Mr. HAMILTON. Mr. Secretary, I understood you to say that as between the original licensee and another, assuming there is a licensee who is a bidder at the end of 50 years, as between him and the other bidder, you would give the preference to the licensee?

Secretary LANE. At the same figure.

Mr. HAMILTON. Would you give that preference to the original licensee, assuming that the other bidder was a municipality? Secretary LANE. I do not think I would.

Mr. HAMILTON. There seems to be some confusion about that. Secretary LANE. It may be at the end of 50 years we will have this country split up into great electrical districts and there will be municipal corporations of a peculiar kind. I should hope that would be so, and I would say the preference should be given to that electrical district.

Mr. HAMILTON. In your original statement that was not considered, and it occurred to me that it should be presented to you.

get

Secretary LANE. These things are primarily public utilities. The people are entitled to the power that is generated from these waters. and we make use of private corporations as a method by which they can be developed, and cause no embarrassment to ourselves, politically, socially, and economically, and be better developed. As soon as the public can take these things over and put its own money into them, then the public ought to do it, providing the public will as good service as they did before. But until that time comes, we want these things privately developed, as practically all public utilities have been developed in the United States by private enterprise and private capital. As long as things are not standardized so that the public can be assured of securing good service under governmental ownership, they should remain in private control. But when they are standardized and the good service can be assured, then they should be turned over to the Government, if the pople want to put their money in it.

The CHAIRMAN. If you put in a rigid provision of law requiring at the expiration of the lease that the original licensee should have a right to get another license, would not that prevent any bidding against him, inasmuch as competitive bidders could not bid anyway? Secretary LANE. I do not think so.

The CHAIRMAN. Unless the bids were secret.

Secretary LANE. We can have it so that the bids will be accepted at a certain time. We could just simply say here is a water-power proposition, and bids are to be put up at a certain time, and this can be done as those things are done now, and you can take it at the highest price that is offered. If he was not willing to take it at that price, he would not get it; and then the other fellow would get it.

The CHAIRMAN. As I remember it, it was the statement of Mr. Merrill in explaining this bill that there was not any thought of revenue, and that the charge of 10 cents was only to cover the administration costs.

Secretary LANE. I do not think that should obtain 50 years from

now.

The CHAIRMAN. If that is the case there will be no high or low money bid, and the licensee would simply get it.

Secretary LANE. My own judgment is twofold on that proposition. first, that it is a very proper thing to get revenue, and it will be a very proper thing to get revenue from these powers.

The CHAIRMAN. That is my own position.

Secretary LANE. In the far future, it seems to me, it will be a very proper thing to get revenue from these powers, looking a couple of generations hence, which is quite the far future, as far as I am concerned. But there is another proposition that I think should be carefully considered, and that is, instead of making this a competitive proposition in reference to the amount of money that is paid, you can make it a competitive proposition upon the principle of the lowness of the rate which can be charged, and that is a great deal better thing for the country than to make it competitive on the basis of the amount of money paid. If they have been selling power for 4 mills, and there is real competition as to whether it shall be sold for 2 mills, and somebody comes in and says, "I will sell the power for 2 mills." that man ought to have it.

The CHAIRMAN. I took that same view in reference to making it a rigid period of 50 years. I do not think that it is a proper thing because some company might offer to make the improvement for a 40 years' license, and there is no use in forcing 50 years upon the Government if it can get it done for a less period.

Mr. HAUGEN. Mr. Secretary, would it not be safe to trust the justment and wisdom and integrity of Congress 50 years hence to determine what terms and conditions should be invoked in the terms of the new lease?

Secretary LANE. Yes.

Mr. HAUGEN. Why should we legislate now and tie Congress up for all time to come?

Secretary LANE. I do not think Congress will be any less liberal 50 years from now that it is now.

Mr. HAUGEN. Can we not trust to the wisdom of Congress 50 years hence to determine what is to be done, and is it necessary at this time to tie down future Congresses as to the length of the license?

Secretary LANE. I think you have to take one question into consideration there, too. That is whether these people, who are willing to put in their money now, need some assurance as to a guarantee at the end of that period.

Mr. HAUGEN. Why do they not need it at the end of future years, as well as at the end of 50 years?

Secretary LANE. Perhaps that suggestion has no validity; perhaps it is not of any value.

