Mr. LEMKE. How does that affect you?

Mr. CONE. We have no objection to H. R. 1977, particularly if the Bureau of Reclamation goes along with it, and I understand they do in the main.

Mr. CARROLL. This point that you have raised on your objection to that portion of 1886 I read from the proposed amendment: "Electric power rates shall be on a basis which will afford to irrigation the maximum benefits compatible with reasonable charges for electric power."

Is it your opinion that that will not injure your present yardstick fixing power rates?

Mr. CONE. I would not accept that amendment.

Mr. CARROLL. Perhaps I can get this later from Judge Stone, but has anybody presented an amendment to you that you will accept on this as representing the view of the people that use the power?

Mr. CONE. My instructions are that I shall not ask for anything beyond the 1939 act. On the question of the interest component we will submit that to the committee for its judgment.

Mr. CARROLL. I am not talking about interest component now. I am talking about this yardstick.

Mr. CONE. The reason I cannot accept it, using my own judgment, is that I do not know what maximum benefits to the water users might mean. I would, in our own project, but not how it would affect the others.

Mr. CARROLL. Would you have time enough if this committee were still to meet for another 10 days or so to give us an opinion in writing on that?

Mr. CONE. Yes, sir. I can ask our attorney to analyze it and give me an opinion on it.

As to the authority of the Secretary to authorize projects found by him to be feasible, that affects our project not at all. But we do think it is desirable for smaller projects which might lack the resources to be properly represented in Congress. That has been historic. And it is our opinion that the Secretary should continue to exercise that right.

Mr. CARROLL. Is the Bonneville project a purely power project?

Mr. CONE. The Bonneville Power Administration takes the electricity from power from Bonneville Dam which was built by the Army, and all the commercial power from Grand Coulee.

Mr. CARROLL. What is the interest component on Bonneville? Mr. CONE. I understand that on Bonneville Dam the interest rate is 212 percent.

Mr. CARROLL. And that is paid into the Treasury?

Mr. CONE. That is right.

Mr. CARROLL. There is no irrigation in connection with that?

Mr. CONE. That is true.

Mr. CARROLL. On the Grand Coulee do they pay that into the Treasury or not?

Mr. CONE. Our interest rate on the commercial power facilities is 3 percent, and that under the present law, I believe, goes into the reclamation fund. Our interest rate after the expiration of the payout of the water users bears 3 percent, that is, 50 years after water is delivered to a given block of land; if there is a remaining balance on

the obligation to the water users, that unpaid balance bears 3 percent interest.

Mr. D'EWART. You said there were 6,000 who had signed these contracts-6,000 contracts to be signed.

Mr. CONE. 6,000 landowners. Only those residing within the State of Washington could vote at the election.

Mr. D'EWART. What I was trying to get at is how many should sign those contracts?

Mr. CONE. The recordable contracts?

Mr. D'EWART. How many of those who should sign have signed them.

Mr. CONE. About 4,500. But the date for signing has not expired. Mr. D'EWART. Out of how many, 6,000?

Mr. CONE. Approximately 6,000.

Mr. D'EWART. The date expires this year, as I understand it.

Mr. CONE. The date expires at three different times, depending upon the time that the final decree of confirmation was entered by superior

court.

Mr. D'EWART. I saw a letter from the project 3 or 4 days ago that they expire at three or four dates during this year.

Mr. CONE. One in June, one in August, and one in October, as I remember.

Mr. D'EWART. You have water going on the Pasco unit of that division this summer?

Mr. CONE. Late in the summer, if at all.

Mr. D'EWART. Are they signed up pretty well?

Mr. CONE. I think they are signed 100 percent.

Mr. D'EWART. In regard to this Bonneville power authority, do Foster Creek and Hungry Horse and all those come under Bonneville for distribution of power?

Mr. CONE. As to Hungry Horse I cannot say. As to Foster Creek, the Bonneville Power Administration has been designated as the distributor if, as, and when it is built.

Mr. D'EWART. And then when all that is put in Bonneville, if I understood your statement correctly-the interest component of Bonneville will still go into the Treasury, will not be available for irrigation.

