and it is very important that this plant continue to be operated in that locality. I join with Senator Hayden in urging that the bids be limited so that it will be operated in that locality. These people, according to these resolutions, feel that the Aluminum Co. of America should be allowed to bid upon this plant. They feel that they are qualified and are financially able to operate the plant, and they would like them to be permitted to bid along with the companies who are willing to operate the plant there at Phoenix. I believe that Senator Hayden has pretty well covered the field, and I will not reiterate what he has already said, but we are very anxious and feel that it is very important that this plant be operated at Phoenix and not move out to some other locality. Senator O'MAHONEY. Thank you, Senator. The chairman of the Committee on Military Affairs is in receipt of a letter from the Standard Bauxite & Chemical Co., written on the letterhead of the Arkansas Stripping Co. This has also been received by Senator Murray, chairman of the Small Business Committee. Inasmuch as it deals with this subject, it will be inserted in the record at this point. (The letter and enclosure follow :) ARKANSAS BAUXITE STRIPPING CO., Senator ELBERT D. THOMAS, Chairman, Military Affairs Committee, Washington, D. C. DEAR SIR: As press reports disclose that politicians highly placed in our State are furthering the program of the Aluminum Co. of America we believe your committee will be interested in the position of the Arkansas owners of bauxite. Copy of a letter to Mr. Symington on this subject is enclosed. The owners of 6,000,000 tons of metal-grade bauxite, we are unable to sell our ore, and we see no market in the future if monopoly control is continued. Arkansas has more than 15,000,000 tons of drilled and proven deposits of independently-owned metal-grade bauxite, and those who know the field believe that further exploration will locate many more large deposits. Independent operation of the Hurricane Creek plant will insure a supply of low-cost alumina for Pacific coast reduction plants as well as for Jones Mill. Our proven deposits of independent bauxite, with the Government-owned stock piles and tailings storage, are ample to operate this plant at almost full capacity, and give the country a supply of low-cost alumina, for 15 or 20 years. To maintain a vigorous light-metal industry the 300 aluminum fabricating plants in the Mississippi Valley and the Middle States must have a free and open market in which to buy aluminum. Jones Mill ingot can be made and delivered to them below the delivered cost of Alcoa ingot. The Jones Mill capacity should be enlarged to meet the full requirements of this market. We believe the administration's program will insure permanent operation of the Government-owned facilities and reduce the price and increase the use of aluminum. We endorse the plans of the Attorney General and the Surplus Property Administrator to sell or lease the plants to operators who will provide competition in the bauxite and aluminum industry and we desire to cooperate with them to this end. Very respectfully, Standard Bauxite & Chemical Co., Benton, by Dan Hudspeth; BENTON, ARK., October 5, 1945. Hon. W. STUART SYMINGTON, Surplus Property Director, Washington, D. C. DEAR SIR: Referring to enclosed press reports of your meeting with Senators McClellan and Fulbright, Mr. Phil Dulin and his sister, Mrs. Dixon, and Mr. H. F. McMahan, and their appeal for continued control of the bauxite and aluminum industry by the Aluminum Co. of America, it should be recorded that Dulin and McMahan are representing themselves and not the owners of other Arkansas bauxite. These men are operators of three small-shaft mines. Last year, with three other shaft operators, they adopted the title of "Independent Bauxite Operators Association" to assist them in getting Congress to authorize the purchase by the Metals Reserve Company to buy additional bauxite which they feared would be lost if their shafts were abandoned. This objective was attained, and Dulin, Dixon, and McMahan now have unfilled contracts exceeding their ability to deliver ore. Recently other owners of bauxite were invited to join their "association." When it developed that Dulin and McMahan had adopted the views of Alcoa they lost the support of the new members who own more than 6,000,000 tons of metal-grade bauxite. We ask to be placed on record as believing that the Attorney General's plans are feasible and practical, and we endorse the administration's efforts to destroy monopoly control of bauxite and aluminum. Recent activities have no doubt made it clear to you that Alcoa's control in Arkansas does not stop with bauxite but covers our political field, our State agencies, and our State press. We are prepared to contract to supply the bauxite requirements of the Hurricane Creek alumina plant and to cooperate in any way desired in the Government's program. Very respectfully, STANDARD BAUXITE & CHEMICAL CO., By DAN HUDSPETH. Mr. BORCHARDT. Senator, may I ask you whether you know why that plant was shut down in Phoenix? Senator MCFARLAND. I am not so much informed