Mr. GRANGER. Mr. Chairman, I think the best guaranty of the likelihood of this being a sound venture is two things, first, it has back of it the engineering and construction services of what they call EBASCO which is part of the Electric Bond and Share, a big outfit. It has back of it for the operation of the mill Perkins-Goodwin, one of the two largest wholesale pulpwood operators in the United States, and I have a letter from them and they say they will be willing to put in three and a half million dollars. I have three letters, in fact, one from Perkins-Goodwin, one from EBASCO, and then a third one from Columbine Development Co.

Mr. WHITTEN. We would be glad to have them.

Mr. GRANGER. They are big reliable outfits which gives assurance that this will be a going concern. This was not a defense project, this thing began long before Korea. It will be valuable in the defense effort, however.

Mr. HORAN. On the justification you put it on a defense basis.

Mr. GRANGER. It says that it will be of added importance from that standpoint.

Mr. HORAN. I am not trying to deny that, but it says

Application for certificate of necessity for constructing the plant and the loan under the Defense Production Act were filed on January 11.

Mr. GRANGER. I see what you mean. That is true, but the project itself

Mr. WHITTEN. Now we may be getting into something; this is a loan. Is the Federal Government putting this mill up?

Mr. GRANGER. The Federal Government may loan money. They have applied for a loan from the Federal Government.

Mr. WHITTEN. What will the amount of the loan be?

Mr. MASON. The project is approximately a $20-million project. Mr. WHITTEN. Whose $20 million, the Federal Government, or some private firm?

Mr. MASON. The loan application is for $16.5 million.

Mr. WHITTEN. About the $4 million they are putting up. Is that the know-how, the engineering plans, the architectural part of it, or $4 million in cash?

Mr. MASON. In this letter from Perkins-Goodwin they say that they are ready to put up $3,500,000 for this thing.

Mr. WHITTEN. It is still something of a gamble. It may be a good gamble but it is something of a gamble.

My chief quarrel with the Forest Service is not laying the stuff on the table. You are going to come out all right with this committee and with me, if you do. We find out this year that in addition to the appropriated funds you had $5 million extra which was in the justification but it took Mr. Roberts to find it.

As long as I am on this committee, I hope you will lay your stuff on the line. I am not shooting at any individual. You folks are hard working and patriotic, but if your relations are going to continue from year to year, it will help a lot to lay the suff out on the table so we can arrive at what I hope will be a fair conclusion.

Mr. GRANGER. Mr. Chairman, what have we failed to lay on the table here?

Mr. WHITTEN. Well, in this instance, the impression that I have gotten was that an outside group was coming in and putting in a paper mill and that they are fixing to buy this timber at a price which

would make the timber worth $96 million. It now develops that, instead of an outside group coming in and putting up the mill, the Government is putting in 85 percent of the money and it is a gamble as to whether you will get the $96 million or not. You are not dealing with a solvent purchaser but you are depending on whether the mill works out and whether they will be able to repay the Government. You have not said that was not true, but I do think that the hearing would lead one to believe that we had made a firm sale to a solvent purchaser.

Mr. GRANGER. We have in here a statement to the effect that the application for the certificate of necessity and a loan under the Defense Production Act was filed January 11.

Mr. WHITTEN. I was referring to the testimony.

Mr. GRANGER. If I neglected to bring that out in my oral testimony, certainly it is the last thing we want to do, is to get money under false pretenses. We do not ever want to be vulnerable to that kind of criticism. We do feel that with the people back of this thing, there is a great assurance of its being successful.

Mr. WHITTEN. We do not know that that is not true. There are a lot of good gambles. I am not trying to quarrel with that thing, I just did not understand it, and it may be my own failure to check the matter.

Mr. GRANGER. I think they have deposited $100,000?

Mr. MASON. $25,000 filed as earnest money that they will lose if they do not go through with it. Of course that does not necessarily mean that they will go through with it but it is evidence of good faith. In addition the company has spent more than $100,000 for legal engineering and other development expenses.

Mr. HORAN. Do you know the nature of the defense loan that they have asked for?

