of the fertilizer market, which has, no doubt, been carefully considered by everyone offering to undertake production at Muscle Shoals. There is a chance of a heavy loss being incurred in guaranteeing to produce a fixed quantity of fertilizer.

I will now mention the various proposals which fall into two general classes:

(1) The Union Carbide Co.'s plan and the Hooker plan are alike in that the Government will furnish the capital for the fertilizer operations, takes all of the losses should there be any, and a part of the profits under the Hooker plan or all of the profits under the Union Carbide Co. plan, should the business prove profitable. They are also alike in that both offers are made by concerns having wide experience in chemical manufacture, and either would therefore be in a position to apply to the business experience of undoubted value. The Hooker plan provides that a sum of $50,000 per year be set aside from the net profits when a reasonable sale of power from Dam No. 2 is made for use in research and experimental work. At a time when a reasonable sale of power shall be commenced from Dam No. 3 this sum will be increased to $200,000 per year.

Since the Government will receive two-thirds and later threefourths of the net earnings, those proportions of these sums will be advanced by the Government. In addition, it is required that the Government will duplicate these amounts.

The offer of the carbide company provides nothing for research. The Hooker plan provides that the corporation shall furnish such power as is needed for actual nitrate and fertilizer production at plants Nos. 1 and 2 from time to time out of power then available from sources under lease from the United States and not previously sold, and of such character as the Secretary of War may require. To this end the corporation will hold available for the United States on reasonable notice up to one-fourth of the developed primary power capacity of the steam plant at nitrate plant No. 2 and from Dam No. 2 and from Dam No. 3 when completed; and in addition will hold available on similar notice developed secondary power from Dams Nos. 2 and 3 up to 100,000 kilowatts.

The offer of the Union Carbide Co. is of such nature that it can make no reservation of power for the manufacture of fertilizer. The amount of fertilizer to be manufactured under the Hooker plan is indefinite.

The amount of fertilizer to be made under the Union Carbide Co. plan will have a maximum nitrogen content of approximately 20,000 tons per year.

It is my opinion that both of these plans are undesirable. These are cost plus contracts.

(2) The Ford plan and that of the power company are alike in that they both agree to finance the fertilizer project and to make fertilizer at a limited profit, bearing the losses, if any. It is inconceivable that either company would continue indefinitely to manufacture a material which could be sold only at a loss, and it is still doubtful if nitrogen fertilizer can be made at a profit by present fixation methods.

The Ford plan does not stipulate a definite sum to be expended in research and experimental work.

The power company's plan stipulated that $1,000,000 to be paid in 10 years will be used for research and experimental work. The Ford offer contemplates the manufacture of 40.000 tons of nitrogen per year, and the amount of power used in the manufacture of fertilizer will be that required to produce this amount.

The power company's offer provides for initial installation and manufacture of 5,000 tons of nitrogen per year. Should this undertaking prove successful, they will expand the production of nitrogen until it reaches the sum of 50,000 tons per year. This offer provides that 60,000 horsepower from Dam No. 2 and 40,000 horsepower from No. 3 will be sold at cost for use in the manufacture of fertilizer. It also provides that an additional 40,000 horsepower will be reserved for sale to manufacturers of fertilizers at the price and terms prescribed by the Federal Power Commission.

It is felt that from the fertilizer production standpoint all the offers are of uncertain value. The offers can not be rated in this respect because there is no similarity among them.

There are of course a number of points in each offer that I have not commented upon as it seemed necessary to cover only the salient features.

The CHAIRMAN. Are there any questions?

Senator HEFLIN. General, you don't think they could afford to make fertilizer at Muscle Shoals, I understood you to say?

Major General WILLIAMS. I don't think that I said that, sir. Senator HEFLIN. I thought you said that the price

Major General WILLIAMS. I said it is not certain the present development of the art of fixation that it can be done profitably at Muscle Shoals.

Senator HEFLIN. A great many witnesses have testified here that by reason of the water power Mr. Ford would have there he could make fertilizer so cheap that it would put out of business a lot of the other fertilizer companies.