Mr. CONE. That is my understanding.

Mr. D'EWART. That would be another opportunity for us to capture some more money for our irrigation fund, would it not?

Mr. CONE. I would not oppose such a measure.

Mr. D'EWART. Thank you; that is all.

Mr. CARROLL. Did I understand you to say that you do purchase power from Grand Coulee-the Bonneville project-take power from Grand Coulee?

Mr. CONE. It takes all of the commercial power and distributes it except that to be used on the project.

Mr. CARROLL. Had you thought about this, that if the interest component is taken away from the reclamation fund and paid into the Treasury, what would be the effect on the power rate from Grand Coulee to Bonneville?

Mr. CONE. I think I lack the information to answer that question.. Therefore, I shall not attempt to.

Mr. D'EWART. The interest component from Grand Coulee goes into the irrigation fund, is that correct?

Mr. CONE. I understand it is going into the reclamation fund.

Mr. D'EWART. These other dams, Hungry Horse, Foster Creek, where does the interest component from those go?

Mr. CONE. They are not built so I do not know that that has been established.

Mr. D'EWART. They have been authorized evidently and considered feasible, or else they would not be in our appropriation bill. In order to do that, there must be some plan of how they will be financed and what will become of the proceeds.

Mr. CONE. Foster Creek was authorized, as I understand it, under the rivers and harbors bill and is destined for construction by the Army engineers. I am not acquainted with any allocation that has

been made on that.

Mr. D'EWART. There will be a power unit in connection with it, however?

Mr. CONE. An enormous power unit, about a million kilowatts.

Mr. D'EWART. If there is a power unit, it will be managed by the Bureau of Reclamation?

Mr. CONE. Foster Creek?

Mr. D'EWART. Yes.

Mr. CONE. Bonneville was built and is operated by the Army engineers. I assume Foster Creek will be built and operated by the Army engineers.

Mr. D'EWART. You cannot tell us what will become of that interest component?

Mr. CONE. I have no information on that point.

Mr. D'EWART. That is what I was trying to get at: What becomes of the interest component on all of the projects?

Mr. ROCKWELL. Thank you, Mr. Cone. We will now hear from Congressman Horan.

STATEMENT OF HON. WALT HORAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WASHINGTON

Mr. HORAN. Mr. Chairman, first I want to thank you and this subcommittee for the opportunity to be heard here today, and I also want to say that I was very much interested in what my constituent, Mr. Charles Cone, had to say. I felt he did a great job for the people that he represents.

My main purpose in coming here this morning is to urge most sincerely that this committee weigh very carefully the probable results of any change in the construction of the Reclamation Act of 1939 with a view toward protecting the Federal investment in existing multiple-purpose projects and those now under contract or construction. I should like to place particular emphasis on the role these projects play in our long-range national defense, because there is a very direct connection between western development and strategic material supply.

Some 2 years ago, Mr. Chairman, there were charges made that the Federal Government never would be repaid for the money it spent on the Bonneville-Grand Coulee projects at the present rates for

power sales and that these rates must be raised in the interest of the national solvency.

At that time, I asked the Secretary of the Interior to conduct such studies as were necessary to determine whether the present power rate of $17.50 per kilowatt-year was adequate to pay off the proportionate share of the cost of Bonneville-Grand Coulee construction allocated to power within the period of time prescribed by Congress. As I am sure the members of this committee well know, the resultant studies, made by an independent private auditing organization, conclusively proved that the $17.50 rate was not only adequate but under present conditions was piling up surpluses that would bring a substantial profit to the Government long before the end of the pay-out period.

Mr. Chairman, I shall not further discuss those pay-out studies. They are a matter of record and I made a speech outlining them on the floor of the House on February 12, 1946. They have never been successfully disputed or discounted; therefore, I believe they should stand in any argument on the subject until such time as changing circumstances may prove them incorrect.

