whether they thought the bond language of the bill provided the reasonable margin of security necessary to them, and so far they have indicated it does.

I think a word or two might be changed in order better to tie the certification required here to the declaration which sets out the specific purpose of a bond issue. If you are to acquire plant A at a cost of $10.000 or any amount-you would make a certificate that the purpose of the issue was to secure that plant, and a declaration would follow which would be filed with the Interior Department, and upon that declaration and that certification would rest this issue of bonds. That makes a complete record. It is a procedure somewhat like our revenue issues in public utilities out West. There they use an underlying city council or commission resolution, and its sufficiency has been thrashed out in court a number of times and every question brought to repose. The Columbia Administration could not go beyond or outside the scope of this declaration and certificate, in my judgment. I think all the lawyers who are familiar with those issues will agree with my general conclusions.

The revenues will have to be used for the purpose prescribed. They could not be used for any other purpose. Otherwise bondholders could stop it. It is pretty much of an airtight thing, because there is 50 years of judicial history back of it.

Mr. PETERSON. You brought up a discussion of the bond issue with reference to this bill. Does it not appear that this authority can buy another plant that might be operated in connection with one of these plants and proceed to operate that plant also? If so, would it not be possible for this authority to go to an unlimited degree to a point where they finally have developed the whole western part of the United States by setting up in the resolution that they were going to buy a certain plant in a certain town and tie it in with their project and then proceed to operate that plant?

Senator BONE. No. There are two or three barriers set up in the bill which would make that impossible. The first is that the authority may only acquire properties in the States of Washington and Oregon. Second, it may not condemn any publicly owned plant. It may acquire private utility systems in the States of Washington and Oregon.

Mr. PETERSON. It would have the authority at least finally to operate and control all of the public facilities of those two States?

Senator BONE. I perhaps should not have brought myself into this discussion at this point, because I had intended later on to go into these legal angles, but the bill prescribes precisely what the people of that section want, demonstrated time after time over the years.

I have some maps I want to show you of the State of Washington indicating the extent of sentiment there for public power development. These maps will show in green the sections of the State that have voted themselves for public power development-in fact, they nearly blanket the whole State.

The bill provides that upon acquisition of one of these private power systems the Administrator shall forthwith sell back to public bodies the distribution systems so acquired

Mr. PETERSON. Sell back to whom?

Senator BONE. To public bodies and cooperatives, cities, and towns in the States of Washington and Oregon.

Senator OVERTON. What is meant by "cooperatives"?

Senator BONE. Well, we have, Senator Overton, a large number of cooperatives in my State. I have in mind several of them in my own county. I think there are nine farmer power cooperatives in Pierce County, which is my county. Several thousand farmers are on those power lines, and they own them. They are purely nonprofit cooperatives.

Senator BURTON. Section 3 of the Bonneville Act reads:

As employed in this Act, the term "cooperative" or "cooperatives," means any form of non-profit-making organization or organizations of citizens supplying, or which may be created to supply, members with any kind of goods, commodities, or services as nearly as possible at cost.

I understand that is not being changed.

Senator BONE. That is right. Out of the 39 counties in the State of Washington 30 of them have set themselves up to go into the power business and take over everything in those counties. I helped write the law under which they did it. They have blanket power of condemnation and acquisition. A great many of them have already utilized that power and have taken over large segments of one private power company.

Mr. PETERSON. Did you say that was from 39 counties in the two States?

Senator BONE. No; in my own State.

Mr. SMITH. If you will allow an interruption, Senator Bone, apparently we have about 17 cooperatives in Oregon and 21 in the State of Washington.

Senator BONE. We also have many R. E. A.'s in Washington.

Mr. ANGELL. Mr. Chairman. May I ask what the procedure of the committee will be and how long you will continue before the noon recess?

Mr. SMITH. The House is likely to consider declaration of war resolutions today.

Senator OVERTON. It is now 3 minutes of the noon hour.

Mr. SMITH. How would it be, Mr. Chairman, if we were to suspend and come back at 2:30 or 3 o'clock?

Senator OVERTON. That would be agreeable to the chairman. It is agreeable to Senator Burton. The Senate is not in session today. Mr. DONDERO. If possible, we will be completed in the House before 3 o'clock. These declarations of war do not take very long. Mr. SMITH. They do not take very long. Well, we could make the hour 2:30, Mr. Dondero.

