Major BUTLER. Gentlemen, I have some curves here which I thought were very interesting. They are what we call the repayment curves. (See plate 142.) For instance, with power selling from 11⁄2 to 3 mills, the curves show the number of years in which it would be possible to make payments on the investment. These curves show that if the power is sold for 2 mills, net, or about 2.1 mills gross per kilowatt-hour at the switchboard of the Columbia River-Grand Coulee Dam, it will pay for the high dam and power plant, plus 4 per cent interest, in 30 years.

Mr. SMITH. Mr. Chairman, I have not been able to attend these sessions continuously, but if this information has not been furnished by the major, I would like to ask him a question. What progress has been made, if any, toward extending the proposed market for this power over a lapse of years?

Major BUTLER. We have gone into that study quite carefully and the results are shown on this chart [indicating]. According to the records of the United States Geological Survey, here is the production or output of power for the entire United States beginning with the year 1905 and running up to 1930. The curved line there shows an average yearly increase of 9.6 per cent compounded for the entire United States. For the Pacific coast the rate of increase was 9.7 per cent annually. For the Columbia River market area, the chart shows a rate of increase of 9.5 per cent compounded annually. The rate of increase for the western part of the State of Washington was 10.8 per cent and for the eastern part 7.5 per cent. Now, from this information and from other information that we obtained, we derived a curve for the purpose of showing what the growth of the market would be in the future. This curve was worked out in a very careful way. According to the curve [indicating], we estimated that the rate of growth, beginning at 9.5 per cent in 1930, would gradually decrease to a rate of increase of 4.75 per cent by 1960 and thereafter would continue to decrease until it reached zero by 1990.

Of course, this is simply our prediction, based upon the best information obtainable, of what is going to occur. Nobody, I think, knows what the future is going to bring forth. There may be developments that will change the situation altogether, but from the best information that we have this chart shows the trend in the growth of the power market in that section.

The Bureau of Reclamation, I believe, worked up curves of the Northwest power market independently, and arrived at practically the same conclusions as we did. They were probably a little more pessimistic than we were.

Mr. MCCLELLAN. A little more conservative.

Major BUTLER. Well, we thought we were conservative, but their estimated rate of growth was, perhaps, just a little more conservative. Mr. ARENTZ. Have you touched on the absorption period at all? Major BUTLER. We estimated that the power generated at the Grand Coulee would be absorbed in about 15 years after the completion of the dam. In order to arrive at that figure, it was assumed that one half the estimated future increase in the demand for commercial power in Washington, the northern half of Oregon, the northern part of Idaho and a section of northwestern Montana would be supplied from the Grand Coulee plant.

Mr. MARTIN. And the other half would go to irrigation?

Major BUTLER. No, sir. This [indicating on the chart, plate 125] is the entire power market for that vicinity. The other 50 per cent of the power would be produced by private or municipal interests in a smaller way, in smaller plants. It must be remembered that this power that we are discussing will be new power and will be in addition to the power now produced or that will be produced by the time the Columbia River-Grand Coulee dam and power plant are completed. Mr. MARTIN. You made a very thorough investigation of the cost of power. Now, you are going to have to meet certain objections which I would like to have you answer now.

Mr. ARENTZ. If we are going to have those questions we might just as well have them answered now. We are going to face them anyway. Major BUTLER. As I said before, Mr. McClellan, who is chief electrical engineer of the Bureau of Reclamation, is here to make a statement. It will facilitate matters if we leave these questions to him to answer. Otherwise, we will have to go over the same ground again.

Mr. ARENTZ. For instance, Major, in the matter of a fraction of a mill, what will the interest over this absorption period amount to per kilowatt-hour in fractions of a mill?

Major BUTLER. Our electrical experts worked that out, but I have not that data with me at this moment.

