the House, in preventing that appropriation from taking effect until the 1st of October, thus taking away from the Government the opportunity to work there when the water was low, and they could work to the best advantage. That was done by the Ford people.

Senator HEFLIN. That was only two or three months at the most. Senator CARAWAY. May I ask the chairman how he differentiates Ford people from white folks? [Laughter.]

The CHAIRMAN. Well, there is so much difference between them that it is not a difficult matter to determine, so when I say "Ford people," I have no doubt of my statement being correct.

Senator HEFLIN. Under the waterpower act, it seems nobody wanted this place, and they left it there, and the Government had abandoned it. The work was stopped. Mr. Ford was invited to make an offer, and he made it, and after it looked like Ford was going to get it, this same Wall Street group that you spoke of that has been trying ever since that time to keep Ford from getting it, commenced to work in various directions, bringing pressure to bear here and everywhere else to keep Ford from getting it.

If Ford could get it and make this cheap fertilizer, as well as the Government making the river navigable there for miles and miles, wouldn't it be putting this governmental instrumentality to good use? Governor PINCHOT. Under the Ford offer, absolutely not.

Senator HEFLIN. Even if the farmers could get fertilizer for half price?

Governor PINCHOT. The farmers could get very much better terms on fertilizer out of an offer thoroughly considered in advance than they could out of the Ford offer. The Ford offer does not do justice. to the farmers in the fertilizer matter.

Senator HARRISON. How would you change it?

Governor PINCHOT. I think we ought to ascertain, after careful investigation, whether or not the larger part of the power to be developed at Muscle Shoals can not profitably be used for fertilizer. I think then we should have a perfectly definite guaranty that whether it is profitable or not the fertilizer shall be made. Mr. Ford's offer was not made after conference with any farmers, and, in my opinion, as I have held from the beginning, the nitrate part of the Ford offer is "window dressing", just exactly as I think this committee of farmers to fix the price is "window dressing." I think this thing ought to be gone into seriously, carefully, in cooperation with the Agricultural Department, to get out of that power everything that can be produced for the benefit of the farmer, and that then, as to the rest of the power-provision should be made for distributing the rest of that power over the South in the way that will be most valuable for the entire agriculture and the industry of the South.

Senator RALSTON. Governor, you made a suggestion that impressed me. You observed that the Government should first make up its mind what it desires to do with this power, and then see who will handle it, or words to that effect. Is that your theory?

Governor PINCHOT. That is my theory.

Senator RALSTON. Well, I think it is a pretty good one. That has been mine.

Senator CARAWAY. May I ask the Governor if he is making that statement in the light of the telegram that was published yesterday?

Governor PINCHOT. I am taking a position, Senator, that I held for a long time before that telegram came to light.

With the permission of the chairman and the gentlemen of the committee, I will proceed to a general outline of what I think ought to be done at Muscle Shoals:

At Muscle Shoals the Government will have installed, when the project is completed:

About equivalent to the total installation of the southern super power system____

Horsepower

600,000

250,000

850,000

80,000

930,000

1, 000, 000

Two nitrogen fixation plants and their accessories (constructed but not now in operation).

This property, so far as it now exists, was paid for by money taken from the taxpayers, or by borrowed money which must be repaid by money taken from them. It was acquired for the fixation of nitrogen, first, for munitions in war time; and second, for fertilizers in peace time.

II. POLICY OBJECTIVES

All this property should be used or disposed of by the Government so as to attain three different ends:

1. To fix nitrogen for fertilizers (or munitions) without fail.

2. To distribute to those parts of the South not now having electric power service the power output over and above that needed for the first end.

3. To distribute the surplus power thereafter remaining, if any, to the rest of the South and adjacent territory.

at the

All such distribution of power should be made (a) to the widest practicable extent; (b) at the lowest practicable cost to the Government; (c) lowest practicable profit to private agencies and thereby (d) at the lowest practicable price to the consumers.

III. POLICY-PROCEDURE

To obtain these objectives the Government should

1. For the purpose of assuring the production of fertilizers: (a) determine the quantity of power to be devoted to that use, reserve it from any other use, and make the right to use it go with the nitrate plants; (b) hold permanently the title to the nitrate plants, the power that goes with them, and other property necessary for their operation; (c) operate or make certain by lease to private interest the operation of the nitrate plants on conditions that will without fail

(i) Insure to the full capacity of the power reserved for that purpose the fixation of nitrogen in the form most suitable for munitions in war or for fertilizers in peace.