The present bills to amend the Reclamation Act of 1939, however, appear to contain provisions which most certainly would force an increase in the rates for power from the Bonneville-Coulee system. The present Bonneville rate, Mr. Chairman, was arrived at after more than 12 years of study on the part of experts on all phases of such matters. The formula for setting rates for Boulder Dam power, which also would be affected by any change, was adopted after more than 16 years of study. Now we have a move under way to change these formulae after only a few days of hearings and no substantial study whatever. I certainly believe, Mr. Chairman, that we should not rashly accept such changes without being very sure that they are necessary and not merely designed to favor some particular group or interest, rather than the over-all benefit of the Federal Government and the residents of the regions who will be affected by the amendments.

Mr. Chairman, the supply of low-cost electrical energy developed by the Columbia River projects in the Northwest is absolutely essential to the maintenance of the light-metals industry upon which the aviation arm of our national defense is dependent. During the recently ended war, Coulee power energized the plants which produced some 40 percent of the aluminum used in aircraft manufacture in this country. In so doing, it saved the Federal Government some $200,000,000 under the contract cost of reduction at any other location in the world. In terms of mass production of light metals, the existence of Coulee power was a benefit that cannot be measured in dollars when we compute its contribution to the war effort.

Mr. Chairman, the aluminum reduction plant and rolling mill at Spokane are now running full blast, 24 hours a day, turning out this strategic metal for peacetime purposes. It is carrying a peak load of Coulee power now that is bringing a more profitable return to the Government at the present rate than any conventional industry would on an 8- or 10-hour load factor at twice that rate. There is an increasing demand for this power output and only last week the War Assets Administration rejected two bids for disposal of the multimillion dollar DPC magnesium reduction plant at Spokane on the

ground that there was not now sufficient power in the district to run the plant. From that you can see, Mr. Chairman, how desperately the United States needs more of this same low-cost power if it is to continue its place of leadership in light-metals production.

But what would happen, Mr. Chairman, if the rates for this Bonneville-Coulee power were arbitrarily raised, as the proponents of these present bills are asking? The light-metals industries would no longer be able to continue in the Northwest and the United States would be forced to buy these strategic metals-not somewhere else in the country, because no other section of the country can begin to supply the amount of electrical energy needed for this industry-but to Canada, or down the Orinoco River in South America, or some equally distant place where cheap power can be obtained. Before we throw away our vitally important aluminum industry in the Northwest, Mr. Chairman, we might as well give any of these same countries our atomicenergy secrets and the rest of our national defense, for without one we cannot properly safeguard the other.

Mr. Chairman, I urgently ask this committee to consider these matters in the light of the other testimony which has been presented here and to make absolutely certain that before it yields to the pressure of those who wish to alter the present structure of our reclamation policy it should be very, very certain that the seeming benefits would not redound to the serious detriment of the national defense.

Mr. Chairman, after years of study on these matters and working toward their best presentation in Congress, I-am convinced that the Federal Government has nothing to gain by any alteration of the Reclamation Act which would result in an arbitrary increase of Federal power rates. I have seen no evidence that would justify such an increase and unless and until such evidence is brought forth, I must seriously object to the present bills for amendment to the Reclamation Act.

That completes my statement.

There is one request I have, and I would like to make it in conjunction with my colleague from Montana.

I believe there was inserted in the record a statement by you, Mr. D'Ewart, that Dr. Raver had said that passage of this act would not affect the Bonneville rate.

Mr. D'EWART. A quotation from the Wenatchee newspaper of last month, I believe.

Mr. HORAN. I had a hurried call from the editor of that paper and he is very anxious that the entire column be put in. There, again, we run into the same thing that we have had throughout this. It is a matter of opinion, personal opinion.

Mr. D'EWART. I understood that was a direct quotation.

Mr. HORAN. It is, but as I say, it was his opinion. I would like to say, I would like to have, either in connection with my colleague's insertion yesterday, or mine here, the completed column which I will have tomorrow. I think it carries on and outlines his reactions to

it.

That completes my statement, Mr. Chairman.

Mr. ROCKWELL. Without objection, the matter you refer to will be inserted at this point in the record.

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