It is my opinion, therefore, that the Secretary of the Interior is not required, in fixing the sale rates for power to be generated at Boulder Dam, to make provision for the amortization within the fifty years of the $25,000,000 allocated by the act to flood control.

Your third question is as follows:

Must provision be made for payment out of the power proceeds, during the fifty-year period of amortization of interest upon the principal of the $25,000,000 allocated to flood control? If so, should interest start to run from the first appropriation made from the General Treasury to the Colorado River Dam fund?

With respect to the matter of interest upon the principal of the $25,000,000 allocated to flood control, the act is very ambiguous. I have had great difficultly in reaching a satisfactory conclusion as to what Congress intended in respect of this item. The act is susceptible of any one of three interpre

tations:

First. That no interest is to be paid under any circumstances or out of any source of revenue on the $25,000,000 allocated to flood control, or

Second. That such interest must be paid and that it is payable annually dur ing the fifty-year period of amortization and that the power rates should be fixed at a high enough figure to pay such interest during the fifty-year period,

or

Third. That it was the intention of Congress that interest should be paid on the principal of the amount allocated to flood control, but that such interest is not required to be paid absolutely during the fifty-year period and is only to be paid, as is the principal of the item, out of 621⁄2 per cent of excess earnings, if any, during the fifty-year period and out of the 621⁄2 per cent net earnings after the expiration of that period.

It does not seem reasonable to suppose that Congress intended to make the payment of interest on the $25,000,000 allocated to flood control an absolute charge during the fifty years when it left the payment of the principal to the chance that there might be excess earnings during that period. I am inclined to believe that Congress intended that interest should be ultimately paid on the $25,000,000 allocated to flood control from the same source as is provided for the payment of the principal, to wit: Out of 621⁄2 per cent of the excess earnings during the fifty-year period and out of 621⁄2 per cent of the net earnings thereafter.

The word "thereon" in section 4 (b) following the word "interest" in the phrase "all amounts advanced to the fund under subdivision (b) of section 2 for such works, together with interest thereon made reimbursable under this act" apparently limits the requirement, with respect to interest, to interest on such principal sums as are embraced within the scope of the paragraph.

A construction of the act as not absolutely requiring the fixing of rates high enough to cover the payment of interest during the fifty-year amortization

period upon the $25,000,000 allocated to flood control is entirely consonant with the apparent purposes of Congress in adopting the amendment which made that allocation, namely, to discharge a governmental obligation to provide flood control, and to make the project more probably feasible by reducing the amount which would have to be amortized out of revenues obtained from power and water at the dam.

It does not seem necessary to pass further upon the question of the ultimate payment of interest, as I am of the opinion that if such interest is ultimately payable, the act does not require you to make provision for its payment out of power proceeds during the fifty-year period of amortization.

Respectfully,

WILLIAM D. MITCHELL, Attorney General.

THE HONORABLE THE Secretary OF THE INTERIOR.

Department of the Interior, Washington, D. C.

[ITEM 113]

BOULDER CANYON PROJECT

OPINION OF THE SOLICITOR OF THE DEPARTMENT OF THE INTERIOR

JANUARY 6, 1930

UNITED STATES DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SOLICITOR, Washington, D. C., January 6, 1930.

THE HONORABLE THE SECRETARY OF THE INTERIOR.

MY DEAR MR. SECRETARY: You have asked me to consolidate in one memorandum my views on the following 16 questions, the majority of which have been covered in separate memoranda submitted to you from time to time as the problems arose.

Your questions and my opinions on them follow:

(1) What is meant by the term "public interest" as used in the Act? What body of people comprise the public as the act uses the term? Is the "interest" referred to as "public" the Government's responsibility to the whole people of the United States, or is it the interest of the area to be immediately served by Boulder Dam power, or is it the interest of a particular part of that area?

The term "public interest" is used in section 5 (c) of the Boulder Canyon project act as follows:

In case of conflicting applications if any, such conflicts shall be resolved by the said Secretary, after hearing, with due regard to the public interest, and in conformity with the policy expressed in the Federal water power act as to conflicting applications for permits and licenses except that preference to applicants for the use of water and appurtenant works and privileges necessary for the generation and distribution of hydroelectric energy or for delivery at the switchboard of a hydro

electric plant shall be given, first, to a State for the generation or purchase of electric energy for use in the State, and the States of Arizona, California, and Nevada shall be given equal opportunity as such applicants.

The same term "public interest" is used in the Federal water power act, as follows:

the

Preferences in issuance of preliminary permits or licenses.— * * commission shall give preference to applications therefor by States and municipalities, provided the plans for the same are deemed by the commission equally well adapted, or shall within a reasonable time, to be fixed by the commission, be made equally well adapted to conserve and utilize in the public interest the navigation and water resources of the region; * *

"Public interest" is one of those broad terms like "public policy" capable of different legitimate interpretations in the discretion of the officer called upon to administer it. The "interest" referred to is, primarily, the Government's responsibility, financial and otherwise, to all the people of the United States for the greatest good to be derived from this project, the cost of which is to be advanced from the Public Treasury. Secondarily, the term excludes confinement of the benefits of Boulder Dam power to one locality out of the many which comprise the "region" capable of service. The term "public interest" is the dominant consideration, a check upon the preferences mentioned in the two acts. It is necessarily a source of broad discretionary power in the Secretary.

(2) Does "public interest" include the necessity for making a good business contract which will guarantee the return of the investment within fifty years? If the "preference right" of States and municipalities would require the making of a contract which is less sound as a matter of business than a contract offered by a privately owned public utility, which consideration is the Secretary required to regard as dominant, the public interest or the preference right of the State or municipality? To the first question I answer yes. Money provided by taxes from the entire United States constitutes the sum placed at risk by this Federal investment. When contracts are made for its repayment as required by section 4 (b) the primary "public interest" is in the soundness of the contracts and the solvency of the contractor, not in the corporate or municipal character of that contractor. If one bidder can obligate itself by a contract whose enforceability is unquestionable, and the financial future of another bidder is uncertain or its legal capacity is questionable, public interest obviously requires acceptance of the sounder bidder. All preferences are subordinate to this public interest. It is only when two bidders can both offer a satisfactory contract from a business viewpoint that the Secretary must or should base his choice between them on claimed preferences.

(3) Is the Secretary required to accept the highest bid made for power by a reputable bidder, or must he take into consideration what constitutes a reasonable return under all attendant circumstances, including "competitive conditions at dis tributing points or competitive centers"?