Mr. HAUGEN. The question is whether it should be made for a certain term or made perpetual. If you say it can be renewed for certain definite periods, that makes it a perpetual lease, it seems

to me.

Secretary LANE. I would not think so. I think you have got to say that if the Government wants a project for itself or another licensee, this comes to an end at the end of 50 years and then we start with a new deal.

Mr. HAUGEN. If we fix the terms now you start with a new deal. My idea would be that the contract and this license is a contract— should be made for 50 years, and at the end of 50 years that termi

nates the contract, and then we must trust to future Congresses as to what terms shall be fixed for the renewal of the license.

Secretary LANE. Do not tie the hands of the generations to come. I should say that is a wise policy.

Mr. TAYLOR. We might put a clause in this bill to the effect that their rights shall be at a future time determined by the then existing law, and trust that to future Congresses.

Mr. HAUGEN. Somebody expressed some doubt about the judgment of future Congresses, but I am willing to trust their judgment as much as the judgment of the present Congress.

Secretary LANE. There must be a certain comity between the Congresses.

Mr. LA FOLLETTE. I do not think the idea that Mr. Haugen wished to convey has been brought out. We have had the question as to whether if the Government did not take it over or no new licensee would come in, what the terms should be for the new lease and occupant.

The question was brought up here that you had fixed a certain term, far enough in the distance so that they could refund, and that is the question, the fixing of the date when they can refund and sell their bonds again, and there is a question in the minds of some here as to whether they shall be given any specific time beyond the 50 years, and it has been brought out here by some of the witnesses that they could not refund under conditions like that. What is your idea about that?

Secretary LANE. I should say the safe and wise course to pursue there is that this thing should be made terminable at the end of the period if the Government wants a project for itself or another licensee without any holdovers.

Mr. LA FOLLETTE. That is not terminating it at all. It is only in case the Government does not take it or any other licensee, whether or not there shall be a fixed term so that the occupant can refund and sell his bonds to good advantage. It was brought out here that it was necessary for it to be fixed now in order to protect people who loan their money the first time. They would not want to be left up in the air at the end of that time so that they would not know whether they were going to get their money or not. If they were sure it would terminate at that time, there would be no question about it.

The question was as to whether the term would be fixed, so that they could bid on these bonds and buy these bonds and have a chance to refund and continue. The question that has been brought up here. and I think that is the question Mr. Haugen had in mind.

Mr. HAUGEN. I think we all agree that it is necessary to wind up the business, and that can be taken care of in another way. If we determine to terminate the license at the end of 50 years, it would be necessary to have 5 or 10 years in which to wind up the business. Secretary LANE. The question is whether you can now tell that. Mr. HAUGEN. The question is when is the license terminated, and I think the Secretary has made the matter entirely clear.

The CHAIRMAN. We are very much obliged to you, Mr. Secretary.

MY DEAR MR. FERRIS:

DEPARTMENT OF THE INTERIOR,
Washington, March 28, 1918.

I have again been over the amendments printed in italics in the committee print of the proposed House substitute for Senate bill 1419, and find only

two which, in my opinion, are of particular importance. In order to clearly grasp their purpose, a few moments' study of the definition of "net investment " on line 6, page 6, will be necessary.

At the end of the period of the lease, be it 50 years or less, the lessee will have either

(1) Amortized his entire investment, and so will expect to receive no payment for his plant.

(2) Partly amortized his investment, and so will expect to receive payment only for what has not been amortized, if the Government takes it or transfers it to a new licensee.

(3) Will not have amortized his investment and will expect payment therefor on the basis of "actual legitimate original cost thereof as defined," etc., less the sum of

(a) Any unappropriated surplus,

(b) Aggregate credit balances of current depreciation accounts,

(c) Aggregate appropriations expended for extensions or betterments,

in case the Government takes it or transfers it to a new licensee.

The third alternative will be that usually encountered because most State public utility commissions are not likely to permit rates to be charged in an amount sufficient, after paying interest, to amortize the cost of the original project, much less the cost of later extensions.

With the above clearly in mind, lines 17 to 24 on page 21, which have been stricken out, are merely a repetition of what has already been included in the definition of "net investment" beginning on line 6, page 6, where it is said that "net investment" in a project means the "actual legitimate original cost thereof," etc. Should there be any doubt about the matter, I would suggest that the words "net investment" be substituted for the words "fair value in line 17, page 21, and that as so amended lines 17 to 24 on page 21 be replaced in the bill.