Major General WILLIAMS. Well, that is their opinion, I take it. Senator HEFLIN. That might happen?

Major General WILLIAMS. I don't know. That might happen. Senator HEFLIN. You are not an expeht on fertilizers, are you? Major General WILLIAMS. No, sir; I am not.

The CHAIRMAN. General, you have made no comparisons between these various leases, as to the time. You have not compared leases with a sale anywhere in your analysis of these bids. Why have you omitted those things?

Major General WILLIAMS. We have taken as our basis of comparison the actual amount of money that will be paid into the Treasury of the United States over the period concerned by each one of the different offers. When we come into the question as to the value of the property at the end of the fifty year period, there we are going into the field of speculation, and we have no means of estimating what those values will be.

The CHAIRMAN. But the various bids are not all on the same time. Ford's is a hundred years, and the others are just half of that. Major General WILLIAMS. For the purpose of comparison we have taken only 50 years of the term of Ford's bid.

97903-24-PT 3- --12

The CHAIRMAN. Of course, we have to consider it just as it is. and therefore your comparison, taking it on the basis of 50 years, does not coincide with what the facts before us are when we take up these bids.

Major General WILLIAMS. I was not endeavoring, of course, to give to the committee a complete analysis of all these bills, going into all the details of each one of them. I was simply endeavoring, so far as I could, to apply some standard to each one of them that would indicate their relative values. Of course, the fact that Mr. Ford's offer calls for a period of 100 years seems to us to be a matter of very great importance.

The CHAIRMAN. Yes: it seems to me that it is of great importance. and evidently regarded so by Mr. Ford himself, and everybody else. But there is another particular in which, it seems to me, you have made no comparison. In all these other bids which you have mentioned, except Mr. Ford's bid, there is no sale of property by the Government. They are leased.

Major General WILLIAMS. They are all leased.

The CHAIRMAN. The title remains in the Government of the United States.

Major General WILLIAMS. They are all leased.

The CHAIRMAN. In the Ford bill it is a definite sale of all the property except the dams and a 100-year lease instead of 50 years. Major General WILLIAMS. Unless the amendment that has been offered should be attached to the Ford bid. That provides for what is in effect a lease of the properties and their possible recovery in the event of failure to carry out the terms of the contract.

The CHAIRMAN. You don't endeavor to analyze any of the legal aspects of any of these propositions?

Major General WILLIAMS. No, sir.

The CHAIRMAN. Are there any questions any other members of the committee want to ask the general?

Major General WILLIAMS. May I make one statement, please? The CHAIRMAN. Yes.

Major General WILLIAMS. I noticed in the paper this morning that I was quoted as saying on yesterday that the Government no longer had need of nitrate plant No. 2. What I said was that the progress up to the present time, the prospective progress in the part of fixation of nitrogen, would probably be such that in 20 years we would be able to discard nitrate plant No. 2 and need not keep it beyond that time. purely and simply from the point of view of national preparedness.

Senator HARRISON. I think that is what the committee understood you to say.

The CHAIRMAN. Yes. I got this idea from you. General; that it was entirely problematical. Even the 20 years is only a guess. Major General WILLIAMS. That is all.

The CHAIRMAN. It depends altogether on whether these improvements that we have been told of-and we will get further information from scientific men-develop into what may result as you have indicated.

Major General WILLIAMS, Yes.

The CHAIRMAN. It may happen within two or three years.

Major General WILLIAMS. It may.
The CHAIRMAN. And it may not happen at all.
Major General WILLIAMS. Yes, sir.

STATEMENT OF MR. WILLIS G. WALDO, ENGINEER AND SECRETARY OF THE TENNESSEE RIVER IMPROVEMENT ASSOCIATION

The CHAIRMAN. Now, Mr. Waldo, I don't want to interfere with the order in which you want to present your statement, but these various maps that are up here show various territories

Mr. WALDO. Yes.

The CHAIRMAN. I don't see some of the maps you had before. Are they all different?

Mr. WALDO. Nearly all.

The CHAIRMAN. Do you expect to take them up this morning? Mr. WALDO. Very briefly.