as to the details. I presume that it was shut down because of the end of the war, and probably the Government did not need the same amount of supplies that they needed previously. Mr. BORCHARDT. I was just wondering whether that was part of the lease cancellation of the RFC. Maybe Mr. Wilson can answer that question. Mr. WILSON. May I have the question, please? Mr. BORCHARDT. I wonder whether the closing down of the plant in Phoenix, Ariz., was the result of a lease cancellation on the part of the RFC or was it due to other reasons? Mr. WILSON. The closing down was primarily occasioned by the cancellation of orders on which the plant theretofore had been operating. Mr. BORCHARDT. In other words, this was not one of the instances where it was due to a cancellation of a lease between RFC and Alcoa which we discussed yesterday? Mr. WILSON. No; that was not the cause, but the lease has been canceled. Senator O'MAHONEY. Mr. Ely. STATEMENT OF NORTHCUTT ELY, SPECIAL COUNSEL, DEPARTMENT OF WATER AND POWER, CITY OF LOS ANGELES, CALIF. Mr. ELY. My name is Northcutt Ely, special counsel, department of water and power, city of Los Angeles, Calif. Mr. Scattergood will make the presentation for the department in regular order, but I do ask the chairman's indulgence to correct one figure used by an earlier witness, because it may be important. The statement has been made here that 18 percent of the Boulder Canyon project is allocated to flood control and written off in comparison with a very much larger write-off at some other projects. That is in error. No part of the cost of the Boulder Canyon project is written in consequence of any factor. As a matter of fact, the books of the Reclamation Bureau, I am advised, show, as of May 31, 1945, a total investment, exclusive of interest, during construction of approximately $142,000,000 and every penny of that is required under the Boulder Canyon Project Adjustment Act to be repaid within a 50-year period. Twenty-five million dollars will, in fact, be allocated to flood control but must be repaid after the balance of the investment is retired, and that $25,000,000 is at once and simultaneously and automatically replaced by the addition of a new $25,000,000 factor representing payment in the Colorado River Development Fund. Over and above that, the project rates are required to yield, during the 5-year period, $30,000,000 over and above the amortization requirements for payment to Arizona and Nevada in lieu of Texas. The interest rate on that project is 3 percent as compared with 22 percent on the Bonneville project referred to earlier. Also, all of the operation and maintenance expenses of the Boulder Canyon project, that is, of the dam and power plant, are borne by power, and no part of those expenses is allocable to navigation, irrigation, or flood control as is done on some other projects. The current rate at Boulder Dam, for the water rate only, is 1.244 mills per kilowatt-hour for firm energy, and 0.392 mill per killowatthour for secondary energy. These, after adding in the charge for generating power equivalent to approximately 0.45 mill, produce costs at the switchboard of about 1.7 mills per kilowatt for firm energy, and about 0.85 mill for secondary energy. The transmission lines from Boulder to the point of use, primarily in southern California, were constructed by the power users and not by the Government, as is the case of Bonneville or TVA, and that represents additional investment of about $50,000,000 to $55,000,000 to be retired by them, in addition to the amount they pay the United States. In view of the information which has been developed in these hearings as to the entirely inconsistent bases of allocation of costs at the major Federal power-producing projects, I think that the direction or request given by the chairman to the Chairman of the Federal Power Commission to bring forward a comparison of these allocations and suggestions as to ways in which these rates may be reduced is of the utmost importance. Surely, we desire to be placed in a position to enable this alumium industry in southern California to go forward. We desire to see our friends in Phoenix, who also depend upon Colorado River power, aided in the same way, and we expect to see the gigantic new power developments in the upper basin of the Colorado River similarly protected. Senator O'MAHONEY. I may say, Mr. Ely, that your statement is the first occasion upon which I have heard anything resembling a directive attributed to any Member of the Congress. (A memorandum on provisions of Boulder Canyon project_acts affecting to fixing of rates for Boulder energy, submitted by S. B. Robinson, chief assistant city attorney for water and power, Los Angeles, is inserted in record at conclusion of today's proceedings.) Senator McClellan, did I understand that you wished to make an inquiry about the negotiations that were initiated this morning? Senator MCCLELLAN. Has there been no report made? Senator O'MAHONEY. I have had no report made as yet. Senator MCCLELLAN. IS Mr. Husbands here? Senator O'MAHONEY. Mr. Husbands is not, but Mr. Wilson is here. Senator MCCLELLAN. Mr. Wilson, would you