With regard to lines 17 to 21 on page 22, the intention is to recognize the fact that if at the end of a lease period the United States Government does not take over a property nor does the Government turn it over to a new licensee, the Government will recognize the fact that there may exist a "net investment" in the property which has been made by the original lessee and will determine what to do with the property having that fact in mind. In other words, that the Government, if it does not want the property itself and can not secure another satisfactory lessee, will not impose such terms on the old lessee for a continuance of the lease as will wipe out his investment in whole or in part. In short, if the old lessee is to get a renewal he will secure it on no worse terms than would another lessee. For it is to be remembered that a new lessee would have to purchase under the terms of the law the old lessee's "net investment." If the Government takes the property it must pay him; if another lessee is given the lease he must pay him. If neither is done, I see no reason why the new license should not recognize that there is an investment which has not been canceled. The amendment does not state what the terms of a new lease to the original lessee shall be or what a fair return on his "net investment " shall be 50 years hence. It means, in my opinion, that if the Government does not make use of the project in any other way, it will recognize the fact that the original lessee, who will then be required to continue to operate the property or to abandon it, may still have a net investment," which shall not be taken from him without payment as provided in the bill, or by the imposition of conditions by the Government itself which will impair the "net investment" remaining.

66

In relation to the provisions of section 6, as amended, I assume that your only doubt is as to whether the Government, if it does not care to take the property itself or does not turn it over to a new licensee, should allow the original licensee to continue operating under appropriate conditions. Most certainly we can not contemplate the cessation of operations of the property, the withdrawal of the service, and the dislocation of the industry which would result from the shutting down of the project. The operations must be continued by somebody. If the Government does not wish to do this itself, or does not wish to find or can not find another licensee, there is no one to continue the operations except the original licensee. I can see no objection to a provision in the bill which will recognize this condition. For example, an indeterminate license, under the laws of Wisconsin, can be ended only upon payment of "just

compensation," a term which includes values specifically eliminated from “net investment as defined in the bill. Similar provisions exist generally in the laws of other States.

I know of nothing in the bill which departs from the principles of legislation adopted on former occasions by the House of Representatives.

Cordially, yours,

Hon. SCOTT FERRIS,

House of Representatives.

FRANKLIN K. LANE.

M. TAYLOR. Mr. Chairman, the governor of the State of Colorado, and I as a representative of the principal water-power district of the State, and a number of prominent people in our State have asked Mr. Dawson to represent our State in these water-power hearings. and to speak for the State of Colorado.

The CHAIRMAN. We will be very glad to hear Mr. Dawson now.

STATEMENT OF MR. CLYDE C. DAWSON, OF DENVER, COLO.

Mr. DAWSON. Mr. Chairman and members of the committee. My name is Clyde C. Dawson: my post-office address is First National Bank Building, Denver, Colo. I am a lawyer, engaged in the general practice of law. I have never represented, as general consul or as regular attorney, any water-power company. I have acted in an advisory and consulting capacity for a number of water-power companies and have consulted with their representatives during these hearings, and I have also represented a number of such companies in litigated cases. I appeared as of counsel and took part in the argument of what has been referred to here as the Utah Power cases in the Supreme Court of the United States. In that instance I appeared specifically for the Beaver River Power Co., and also spoke at the request of the official representatives of certain States for some six Western States in regard to what they deemed to be their rights in the matter.

I do not wish, however, to appear before this committee as the representative of my State. It is true the governor of Colorado offered to give me a letter to the committee, but I told him that in view of the fact that I had on so many occasions represented private power companies, I would not take advantage of his kind offer. I prefer at this time to appear purely as an individual and attorney, and I now speak in that capacity.

Coming from the State of Colorado, and having been a resident of that State for more than 40 years, I have watched the proceedings here with interest and with care, first because of the importance of the subject to the people of my State, and, second, in the hope that if I should conclude to say anything before the committee I might by following the statements of other witnesses avoid duplication.

I believe most of the members of the committee know that the State of Colorado, together with many of the other public-land States, has for many years opposed what is commonly known as the leasing or permit system. I have been one of those who has taken that position, and up to the time of the adverse decision in the Utah Power cases, I did all I could to prevent legislation affecting the resources of the Western States which should be based upon the leasing or permit theory. I think, however, that my judgment is sufficiently good to know when I am beaten, though I have been told that I do not always realize that.