Senator KENDRICK. From the testimony had before this committee and others who have testified along that line, I understand that there is to be a decrease in the relative amount of power used in the production of nitrates. For that reason, this plan of determining in advance how much power should be used should be a flexible plan. Governor PINCHOT. I am not aware of what you speak.

The CHAIRMAN. I think that it has been conceded by the chemists, the scientific men, that they have been making, even since this Ford

offer was first made, particularly during the last year, very great advances in the way of improving and cheapening the method of extracting nitrogen from the air.

Governor PINCHOT. Precisely.

The CHAIRMAN. And all these methods of improvement, so far as they are able to see now, use less power than formerly, and most of the scientific men who have studied it think that ultimately the use of power will be a very minor consideration in the extraction of nitrogen from the atmosphere.

Governor PINCHOT. It may be wise to fix the thing on the amount of nitrogen to be secured and not upon the power basis.

Senator KENDRICK. Fixed upon the basis of the amount required. Governor PINCHOT (reading):

(ii) Insure the distribution of the resulting fertilizers to farmers at the lowest prices that will reimburse the cost to the Government or the lessee, and in any event at a price that the farmers can afford to pay.

(iii) Insure the forfeiture of the lease, if any, upon failure by the lessee to so fix and distribute nitrogen.

(iv) Insure the limitaton of the profits of the lessee to the lowest reasonable rate.

2. For the purpose of makng certain the distribution of the unreserved power, first, to those parts of the South not now served with power, and second, to the rest of the South and adjacent territory in the manner and under the limitations above set forth; (a) hold permanently the title to the power sites and dams, power houses, reservoirs, and other works constructed by the Government; (b) make the necessary plans for—

(i) The upper Tennessee River storage so far as practicable with provisions for assessing equitably upon all downstream power sites the benefits resulting to them, respectively.

(ii) The necessary high tension transmission lines.

(iii) Possible giant fuel-power plants near coal mines with a view to cheapening costs through by-product recovery, approximate locations and sizes of plants to be indicated.

The CHAIRMAN. Let me interrupt you there, Governor. I would like to say that while you have said you have not examined my bill, I provide in my bill most of the things you have outlined there. For instance, a complete survey of the Tennessee River, with a provision for the building of additional power dams and storage reservoir dams on the Tennessee and also on its tributaries.

I only call your attention to that because it might be an indication. of how great minds run together when they are acting separately. [Laughter.]

Governor PINCHOT. I am very much delighted to find myself in such agreement with you.

Senator RANSDELL. I hope that both of you will build those dams high enough to bring in the element of flood control as well as power.

The CHAIRMAN. Also, Senator, let me say that that is one of the elements in the bill I have introduced. There are three things, flood control, navigation, and power, to get the maximum out of it on the entire Tennessee and all its tributaries.

Senator RANSDELL. A wonderful thought, Senator.

Governor PINCHOT. The more I hear of the Senator's bill, the better I like it. I am going to read that bill.

(c) Construct or by lease to private interest secure the construction of— (1) The unfinished portions of Dam No. 2 and power house.

(ii) Dam No. 3 and power house.

(iii) The upper Tennessee river storage, if found practicable.

(iv) The necessary high-tension transmission lines-no new line to be deemed necessary if it duplicates an adequate existing line, the use of which can be secured on terms just to the Government and to consumers.

(d) Establish the principles of

(i) Rural distribution systems, the Government to cooperate in outlining the principles for such systems, so as to keep down costs.

That I regard of very great importance, the question of supplying the electricity to the farmers. That is one of the big problems that is ahead of this country. It has got to be taken up and very carefully worked out, and it must not be left to the electric light companies. There is a standard now employed by electric light companies under which a farmer who wants to be served must pay the cost of the additional construction necessary to get a wire to his house. Then he must vest the title to what he has just paid for in the company. He pays for it, but doesn't get it. Then he pays a very high rate in addition. What can be done, as you gentlemen have been doubtless told over and over again, is at least indicated by what is going on now in Ontario, where immense quantities of power, as compared with the use in the United States by farmers, is being employed to the very great advantage of that agricultural population.

