to correct his understanding as the minimum charge in the power contract with the Bohn Co. was only $1,700 per month, and certainly will not be any more in the future, and was a reasonable minimum for a plant estimated to use up to 10,000 kilowatts of demand.

We provided 550,000 kilowatts for the war effort for which the Government did not advance a dollar for that capacity on account of the war effort, or during the war period.

We made interconnections for parallel operation at a cost of between $500,000 and $600,000, to the utilities there, and we did not ask the Government for a dollar of that, and we haven't yet settled how we are going to settle between the public and private institutions there.

That is the spirit of that country out there, and we are there to further small business, and we will do it.

Mr. GOLDSCHMIDT. May I, in commenting on what you said, point out that you were not able to write anything of that off on any 5-year tax amortization either.

Mr. Ely. Mr. Goldschmidt is quite correct. The public power generating agencies who made war investments were unable to amortize them during the period of the war. I want to express our appreciation for what Mr. Goldschmidt has said about the interest of the Interior Department in all of these Federal projects, without distinction. What has been brought out here, by the way, is one of the most interesting and dramatic problems that we in the West face in the postwar developments. We are out, for the time being, from the area of sharp conflict or competition between public power and private power and are into an area of much greater concern in the long run, of potential competition between these gigantic Federal projects.

The Federal policy on amortization, interest rates, write-offs, and so forth, for one area, one great dam, if more favorable than that of another area, swings the whole economy of the West in one direction or the other.

Boulder first was set up on an entirely different basis than Bonneville or TVA. That is not to say that one scheme or the other is right or wrong, but they can't all be right. Some readjustments are necessary as we go along, and the Government now has this tremendous stake in the aluminum industry and the cost of power high-lights that as no other development to date has done.

We welcome this, which I gather is a sympathetic study of the whole program which we may hope for from the Interior Department and the Federal Power Commission.

Senator MURRAY. Thank you very much for your statement.
The next witness will be Mr. Matthew Davis.

STATEMENT OF MATTHEW W. DAVIS, REPRESENTING INTERNATIONAL ALUMINUM COUNCIL OF THE AMERICAN FEDERATION OF LABOR

Mr. DAVIS. Mr. Chairman, gentlemen of the committee, my name is Matthew W. Davis, of Louisville, Ky. I represent the international aluminum council of the American Federation of Labor. This committee invited Mr. Edward Stahl, of Pittsburgh, president of the international aluminum council, to appear at this hearing. He was

readily, I am going to ask that the attorney, Northcutt Ely, read paragraph by paragraph as though I did it myself, and questions may be asked as may be desired as we go along.

Senator MURRAY. That will be perfectly proper.

ESTIMATED THAT PEACETIME INDUSTRIAL MARKET FOR ALUMINUM IN PACIFIC COAST WOULD CONSUME 120,000,000 POUNDS ANNUALLY Mr. SCATTERGOOD. First off, Mr. Chairman, I wish to mention, so that in going over the statement these points may perhaps be clearer, that in the Los Angeles or southern California area there is an existing market, a conservatively estimated market for aluminum for the immediate and continuing future. That is, immediate within a year or two perhaps of development. The market is estimated by those independent of our department and city for the Pacific coast, as I understand it, and our department engineers and business agent feel it is conservative, at 120,000,000 pounds of aluminum per year of which some 15,000,000 would be in the Northwest and 105,000,000 in the Pacific Southwest.

The market, being there an integrated aluminum industry complete, as is contemplated by these committees, Mr. Chairman, would be free, to the extent of the capacity corresponding to the market available to such production and fabricating industries in that area, of transportation charges in competing for the local market.

Incidentally, the Federal Government-in the application of the principles that have been set out in the three reports spoken of here by the Director of Surplus Property Disposal, the Attorney General, and the interim report of the Small Business Committee-would not have to take into account transportation for an integrated aluminum industry of the magnitude of 100,000,000 pounds per year or more. The industry would have, as a basis of give-and-take in their financial experiences, that differential of transportation, and I would call attention to the fact that transportation of aluminum is a very substantial item because the products of semifabricated aluminum from an extrusion plant or rod plant or sheet rolling mill, have to be crated. It costs to crate. It is light in proportion to bulk, and must be transported by first-class freight, and so the freight is heavy in proportion to durable goods generally.

