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cost to the purchaser, all aluminum so purchased at the plant or plants in which it is produced so long as the lease of said plant or plants to Alcoa continues in effect.

(2) Defense Corporation shall have the right to direct Alcoa in writing to cease operations in any leased aluminum smelting plant or part thereof, and Alcoa agrees to cease operations in the plant or part thereof so designated as rapidly as raw materials then on hand can be used up, but in no event later than three (3) months after the date of said direction.

(3) In the event any such leased aluminum smelting plant after it shall be ready for substantially full operation has not been operated, or has been shut down pursuant to the provisions of paragraph (1) or (2) of this article IV, for a period of three (3) successive months, either party hereto may at its election terminate the lease as to such plant upon thirty (30) days' written notice to the other, and after the date of said notice Alcoa agrees to remove its property from such plant as promptly as reasonably possible, but in no event later than three (3) months from the date of said notice.

(4) If any aluminum smelting plant leased by Defense Corporation to Alcoa shall, after it has been placed in operation, be shut down for a period of one (1) month, operation of such plant shall not be resumed without the written consent of Defense Corporation.

(5) In the selection by Defense Corporation of Alcoa of aluminum smelting plants in which production is to be reduced, or operations terminated, the general principle to be followed shall be to eliminate the plant or plants or parts thereof least economical to operate.

ALUMINUM PLANT DISPOSAL

WEDNESDAY, OCTOBER 17, 1945

JOINT HEARING OF THE SUBCOMMITTEE ON SURPLUS PROPERTY DISPOSAL OF THE COMMITTEE ON MILITARY AFFAIRS, THE SPECIAL COMMITTEE TO STUDY AND SURVEY PROBLEMS OF SMALL BUSINESS ENTERPRISES, AND THE INDUSTRIAL REORGANIZATION SUBCOMMITTEE OF THE SPECIAL COMMITTEE ON POSTWAR ECONOMIC POLICY AND PLANNING

UNITED STATES SENATE,
Washington, D. C.

The committees met, pursuant to recess, at 10 a. m., in the caucus room, Senate Office Building, Senator Joseph C. O'Mahoney (chairman of the Subcommittee on Surplus Property Disposal) presiding.

Present: Senators O'Mahoney (chairman), Murray, Wherry, Revercomb, and Taylor.

Also Present: Senators Hayden, McClellan, and Robertson.

Kurt Borchardt, counsel, Surplus Property Subcommittee of the Committee on Military Affairs; Dewey Anderson, executive secretary; C. E. Childe, consultant; and T. J. McBreen, chief of information, Special Committee To Study and Survey Problems of Small Business Enterprises.

Appearances same as heretofore noted, with the following additional appearances:

On behalf of Industry:

Arthur P. Hall, assistant secretary and district manager, Washington Office, Aluminum Co. of America.

Oscar Ewing, attorney, Aluminum Co. of America.

Roger W. Straus, president, American Smelting & Refining Co. M. B. Littlefield, industrial development engineer, American Smelting & Refining Co.

Senator O'MAHONEY. The committee will be in order.

Acting Chairman Olds, of the Federal Power Commission, will be the first witness, to discuss some of the power aspects that are raised by this problem.

STATEMENT OF LELAND OLDS, ACTING CHAIRMAN, FEDERAL POWER COMMISSION

Mr. OLDS. Mr. Chairman, I am going to start what I have to say by relating it, if possible, to what I saw in the most recent report of the committee on the power aspects of the problem of creating a competitive situation in the field of aluminum.

I would like first just to make some suggestions about the availability of cheap power from the several Government river-basin developments.

SECONDARY ENERGY AMOUNTING TO 4,725,000,000 KILOWATT-HOURS AVAILABLE IN COLUMBIA RIVER AND TVA TERRITORY

In the first place, without taking into account the extent to which it may be at present allocated, I want to suggest that there is a considerable amount of secondary power, or secondary energy, available in the Columbia Basin and in the TVA territory. Our estimate places the secondary power from the Bonneville project at approximately 600,000,000 kilowatt-hours; from the Coulee project, when all the generator units have been installed, at about 2,355,000,000 kilowatt-hours; in the TVA area, in the TVA system, approximately 1,770,000,000 kilowatt-hours or a total from existing projects in those two basins of approximately 4,725,000,000 kilowatt-hours.

Just equating it on the basis of 10 kilowatt-hours per pound of aluminum, that represents secondary energy available, without taking into account the extent to which it has already been allocated, from these Government hydro projects, sufficient to produce something like four hundred and seventy-odd million pounds of aluminum.

In addition to the secondary energy available from these specifically mentioned Government river basin projects, I would like to call attention to another aspect of the matter, namely, the availability of primary energy on an "at site" basis.

Of course, it should be pointed out that transmission costs may be, and in terms of a large system are, a very important consideration in determining the rate at which power can be sold, or the cost of power delivered.

In the Bonneville system, at present the transmission investment is running at pretty close to $100 per kilowatt, which means that in considering power delivered from the transmission system, you are considering power where the investment cost may be nearly doubled as compared with that involved where power is delivered, to all intents and purposes, at the site.

ALUMINUM PRODUCTION SEEKS POWER, USUALLY, CLOSE TO POINT OF

GENERATION

Aluminum production has characteristically sought, so far as it has been able to seek it, power available very close to the point of generation. The present "at site" rate for primary power under the rate schedules of the Bonneville Administration is $14.50 per kilowattyear. However, if Congress were specifically interested in the possibility of making power available for aluminum production on a competitive basis, and for that purpose attempting to secure the lowest possible rates for power without subsidy, consideration could be given to the fact that power, primary power, primary energy, can be delivered at the sites of certain of the Federal power projects at a figure falling in the range of 1 mill to 12 mills.

That is true of power at Boulder-there was a discussion yesterday of the cost of power delivered to a plant at Los Angeles. Of course, that is at the end of a transmission system, a transmission line, that is over 275 miles long, and the cost of Boulder energy delivered at Los Angeles is more than double the cost of Boulder energy produced at the power plant.

So that it seemed to me that in giving consideration, in the committee giving consideration to the availability of low-cost power, it ought

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