this morning. I have received word that he is unable to be here this morning, but will be here some time during the week. In his absence Mr. Merrill, of the Department of Agriculture, whom I understand has assisted in preparing the proposed substitute, is present, and in the absence of the Secretaries he will be heard first. Mr. Merrill has given the matter considerable attention, and no doubt will be an interesting witness, and perhaps the members of the committee will wish to ask him questions, and therefore there will be no attempt to limit Mr. Merrill this morning or to-day. When I spoke about a limitation I had reference to other witnesses than Mr. Merrill. So Mr. Merrill, if you are now ready, you may proceed.

Mr. B. J. REYNOLDS. Mr. Chairman, may I make a request before the hearing starts? I asked the chairman the other day if the committee would extend an invitation to Sir Adam Beck, of the hydroelectric commission of Canada. Our people have asked him personally; but as he does not belong to our Nation, he feels he should have an invitation from the committee. The reason I ask it is this: He has made a wonderful success of the hydroelectric commission in Canada, and probably a word or two from him would be very advantageous to us, as we are working along the same line that they have made a very great success of.

The CHAIRMAN. The question of whether he will be invited by action of the committee or not is something that will have to be taken up in executive session of the committee.

Mr. HAMILTON. I presume there would be no objection to hearing him.

The CHAIRMAN. It is not a question of hearing him, but a question of giving him an official invitation by the committee.

Mr. REYNOLDS. As he is a Canadian, that is the reason, I presume, why he stands a little on his dignity.

The CHAIRMAN. Mr. Acworth came here from Canada and from England and did not stand upon his dignity in appearing before the joint committee. I think it is something that ought to be taken up by the committee in executive session, as to giving him an official invitation from the committee, as others are seeking such invitations also.

Mr. Merrill, you may proceed with your statement, and we will take that matter up in executive session.

STATEMENT OF MR. O. C. MERRILL, OF THE FOREST SERVICE, DEPARTMENT OF AGRICULTURE.

Mr. MERRILL. Mr. Chairman, I would like to make a brief general statement before I take up the bill in detail, and in order to conserve your time as much as possible I have prepared a short written statement to precede the general discussion of the bill and to outline

briefly the reasons which we believe make necessary the consideration of water-power legislation at this time.

The CHAIRMAN. I understand that you are going to present now the views which are entertained by the three Secretaries.

Mr. MERRILL. I think I do, Mr. Chairman, as far as I understand them.

The CHAIRMAN. I mean that what you say will not be out of harmony with what they propose.

Mr. MERRILL. Not at all.

The industrial expansion caused by the demand for materials and supplies needed in the prosecution of the war, together with the huge financial requirements of the Government, have materially changed the prewar status of the electric-power industry. The demand for power has increased, notwithstanding increased costs of construction and operation. Increased operating costs have reduced the ratio of income to revenue, and this reduction, combined with the decrease in the supply of available investment capital, has produced a situation with respect to public utilities, among which is electric-power development, that merits the early attention of Congress.

Prices for structural material have been irregular for the last five years-markedly so since the outbreak of the war in 1914-with a constant upward trend to a maximum reached about the middle of 1917. Although there was a general reduction in the latter part of 1917, prices still remained, at the close of the year, far above the prewar level. The fluctuations in the wholesale prices of 10 building materials and the advanced price level reached at the end of 1917 are shown in the following table:

TABLE NO. 1.—Range in wholesale prices of certain building materials, 1915, 1916, and 1917.

1 Prices for brick are -per 1,000; for cement, per barrel: for lumber, per M: and for all other materials per pound.

Of the 10 materials listed steel plates show the sharpest fluctuation-718 per cent between February, 1915, and August, 1917-and have maintained the highest price advanced, 195 per cent in December, 1917, over the price of February, 1915. The least fluctuation appears in steel rails, which advanced from $28 a ton in December, 1915, to $38 in December, 1917, or 36 per cent. The great increase in steel plates is doubtless due to shipbuilding activities, while the relatively small increase in rails is due to the lack of activity in railroad construction.

The rise in prices is indicated on the first chart which I have here. The several lines on the chart show prices for the years 1913, 1914,

1915, 1916, and 1917. The highest line shown is for steel plates, running up to 9 cents in the middle of 1917 as compared with about 13 cents before the war.

Mr. PARKER. How many cents a pound?

Mr. MERRILL. Those are average wholesale prices throughout the United States. Before the war the steel plates were about a cent and a half a pound. They went up to 9 cents a pound in the middle of 1917. They have now dropped down to this point [indicating], due, no doubt, to the Government's price fixing: but nevertheless, even at the end of 1917, prices were way above what they were before the war began. Materials such as brick and cement have been more stable, but lumber, due to cantonment construction and to shipbuilding, has shown a marked increase and is apparently still rising. Douglas fir, for example, increased in price 147 per cent from August, 1915, to December, 1917.

Similar advances have taken place in power-plant equipment. Hydraulic machinery has advanced from 100 to 150 per cent over 1914 prices, electric apparatus from 125 to 150 per cent, steam turbine generators 150 per cent, and water-tube boilers 170 per cent. In addition to increases in cost, deliveries are most uncertain unless class A priority can be secured.