The CHAIRMAN. I do not ask you to be brief. I don't want you to be brief on account of the committee. There have been a great many things of great value, some of a historical nature, that I think you described before from maps that you had, and I thought it all very interesting. It did not always bear directly on the point, but on the broad view of the whole question, they were very interesting. Mr. WALDO. Senator, the purpose of bringing those maps here was twofold: First, to show what work in which the Tennessee River Improvement Association is really engaged, wholly aside from the Ford offer. Of course, the Ford offer is an important part of the work of the association, but there are several other sides to our work that should be presented.

The CHAIRMAN. I would like to have you present it in any way

that
you want.

Senator McNARY. What is its connection with the Ford offer? You say that it is an important part of its activities.

Mr. WALDO. The connection is that Muscle Shoals is the most difficult section of the Tennessee River to navigate. At the time of the beginning of the improvement of the river, 100 years ago, Muscle Shoals was the one big thing they had in mind.

Senator MCNARY. I understood you to say that your activities. were largely concerned with the Ford offer?

Mr. WALDO. Yes, sir; because we feel that under the Ford offer Muscle Shoals will be properly developed and in that way a big obstruction to navigation removed and through navigation will be brought about.

The CHAIRMAN. That would be true under any offer, so far as building those dams is concerned?

Mr. WALDO. No, sir: I don't think so.

The CHAIRMAN. You don't think the Government will build them unless Ford gets it?

Mr. WALDO. No, sir. I say that the chances of the work getting under way and being completed in a businesslike way would be best under the Ford offer.

Senator HARRISON. Would you like to proceed and present what you have to say and analyze this proposition and then answer questions, if there are any?

Mr. WALDO. It would be very helpful if I could.

Senator HARRISON. I hope that Mr. Waldo will take the Ford offer and analyze it, and then discuss navigation after that.

The CHAIRMAN. I expected him to do that, but at the same time, although I wanted to leave it entirely with Mr. Waldo, the reason I mentioned the maps was that it seems to me if he laid the foundation first, something historical, and I know he can, about what has happened and what can be done on the entire Tennessee River, it would lay a foundation so that he could afterwards take up the Ford proposition. However, that is for Mr. Waldo to say.

Mr. WALDO. Suppose that I make just a brief statement about these?

The CHAIRMAN. I have an idea that when you get to explaining a great many of these things there will be questions asked you about them. There were before. A background that will give an explanation of the entire watershed I think is very important on the general question of Muscle Shoals. I don't think that it has any more to do with one bid than another, but it is an interesting thing, and it is of historical value and something that I think the committee ought to have in analyzing any bid or any bill.

Mr. WALDO. Senator, as to the bearing of these maps on the question there is a very direct bearing on this Cumberland River matter. for example, that has to do with Mr. Ford's offer for Muscle Shoals. Mr. Ford does not care to come under the Federal water power act. He must have some reason for not wanting to do that. That reason has not been brought out, and one purpose of bringing these maps here is to bring that out. There is a very grave misunderstanding all through the country as to what can or can not be done under the Federal water power act. These maps exhibit definite examples of what is going on under the Federal water power act, and that is the part of the work of our organization, to prepare these facts and get them before the proper people so that they can take action accordingly.

The CHAIRMAN. I want to hear all that myself.

Senator HARRISON. Mr. Chairman, I move that Mr. Waldo preceed in his own way, and without interruption, and that then we can ask him questions. He will submit to that. I would suggest that we let him take it up in the way he has it mapped out.

The CHAIRMAN. I want him to do that. He can decide that better than any of us, although I don't want it understood that he can not be interrupted at any time. We will interrupt him as little as possible. We will all respect his wishes on that and treat him the same as any other witness.

Mr. WALDO. The Tennessee River Improvement Association, as I stated here over a year ago, is one of those public organizations that anyone can join who is interested in development of the Tennessee River. It would be, naturally, a very difficult thing to hold the interest all over a large section of the country if there were only to be one single development of a local interest, so that it is not true that the interests of the Tennessee Valley are wholly centered at Muscle Shoals or wholly depend upon the Ford offer. Every one of these communities along the line has its own particular project in which it is particularly interested.