The CHAIRMAN. Might I there interrupt you again? I read an article last night in a magazine calling attention to the superpower system in California, in which the statement was made that 85 per cent of the houses in California were supplied with electricity, as compared with the entire Nation, only 35 per cent.

Governor PINCHOT. That is very remarkable.

(ii) Transmission, interchange, and distribution of power with a view to keeping down prices to just limits, especially to small consumers. (e) Operate, or by lease to private interests, secure the operation of:

(1) Dam No. 2 and power house.

(ii) Dam No. 3 and power house.

(iii) Upper Tennessee storage (if constructed).

(iv) The steam auxiliaries.

(v) High tension transmission lines.

(f) Include in the leases, if any, made to effectuate this policy: (i) The conditions of the Federal water power act, so far as applicable. (ii) Such other conditions as will, without fail and on penalty of forfeiture, secure the power service objectives as and within the limits above set forth. (g) As a means to making the plans and fixing the conditions above outlined, undertake an outline giant power survey for the southeastern section of the United States.

It has often been said that the giant power survey is trying to do now what would have been equivalent to planning the railroad system of the United States in advance of its construction, and the relation of the Government to that railroad system, the method of control, and so on, which makes it evident, of course, that it would have been a simple matter to say in advance a very large part of the evils we are suffering from now in railroads would not have taken place.

(h) (After the plans and conditions are outlined:) Invite publicly and without discrimination offers for the execution of such portions of the plans as are to be entrusted to private enterprise.

That is a general outline, gentlemen, of the way the thing, it seems to me, ought to be handled.

Senator HEFLIN. Governor, your illustration about leasing a farm would hardly fit the situation at Muscle Shoals. The Government in building these dams there is making the river navigable for many miles. So, in developing its waterways the Government is expending this money to good purpose, and then if Ford makes this 40,000 tons of fixed nitrogen, it is claimed that that will affect the price of fertilizer throughout the country and enable the farmer to get it for half the price that he now pays. If that is true, that will mean a great deal to the farmer. The farmers of my State paid $20,000,000 for their fertilizer in 1920. There would be a saving to the farmers of that State alone of $10,000,000, so you can see how much each year it would save the farmers of the South-anywhere from $50,000,000 to $100,000,000.

Governor PINCHOT. Senator, it seems to me your argument has this "blow hole" in it, that any possible benefit that could be conferred by Ford's offer could be reached by any other offer made in accordance with the principles of the conservation act and with very much greater benefit to the farmer, because we should have studied in advance how their needs can best be met. I have no reason to believe-I don't know whether you have that the production of fertilizer ought to be limited to 40,000 tons a year.

Senator HEFLIN. I wouldn't object if they used the whole power for making fertilizer, myself, but if Ford should do that, the opposition that he has now isn't a circumstance to what would be here from the Fertilizer Trust, fighting his offer. If he were going to use all that power for making fertilizer, the battle that is going on now would be a mere May-day performance as compared with a cyclone in the wintertime.

Governor PINCHOT. It seems to me, Senator, that the question where the opposition to Ford's offer is coming from is entirely beside the mark. The question is: Is this a wise thing to do with this tremendous Government property? It seems to me it is as clear as anything in the world can be that it is not the wise thing to do. It seems to me that this illustration of the farm does apply exactly. Senator HEFLIN. You are for Government operation.

Governor PINCHOT. I am taking no position as to that whatever. I haven't even read Senator Norris's bill.

Senator HEFLIN. Have you read Hooker's bill?

Governor PINCHOT. I have read it, and I do not understand it fully.

Senator HEFLIN. They claim that they can make fertilizer there for half price, too.

Governor PINCHOT. My point is that we ought not to take Ford's bill or Hooker's bill or the Alabama Power Co.'s bill or anybody else's bill, but that we ought to find out before we give away this second greatest water power in the United States what we really can make it do for the people of the South, and then, having determined that, intelligently and carefully provide that that thing shall be done. I have never been impressed with the argument of the man who says you will have to hurry and take this thing right Low or you won't get it.

Senator HEFLIN. We have Mr. Ford, who is a wealthy man and an industrial wizard. He wants to know whether he is going to get