like to make some statement? I would like to have both you and Mr. Husbands here. Mr. WILSON. Mr. Chairman, I wish I were in a position to make a statement. I met with Mr. Husbands, Mr. Cox, Mr. Goodloe, and Mr. Stansfield, of the RFC and the Surplus Property Board, this morning, and we spent more than 2 hours without succeeding in reaching any conclusion that I feel was of a character that we could report to the committee. We got so far as to recognize the problems that were involved, with each of us trying to see if there were some way in which we could dispose of those problems. That is about as far as I can-in fairness to the committee-report. Senator MCCLELLAN. Were there discussions as to the terms of an interim cancellation provision? Mr. WILSON. That was one of the many problems that were raised, Senator. Senator MCCLELLAN. Was the proposition made either way? Mr. WILSON. No; we did not develop it to that point, and could not develop it to that point in discussion. Senator MCCLELLAN. You mean you need further opportunity to negotiate? Mr. WILSON. Yes, we do; to calculate and negotiate, I may add. Senator MCCLELLAN. Did you proceed far enough so that there is any prospect of a solution being found of this situation whereby these plants that are now closed may be reopened? Mr. WILSON. We never get to the point, on any of the problems that we have while we are trying to work them out, from our side, at least, where we are prepared to say there is no prospect. There is always the prospect, and we hope to make that prospect eventuate. But I cannot say that for certainty. Senator MCCLELLAN. Are there further conferences now contemplated between you? Mr. WILSON. Definitely. Senator O'MAHONEY. Thank you very much, Mr. Wilson. It is impossible to proceed any further this evening because of prior engagements of the Chair. The committee will stand in recess until 10 o'clock tomorrow morning, when, it is hoped, it will be possible to hear the remaining witnesses who have expressed a desire to be heard, and who have been invited. (Whereupon, at 4:25 p. m., an adjournment was taken until 10 a. mn. Friday, October 19, 1945.) (The following memorandum by S. B. Robinson, chief assistant city attorney for water and power, Los Angeles, is inserted at this place by direction of the chairman :) MEMORANDUM RE PROVISIONS OF BOULDER CANYON PROJECT ACT AND BOULDER CANYON PROJECT ADJUSTMENT ACT AFFECTING THE FIXING OF RATES FOR BOULDER ENERGY (By S. B. Robinson) The original Boulder Canyon Project Act (Public Law 642, 70th Cong., 43 U. S. C. A., 617-617t), authorized the Secretary of the Interior to make contracts for the privilege of generating electric energy, or for the sale of electric energy (sec. 5 (c)), as well as contracts for the storage and delivery of water (sec. 5), and also (sec. 4 (b)) provided that before any appropriation was made for the dam or power plant, or any construction work done or contracted for, the Secretary should obtain contracts “adequate in his judgment to insure payment of all expenses of operation and maintenance and the repayment within 50 * *" of the advances for construction, together with interest thereon made reimbursable under the act. Also (sec. 5 (a)), the act provided that "Contracts made pursuant to subdivision (a) of this section shall be made with a view to obtaining reasonable returns and shall contain provisions whereby at the end of 15 years from the date of their execution and every ten years thereafter, there shall be readjustment, of the contract, upon the demand of either party thereto, either upward or downward as to price, as the Secretary of the Interior may find to be justified by competitive conditions at distributing points or competitive centers, The act thus established the element of competitive value at distribution points or competitive centers-in other words, the "market value" theory-as the basis for the fixing of rates. However, the act (sec. 4, last paragraph) gave Arizona and Nevada a substantial percentage of any "excess revenues" and (sec. 5, second paragraph) provided that "After the repayments to the United States of all money advancd with interest, charges shall be on such basis and the revenues derived therefrom shall be kept in a separate fund to be expended within the Colorado River Basin as may hereafter be prescribed by the Congress.” These provisions gave other States a financial interest in maintaining rates at the highest possible level, and it became apparent that political factors would make strict application of the "competitive value" theory almost impossible in the periodic readjustment of rates contemplated in the act. Therefore, an effort to revise the theory of rate making was made, which resulted in the adoption of the Boulder Canyon Project Adjustment Act (Public Law 756, 76th Cong., ch. 643, 3d sess.). This act directed that the Secretary promulgate charges, or the basis of computation thereof, during the 50-year period, 1937-87, computed to be sufficient, together with other net revenues from the project, to accomplish the following purposes: (a) To meet the cost of operation and maintenance and to provide for replacements; |