Finally scarcity of labor and increase in wages have added to the difficulties and the cost of construction. The union scale of wages in classes of work found in power-plant construction and operation has advanced in many cases from 25 to 40 per cent since 1913, as indicated in the following table (Table No. 2), which shows the advances in eight occupations for six labor centers. The highest mean wage scale for the occupations listed is found in San Francisco, followed by Chicago, Denver, Pittsburgh, New York, and Boston. The greatest increase in wage scale over 1913 is found in Pittsburgh, followed by Boston, Denver, New York, Chicago, and San Francisco. TABLE NO. 2.--Union scales of wages, 1917, and percentage increases over 1913 in certain occupations and labor centers.

mean...... 63.8 17.8 67.1 11.3 65.2 17.0 64.1 12.1 64.1 38.4 68. 1 581

The increase in cost of structural materials, of labor, and of equipment, and the difficulties in securing deliveries, particularly of manufactured equipment, have placed a heavy burden upon new power

development, whether by water or by steam. Since, however, a greater proportion of the total cost of a steam plant is on account of materials and equipment which have shown the greatest increase in cost, unit costs of steam-power development have increased somewhat more rapidly than unit costs of water-power development.

The cost of electric-power operation has increased in proportion to the increase in the elements which make up such cost. These elements are mainly labor, maintenance materials, and fuel. Waterpower developments are affected by the first two elements; steampower developments by all three. Materials for maintenance have advanced in price along with structural materials. Labor advances have already been discussed. It remains to review briefly the situation with respect to coal and fuel oil.

For the greater part of the United States the fuel question in electric-power operation is expressed in terms of coal. Increased demands for coal by the industries, railroads, and shipping, and for export, coupled with the inability of transportation agencies to make deliveries, have reduced the supplies available for power purposes and materially increased their cost. General increase in wholesale prices is shown in Table No. 3. Increases in different sections vary widely. Bunker coal at Portland, Oreg., supplied from Washington and British Columbia, advanced only about 10 per cent from Jannary, 1915, to January, 1918. The advance in San Francisco for similar material for the same period was about 80 per cent; in Denver, 100 per cent; Salt Lake City, 150 per cent; and St. Paul, 160 per cent. TABLE NO. 3.-Range in wholesale prices of coal and oil, 1915, 1916, and 1917.

1 Coal prices are per short ton; crude oil, per barrel; and lubricating oil, per gallon.

The solution of the coal problem is in increased production and in improved transportation, both of which will be attended with difficulties during the period of the war, but both of which will probably be satisfactorily adjusted when the industries and transportation facilities of the country return to a peace basis; although on account of wage increases and labor shortage, it is not probable that prices will return to prewar figures.

On the Pacific coast and in the Southwest steam-power development is mainly dependent upon petroleum. Not only have prices of this product advanced in this territory from 100 to 200 per cent since 1915, with an average increase of 160 per cent, but consumption has exceeded production, the supplies in storage have been reduced to an alarming degree, and depletion of the available undeveloped supply is rapidly taking place. This situation, however, is not confined to the West. The general petroleum situation in the United States is set forth in evidence presented to the Senate Committee on Public Lands on June 15, 1917. This evidence showed that with a

total consumption in the United States in 1916 of 312,000,000 barrels, the production was 296,000,000 barrels, or a deficiency of 26,000,000 barrels. It was estimated that the normal increase in consumption for 1917 would be 41,000,000 barrels with an additional wartime increase of 20,000,000 barrels, making a total increase of 61,000,000 barrels over the consumption of 1916, while on the other hand, production would decrease 9,000,000 barrels, making a deficit of 70,000,000 barrels, with a possibility of a still further deficit. through the stoppage of the importation of some 42,000,000 barrels from Mexico.

I do not know how the Mexican situation has affected the petroleum supply and whether there has in fact been an additional shortage due to a lack of supply from that source, but with normal importations from Mexico the deficit for the year would be 70,000,000 barrels, and, without such importations, 112,000,000 barrels, against which there was a surplus on hand on January 1, 1917, of 151,000,000 barrels.

Approximately one-third of the total petroleum production of the United States is from the California fields. The output of these fields fell from 104,000,000 barrels in 1914 to 92,000,000 barrels in 1916. In the latter year consumption was 105,000,000 barrels or 13,000,000 barrels in excess of production. The production for 1917 has not kept up with consumption, with the result that the surplus stocks in storage had fallen to 37,000,000 barrels on July 1, 1917. The petroleum committee of the California State council of defense reported on July 7, 1917, that if the existing excess of consumption over production should continue, the entire available storage of California petroleum would be exhausted by June 1, 1919. This committee expressed its opinion that, as a whole, the production of petroleum in this country appears to have nearly or quite reached its maximum and to be entering upon a period of decline, except as production may be maintained or increased by a disproportionate drilling of new wells.

The situation with respect to the California fields is more important in its bearing on power production than is the practically similar situation in the remainder of the country, for while approximately 80 per cent of the output of the central and eastern fields is sold as refined products and only 20 per cent is used as fuel, 80 per cent of the California production is used for fuel and only 20 per cent sold as refined products.

Of the 70,000,000 barrels of California petroleum used for fuel. 85 per cent is used in the five States of Washington, Oregon, California, Nevada, and Arizona. Of the amount consumed in these five States, 55 per cent is used by railroads and steamships, 23 per cent in mining and manufacture, and 12 per cent by public utilities, the last named including electric-power production.

California produces only a negligible quantity of marketable coal. Such coal as is used is brought from Australia, British Columbia, Eastern United States (by water). Washington, Oregon, and the Rocky Mountain States. Importation from Australia and from the Eastern United States (by water) ceased in 1916, and 87 per cent of the importation for the year came from British Columbia and the Rocky Mountain States. The total of approximately 420,000 tons used in 1916 is equivalent to 1,260,000 barrels of fuel oil, or only 24