In the Los Angeles area, Mr. Harvey has clearly expressed in his very apt and important statement the conditions of the area for the benefit of your committee, and his statement was exceedingly pertinent. It relates to developments for the market available, some of which may be the Pacific ports in the comparatively near future, and the main part of it for consumption locally.

In that area, as Mr. Harvey has stated, there is industrial leadership, commercial leadership, and skilled workmen as a body ready and available for operations.

In the development of plants of all kinds in the Los Angeles area, for furtherance of the war, 400,000 or 500,000 people came in there, and a large part of them were trained there, and we understand the shutdown was due to the influence of the War Manpower Commission. We are confident that we are right in the expression that the purposes, as we understand them of the Congress, in enacting the antitrust

FREE ENTERPRISE HAS NEVER EXISTED IN ALUMINUM INDUSTRY

I have been sitting here listening to these hearings. I have heard a lot said about the sacredness of free enterprise. I have heard a lot said about how bad a Government subsidy plan would be in operation of these aluminum plants. There has never been free enterprise in the aluminum industry in the United States. It has been completely dominated and controlled by the Aluminum Co. The Federal court's decision in which it holds that the Aluminum Co. is a monopoly is proof of my assertion. Instead of having free enterprise the aluminum industry has operated under conditions in which free enterprise has been stifled. Now is the ideal time to change that situation. It may never come again. Unless the Government in disposing of these plants gives a chance to the only company that has had the nerve to compete with Alcoa a chance to become a factor, free enterprise in the aluminum industry will continue to be a mockery. The idea expressed here at these hearings has been that a subsidy, the Government participating in business is a terrible thing. But Alcoa has been operating these Government-owned aluminum plants under a subsidy in which they were guaranteed against loss by the Government. The United States subsidized the biggest aluminum production facility in the world at Shipshaw, Canada, loaned the Aluminum Co. of Canada $68,000,000 to build a plant outside the United States, which can now make aluminum cheaper than anywhere else. But if anyone thinks that there is going to be competition between Alcoa and the Aluminum Co. of Canada they are going to be disappointed.

ALCOA SUBSIDIZED ALL THROUGH THE WAR

After subsidizing Alcoa all through the war, from which subsidy they made millions of dollars, after subsidizing the big aluminum plant in Canada, it is now decided by Alcoa and her friends that a subsidy is a bad thing.

There ought to be a big aluminum industry in this country. There can be if the Government-owned plants are wisely disposed of so as to create a competitive aluminum industry.

The Government has a lot of money tied up in these plants. If they should be leased to operators who sincerely want to expand the industry, prove to the big potential users of aluminum that they can. buy the metal when they need it and as much of it as they need without the price being unexpectedly hiked on them, we will soon establish a real aluminum industry on a sound basis. It will grow and expand. When that happens the Government-owned aluminum plants will have increased in value as going concerns and a greater portion of the taxpayer's money will be recovered from the investment.

The Government has paid out huge sums in subsidizing aluminum during the war. Why would it be such a frightful thing to follow somewhat the same principle during peace in order to maintain employment, create jobs for workers, instead of leaving them to subsist off of unemployment compensation payments? Why would it not be a fine thing from a long-range view, to use the Government's aluminum plants in conjunction with a firm that knows how to operate them, so as to help a new, venturesome company through the trying period of

all other fabrication would be taken care of by small business, and small industries would multiply in an area that had been deliberately planned for small business and small industry by placing it in five or six different locations in the open where the workmen have to a large degree what has been called subsistence homesteads to live in and not slums.

It is also attractive to branches of big business which are being located there.

If I may repeat, you don't need to buy any pig or ingot, and you don't need to pay any transportation which is heavy on aluminum from an extrusion mill to a market, or for pig from a reduction plant to your stock pile.

An adjustment of power for the purpose of accomplishing the wishes of this committee in making employment and building up competitive centers may be accomplished without anything that at all resembles a subsidy. It is simply a removal of a discrimination between Government plants with respect to at least some piece of business in which the Government is interested.

Personally, I cannot understand why those who have testified here who seem so interested in producing aluminum in other places are not interested in conditions of this sort.

With those remarks, I will ask Mr. Ely to read this with such questions as any of you may desire, which I will attempt to testify to, as far as I can.

Senator MURRAY. We appreciate your preliminary remarks. I think you have made a very valuable suggestion.