Mr. DONDERO. I would think so. It might save time.

Senator OVERTON. I think we will resume at 3 o'clock. (Thereupon, at 12 o'clock noon, a recess was had until 3 p. m.)

AFTER RECESS

The committee reconvened at 3 o'clock p. m., at the expiration of the recess.

Senator OVERTON. The committee will come to order.

I received a letter from Senafor Wallgren, who is a member of this committee, explaining that official duties on the Special

Committee Investigating National Defense Activities prevent his being with us today. He expresses the hope that he will be able to join us before the hearings are completed. The letter reads as follows:

UNITED STATES SENATE,
COMMITTEE ON COMMERCE,

May 28, 1942.

Hon. JOHN H. OVERTON,

Chairman, Commerce Committee on S. 2430.

Washington, D. C.

MY DEAR SENATOR OVERTON: I am deeply sorry that I am unable to be with you throughout the hearings on the Columbia Power bill that Senator Bone and I introduced. My work on the Special Committee Investigating National Defense Activities, however, has necessitated my remaining in the West. While I hope that I shall be able to join you before the hearings are concluded, I want emphatically to record at the outset my deep conviction that the prompt enactment of this measure is of the greatest importance.

My recent trips to the Northwest have convinced me of the urgency of this measure not only because most of the people out here have long experienced the desire to see it enacted, but also because I have seen the far-flung and dramatic war development of the region. As a member of the Senate Committee Investigating the National Defense Program, I have had a particularly good view of the Pacific Northwest's contribution to the war program. I wish that the members of your committee might also have had this opportunity. This area has always been a storehouse of natural resources-it has now become a workshop for making these resources into the machines and ammunition of war. This development has been made possible principally by the Federal Government's power program on the Columbia River. Its continuation and expansion depends upon the commensurate growth of the power program. We all know that every kilowatt of public power and every kilowatt of power produced by private companies must be wrung from the generators and put to work in this war. This will require the closest coordination of both generating and transmission facilities. The maximum degree of coordination is impossible to obtain under any scheme of management that continues the present diversity of ownership; but we must have the maximum. I am convinced that this can be secured better under public ownership than any other way. We are talking in terms of millions of kilowatts in the Pacific Northwest. The two Federal dams on the Columbia River alene will have an installed capacity of over a million kilowatts by the spring of next year. An additional half million kilowatts are installed in plants operated by other public agencies in the States of Oregon and Washington. Private companies have over 900,000 kilowatts of generating capacity in these two States. The continual development of large power supplies in this region is vital; and only the Federal Government can plan and execute projects of the magnitude required for the proper utilization and conservation of the energy available in the Northwest. The Government's investment in these great projects must be preserved for the people and must not be jeopardized by unbusiness-like arrangements with private utilities seeking to profit from the people's power and the people's money. The simple but effective solution for securing the immediate war benefits of coordinated operation as well as the longterm benefits of greater power development and consequent improvement of the public welfare is provided in S. 2430. It is a solution that has the support of the people of the Northwest and their Representatives in Congress as well as of the President and his advisers on power matters.

In connection with my interest in war industries, I have observed over an extended period the work of the Bonneville Power Administration and have been impressed with its speed and efficiency in meeting emergency problems as well as with its constant striving to secure for the Northwest the long run benefits of stable and diversified industries. I was particularly impressed with the work of the Bonneville Power Administration and the Department of the Interior in connection with the aluminum program, which our committee investigated thoroughly. In this case a real effort was made to effect a rational program based on expanding aluminum production through increasing the number of plants in the Northwest and providing for the local fabrication of the ingot metal in order to avoid expensive and time-consuming cress hauling and to stabilize the industry in the region after the emergency. These agencies sup

ported a program for the production of aluminum from local raw materials and plants for this purpose are under construction. This, too, will cut down the maintenance of the expensive "life lines" across the continent and overseas to foreign raw-material deposits and will strengthen the Pacific Northwest's natural advantage as a producer of light metals. These activities in the aluminum program constitute merely one of several instances of valuable service that has been performed. This service can and should be multiplied again and again. I refer to these matters because I believe that the amendments setting up the Columbia Power Administration will make it possible for that agency to extend and enlarge upon the activities of the Bonneville Administration without disrupting its administrative arrangements during these critical times. The work that the Columbia Power Administration can do in this emergency will be an eternal benefit to this country.