Mr. GRANGER. It is under the Defense Production Act, Mr. Horan, which allows for loans which contribute to the defense. I do not know whether they filed for short-term amortization or not but that is one of the provisions of the Defense Production Act, that on certain conditions they may be allowed short-term amortization.

Mr. HORAN. Does anyone else know about this? Are there any clauses which would give them nonrecourse provisions on any part of the loan?

Mr. MASON. I don't quite understand you, Mr. Horan?

Mr. HORAN. Are there any provisions that could give them nonrecourse provision? In other words, is there any part of this loan that they are not required to pay back?

Mr. GRANGER. No; it is a straight loan and has to be paid back. Mr. ANDERSEN. Of course, I presume the only security is the property of the particular corporation set up to administer this particular project, Is that not the case?

Mr. GRANGER. I assume that would be the only security they would have.

Mr. ANDERSEN. Electric Bond & Share, for example, do not put up security themselves for this loan?

Mr. MACON. The loan will be a first mortgage on the plant to be constructed.

Mr. ANDERSEN. Only upon the plant but not upon anything up and beyond the plant? No bank would finance.

Mr. WHITTEN. Gentlemen, we thank you.

RELATIONSHIP OF SUPPLEMENTAL ESTIMATE TO CONTINGENCY FUND

Mr. WHEELER. Before we leave the forest-pest item, Mr. Chairman, there is an item explained in the justification that I think we ought to call to your attention orally too, and that is the relationship of this supplemental estimate to this so-called contingency fund that was provided last year.

Mr. WHITTEN. We will be glad to have that in the record. I had checked that, but we will be glad to have you present it.

Mr. WHEELER. While the supplemental estimate for the fiscal year 1951 which is before the committee is in the amount of $370,000, the financial requirements to June 30, 1951, total $1,045,000, as follows: Spruce-bark-beetle project in Colorado..

Spruce-budworm project in Oregon and Washington..

Total...

$345, 000

700, 000

1,045, 000

If the committee agrees, the Budget Bureau will permit the use for this work of $675,000 of the $750,000 contingency fund established in the 1951 appropriation act, leaving only the $370,000 to be supplied in the supplemental appropriation. We all recognize that these two projects, on which considerable work has been done in past years, do not involve new pests or unforeseen infestations, and hence do not meet the qualifications of the contingency fund as stated in House Document 495, Eighty-first Congress. However, by this late in the fiscal year, we can determine with reasonable safety that this amount of the contingent fund will not be needed for such emergencies, and can be used in lieu of including a similar amount in the supplemental estimate. This will be done only if the supplemental estimate is approved or agreement is otherwise expressed.

Mr. Chairman, we still have for discussion the other phase of the forest-pest-control item, namely the white-pine blister-rust project. Mr. HORAN. Frankly, I am very much interested in a full explanation of these layers of supervision on the blister-rust control because I am interested in the blister-rust control and not necessarily too much supervision. I think that has been brought to your attention. You fellows are ready to testify on that; are you not?

Dr. POPHAM. That question is being dealt with in reply to the investigator's comments.

Mr. HORAN. It is?

Dr. POPHAM. Yes.

Mr. HORAN. I think you can see my point there.

MONDAY, MARCH 5, 1951.

RELATIONSHIP BETWEEN FISCAL YEAR APPROPRIATIONS AND PROGRAMS

Mr. STIGLER. Mr. Granger, we are glad to have you and your associates back with us this morning. When we recessed last night we were discussing forest pest control. I wonder if you have a further statement to make on that before we go on to another item.

Mr. WHEELER. Mr. Chairman, I believe we had finished consideration of the Forest Pest Control Act. But we have prepared, and we suggest for insertion in the record at this point, if the committee is agreeable, a table which shows the relationship between the fiscal year appropriations and the crop year or control year programs. This is somewhat complicated, and I believe the table will help to clarify it. The table also shows the relationship of the funds spent and requested to the workload involved, and also, in response to the questioning of yesterday, there is an indication of the additional funds that would be needed to complete these two main programs. would be glad to insert that, and unless there are further questions, I would suggest that project 2, white pine blister rust, is the subject for discussion this morning.

Mr. STIGLER. It may be inserted.
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