Mr. ELY. This statement is entitled, "Statement presented by the department of water and power of the city of Los Angeles before the joint committee hearings on the aluminum plant disposal program of the Surplus Property Administration." It is as follows:

As, of course, the members of the committees are aware, a five-pot-line aluminum reduction plant and an aluminum extrusion plant belonging to the Reconstruction Finance Corporation and included in the aluminum plant disposal program are situated in the city of Los Angeles, Calif. The city as a community, and particularly as the center of one of the major aluminum using areas of the country, and its department of water and power as the supplier of water and electric energy to those plants, are vitally interested in their continuing operation for the furtherance of employment and more advantageous provision of durable goods for that area.

The department of water and power has been a major factor in the economic development of that city and in influencing such development throughout southern California. This has resulted from the provision of an ample supply of water and electric energy at rates to the consumer which are low as compared with the national average, thus encouraging industrial development-particularly the development of small industries in which the ratio of the number of workers employed to the volume of business is high. This in turn has encouraged development of commercial enterprises and the maintenance of a high standard of living.

Through long-range planning these water and power supplies have never failed in meeting the demand even under the stress of war production and rapid population growth. Similarly, planning is now in progress looking to future years to the end that they may be provided well ahead of requirements and industry may have the assurance of a continuing ample supply of these necessities.

The relative importance of smaller plants within the city of Los Angeles is indicated by the fact that there are approximately 6,250 plants engaged in manufacturing, of which 5,775 are definitely in the small-plant category, and the balance are larger plants, although only a few of them would be regarded as coming within the "big business" category. Before the war they were lacking the means, locally,

of providing products of the larger basic industries. It is essential, therefore, that all possible encouragement should be given to the establishment of plants producing basic or semifinished products to supply the multitude of smaller plants which will engage in their fabrication for the local market as well as export to South America and to the Pacific. For this reason the importance of an integrated aluminum industry cannot be too strongly stressed.

The cost of producing aluminum at the Los Angeles plant during the war was high because of several conditions prevailing at the time. Among these was the fact that the plant was operated at only partial capacity, although full operation had been provided for. Another fact was that the cost of electric power was necessarily high for this reason and the further reason that Boulder Dam power, which had been expected to be available, was in large part diverted to the operation of the magnesium plant near Las Vegas, Nev., resulting in the necessity for generating a substantial part of the electric energy for the aluminum plant at steam electric-generating plants. All of this is set forth in a letter dated October 5, 1945, from Samuel B. Morris, general manager and chief engineer of the department of water and power, addressed to the Honorable James E. Murray, chairman of the Senate Small Business Committee, and the document submitted with that letter, copies of which are filed herewith.

SOURCES OF POWER AVAILABLE TO LOS ANGELES

Senator REVERCOMB. How do you generate your power in Los Angeles?

Mr. SCATTERGOOD. The city municipal bureau of power and light gets something more than half its power from the Boulder power plant. We operate the generators ourselves that supply the power for our uses and other public agencies.

Southern California Edison Co., outside the city, gets a part, but a smaller part of its power.

We have other hydroelectric plants along our own aqueduct in conjunction with the Los Angeles water supply, and we have some steam capacity.

Senator REVERCOMB. To what extent is your electricity generated through steam?

Mr. SCATTERGOOD. At the present time only some peaking and standby. During the operation of these war plants, in addition to all the rest, there was about 20 percent of it at times generated by steam. Senator REVERCOMB. Where do you get your coal?

Mr. SCATTERGOOD. We get oil fuel.

Senator REVERCOMB. You use oil as fuel?

Mr. SCATTERGOOD. Yes; and we get that locally.

Senator REVERCOMB. It is more costly to generate by oil than by your hydro plants?

Mr. SCATTERGOOD. At the present prices of oil; yes.

Mr. ELY (continuing) :

As stated in that letter the Los Angeles Department of Water and Power is now prepared to suggest a rate for aluminum reduction, in connection with an integrated aluminum industry, including a sheet-rolling mill, of $1.75 per kilowatt of demand per month, for two pot lines, for a period of 3 years. This is based on the availability of a supply of lower cost hydroelectric energy not yet marketed which can be made available for aluminum production for that period of time. This charge would result in a rate of 2.5 mills per kilowatt-hour for 700 hours per month use of the demand. This suggestion contemplates that after the 3-year period the normal schedule will be applicable and will provide a rate of $2.10 per kilowatt of demand per month which would result in a rate of 3 mills per kilowatt-hour for such 700 hours per month use of the demand.

Because of the cost of producing energy and the long distance of transmission it is not feasible to develop a rate as low as the cost to Alcoa in Tennessee, for example.