The provisions of S. 2430, I believe, offer a sound approach for the quick and effective solution of many problems confronting the Pacific Northwest. I do not hesitate to recommend it wholeheartedly to your committee for favorable action.

Sincerely yours,

MON C. WALLGREN,
United States Senator.

Mr. Smith, will you resume your statement? Mr. SMITH. Yes, Mr. Chairman. I am prepared to resume my statement.

STATEMENT OF HON. MARTIN F. SMITH-Resumed

Mr. ANGELL. Mr. Chairman, may I ask the witness a question? We were discussing when we adjourned this section 5, page 5, and also the provision on page 10 that has to do with the examination of expenditures by the Government, and as to whether that should be placed in the hands of the Secretary of the Interior.

Mr. Smith, will you state what is the present arrangement that is being followed by the Bonneville administration? Does it have the power now as is set forth in section 5 on page 5 of the bill, or is this a departure from existing law and regulations?

Mr. SMITH. I think that that power now is being exercised by the Department of the Interior. Isn't that your understanding? Mr. ANGELL. Yes. But is it subject to examination by the General Accounting Office?

Mr. SMITH. I think it is.

Mr. ANGELL. Then this provision of the bill would be a departure from existing law?

Mr. SMITH. That is a change in the existing laws.

As Senator Bone explained, the purpose, of course, is to get away from some of what I might term the interminable red tape of the General Accounting Office, the Comptroller General's office, which ofttimes interferes with the efficient administration of the project. I believe that this change has been evoked by their experience in the past at Bonneville, in having delay in getting certain necessary and legitimate expenditures and disbursements approved by the General Accounting Office, and as a result hampering them in their administration of the project. That has been my understanding. Senator Bone, isn't that a fact?

Senator BONE. Yes.

Mr. SMITH. Because otherwise the provision would not have been written into this act, unless there had been some good reason for it.

I do not think that the purpose of the act is to get away from any of the penal statutes or any of the present general statutes giving powers to the General Accounting Office except insofar as it relates to mere matters of detail, such as the Administration should by all means have the power to decide, and which, of course, any private power company would have the unreserved power to exercise.

Mr. ANGELL. Mr. Smith, this provision, however, does take the power out of the General Accounting Office and lodge it in the Secretary of the Interior.

Mr. SMITH. It does not take it out entirely. I would not say that. But it does limit it. There would still be the audit, as provided for in section 10 on page 15.

I do not believe that it is anything more than a slight deviation from that general provision, which would make it easier for the Administration to administer the project without having to have all of these various items go back here to Washington and be approved by the General Accounting Office, many matters of which are purely of detail and which do not vitally affect the project. That is, there could not be any great harm result to anybody if the Administration had the power to pass on these items, instead of having to submit. them in every instance to the General Accounting Office and be subject to the approval of the General Accounting Office.

Mr. ANGELL. My purpose in asking the question is not to express an opinion on the merits of the provision, but merely to find out its meaning and effect and what you had in mind as one of the authors of the bill.

Mr. SMITH. I think that that is what I had in mind-to give the Bonneville Administration a little more leeway and a little more latitude in passing on the ordinary business transactions in connection with the Bonneville and the Grand Coulee projects.

Mr. DONDERO. A question was raised this morning about the issuance of revenue bonds. I think Senator Burton brought up the subject. I want to ask Senator Bone if any estimate has been made as to the amount of revenue bonds that might be issued.

Senator BONE. I think that that would be an utter impossibility, because of the situation that is presented.

One of the things that would assuredly be done under this bill would be to purchase all of the Puget Sound Power & Light Co.'s property. They are already being taken over in part by public utility districts of the State by the process of eminent domain.

The company objects to that piecemeal acquisition and wants to sell the whole system in one transaction and so get rid of this question of severance damages. It would be impossible to know what that system would be worth until appraisals are carefully made and value determined.

Mr. DONDERO. They have not been made yet?

Senator BONE. They have made many appraisals, but those things would have to be determined probably at a conference table.

It is my own opinion, not supported by anything except my own conclusion, that probably the system would be purchased rather than condemned. It might be condemned.

Mr. DONDERO. It have this in mind, Senator Bone, and you will know the reason for the question: We are at war. We are asking