Mr. ARENTZ. That is all right, Mr. McClellan can give it to us later on. We might just as well face these questions now as later. Mr. MARTIN. I do not know whether I can state this exactly or not, but it is another thing that we have got to face. I have been told by very distinguished engineers that the cost of producing electricity by steam has been reduced so much that they can produce it cheaper, or eventually will be able to produce it cheaper with improved machinery, than you can produce it at these hydroelectric plants. What investigation have you made along that line?

Major BUTLER. As I stated a few minutes ago, the cost of producing power by steam has been very materially lowered in the last few years. Mr. MARTIN. And it is going down all the time.

Major BUTLER. It can not keep going down beyond a certain point.

Mr. MARTIN. Where they build these plants at the mine and avoid the cost of transportation of coal and where they have this cheap oil piped to these plants, what are the comparative costs?

Major BUTLER. General, I have already shown that steam power, with oil at $1 per barrel, can not compete with Grand Coulee power, even if the latter power has to be transmitted a long distance. have in my hand a curve prepared by the Corps of Engineers showing the cost of producing steam electric power with oil at $1 per barrel.

Mr. MARTIN. But how about oil at 10 cents?

Mr. ARENTZ. In five years you are not going to face oil at $1 a barrel. We have got an asset here that the United States is not going to see wasted. You are going to see oil at $1.50 a barrel. People are not going to dissipate their natural resources.

Mr. CROSS. Have you any figures showing the depletion of the oil supply, or the probability of its depletion? For instance, take the fields in Texas that I know something about. We strike a rich field. We have gushers and in a little while they become pumpers and then

in a little while after that they are almost played out. Of course, you can keep on adding fields here and there, but have there been any estimates made when that will become exhausted finally?

Mr. ARENTZ. In other words, Mr. Cross, it has been a miracle that over a period of five years peak production has been reached at the same time in a number of new areas. How long is that miracle going to continue? It may stop next year. If it does, you are going to have pumping instead of natural flow and if that happens, you are going to have a higher price for oil, that is all.

Major BUTLER. Gentlemen, I would like to say that in a certain section of this report of the Corps of Engineers, we did go into the question of the available natural resources as far as we could. It is a very broad subject. For instance, we went into the question of the production of aluminum and various steel alloys to try to show the possibility of increasing the demand for electric power. But it is a very broad subject and I can not say that we have anything very tangible in our report that goes into the depletion of your oil fields. It is quite difficult to tie that into the practical question at this time. There is a lot of room for your imagination in that question. We have tried to eliminate that feature from our report as much as possible.

Returning to the question of General Martin concerning the relative costs of steam and hydroelectric power production, let me say again that plate 60 shows the cost per kilowatt-hour of producing power at Grand Coulee, also the cost of producing steam power with oil costing $1 per barrel. With an annual plant-capacity factor of 60 per cent and with 4 per cent money the cost of Grand Coulee power will be 1.14 mills; with 6 per cent money, it will be 1.71 mills per kilowatthour. For steam power, with fuel oil at $1 per barrel, the cost is four and three tenths mills per kilowatt-hour.

Mr. MILLER. Is it not a fact, as a matter of practical application, that where hydroelectric power is available for distribution, but the distributing company has not the experience from past years of operation, the distributing company can buy the power more cheaply from the dam than it can produce it by steam or otherwise, and that the only advantage of maintaining these plants is for emergency purposes?

Major BUTLER. Largely for that purpose.

Mr. MILLER. Just as a matter of actual practice, I know that is our experience in our State; in the State of Arkansas. We have dams down there and that is our experience. I happen to know a little something about our actual experience. I am not so much interested in the actual cost in mills, but I am interested in the actual, practical application of this matter.

Major BUTLER. As a matter of fact, the power companies that have had good hydroelectric developments have been using these plants all the time, at least up until the depression. Some of them have had steam stand-by plants. The Puget Sound Power & Light Co. have lately completed a 70,000-kilowatt steam plant in Seattle, one of the finest in the country and one of the most modern where they can produce power probably as cheap as at any other steam plant in the United States. They have a choice of using hogged fuel (wood chips), or oil by ship at their dock or coal from near-by mines. And