year for each undeveloped horsepower now economically available for development.

Mr. Smith states that there are several million of horsepower undeveloped that can now be profitably developed. Assuming that by several millions he had in mind say five million horsepower, then the non-development of this power represents an absolute waste today at the rate of 27,500,000 tons of coal per

annum.

In the words of Mr. Smith, "these millions of water power economically available, but undeveloped, represent absolute waste." If the entire 32,000,000 minimum potential, horsepower as estimated by Mr. Smith, were developed, the total saving of coal would be about 175,000,000 tons per annum, It may be of interest to know that our present consumption of coal for all purposes is about 500,000,000 tons per annum, of which about ninety per cent is for industrial purposes.

Does not the possibility here presented of increasing the saving from 27,500,000 tons per annum to as near 175,000,000 tons as practicable present a field for fruitful endeavor on the part of the Government? Does not the possibility of so tremendous a saving of our natural resources suggest that the attitude of the Government should be at least sympathetic and not repressive? Does it not even suggest that the public welfare may soon require the principle of a bounty to encourage the development of its powers? These will be found fruitful subjects for reflection.

Returning now to the estimated present waste of 27,500,000 tons of coal per annum, as based on Mr. Smith's data, what does this annual waste amount to in value? The average price of coal is probably in excess of two dollars a ton; so that a measure of the present value of this waste would probably exceed $55,000,000 per annum. However, there is some question as to whether we should treat this 27,500,000 tons of coal per annum from the point of view of its present value, or from the point of view of its value at the time when the reserve, of which this 27,500,000 tons would form a part, would be required for use. It would seem reasonable that the smallest value that could possibly be put upon it would be its present value, and therefore, it would appear that we, as a nation, are losing at least $55,000,000 per annum as the result of the nondevelopment of 5,000,000 water horsepower economically available at the present time, or at the rate of eleven dollars per horsepower per year. However, as conservationists, I think we are bound to give some consideration to the value of the coal in the ground at the future time when this reserve will be needed. At that time it will not be so much a question of dollars and cents as it will be a question of keeping the human

race warm, for, presumably long before that time the coal resources will have been husbanded and held almost exclusively for this purpose. Coal possesses a tremendous value for heating which water powers do not, and there is a very important question of economics involved, which I shall not treat further here than to mention that whenever coal is used to do work that water power can do, we are employing an agent of a very high order to do the work of an inferior agent. The question of the full and true value to be placed upon coal which we could save by the development of water powers is too intricate for treatment here.

As against those tremendous losses to the nation, due solely to delay, what have we gained by the delay? What did we hope to gain by delay? I cannot better state what we hoped to gain than by adopting the words of Mr. Herbert Knox Smith from the report referred to, as follows:

"If the public permits private parties to develop and operate its water powers, it can charge rental for that right which will go into the public treasury. It is only through some such reservation and through the operation of the one agency that represents the public, namely, the Government, whether state or federal, that the advantages inherent in water powers can be reserved and distributd to the community as a whole. This consideration must therefore primarily dominate the water power policy."

This is what we sought to gain. Now what have we actually gained by the delay?

We have caused to be universally accepted the principle of an efficient Governmental control, and we have preserved to the Federal Government the potential opportunity to collect a rental for the use of its water power sites.

I use the word "potential" because if the rental fixed is more than the traffic will bear at a particular site the development will not be made and no rental will be collected from it.

The most important and the important thing we have gained is universal recognition of the principle of an efficient Governmental control.

It is probably not of vital consequence to the public welfare whether this control be exercised by representatives of the Federal or the State Government. The important thing is that the control should be efficient and fair and in harmony with the public welfare.

Of far less consequence, to my mind, is the preservation to the Federal Government of the "potential" opportunity to collect a rental from a site for the benefit of the public treasury, because I doubt the expediency of an attempt in this form to

distribute to the people their fair share of the values flowing from the development of their sites.

Water power, like city real estate, exhibits enormous differences in earning capacity. Many water powers have little or no commercial earning capacity in competition with coal. It would require in many cases a bounty to bring about their development. If we charge a rental on all water power sites at a uniform rate per horsepower of available capacity, only those sites will be developed that can stand the rental. Other sites that might have been developed under a smaller rental or under no rental at all will lie idle and valuable supplies of coal will be consumed to do their work. Is it not true that what we might collect for the people as a rental from a dozen developed water powers could easily be lost to the nation from the waste involved in a single undeveloped power whose development was prevented by the rental policy?

We have seen that at two dollars per ton for coal the waste according to the data of Mr. Herbert Knox Smith is eleven dollars per horsepower year for each several millions horsepower that are now commercially available for development, a total annual loss of around $55,000,000.

How can the nation recoup such a loss by collecting "for the community as a whole" a rental from the sites, and if it could, how great per horsepower year would the rental have to be to recoup so great a loss; and would this rental be within what the traffic would bear?

Fundamentally the question of a rental collected for the benefit of the public treasury is not a question of conservation at all. It is a social question contemplating an equitable division of potential profits, essentially the same as other social questions that have been correctly solved by Governmental supervision and control of the service contracts and profits of public service corporations. No new form of wealth is created by the imposition and collection of such a rental or tax and therefore each year we permit coal to be used, to do work that can as economically be performed by water power we, as a nation, are being impoverished by the value of the coal so used, now estimated at about $55,000,000 per annum.

The nation cannot as a whole be injured without its effect being felt by every class of which it is composed, so that even if we were to view this question, not from the broad standpoint of the nation itself, but from the narrower viewpoint of that class which is most numerous in the nation, the conviction must still be forced upon us that if the nation, itself continues to be impoverished, the aggregate injury to this class may thereby be caused to exceed any possible advantages to it from the "po

tential" opportunity of the Federal Government to collect for the "community as a whole" a rental on water power sites.

If the purpose of the rental is to secure to the people as a whole all the profit from the development after capital has had its fair return, the rental policy, in my judgment, will not accomplish this purpose if it is fixed uniformly at so much per horsepower of available capacity at the site, as has been suggested.

While I am in entire sympathy with the purpose of the rental charge, I must confess that in my opinion unless it be based in each particular case either on actual profits earned or on an agreed estimate of prospective profits prepared in each particular case as the result of a most skillful and exhaustive investigation, the rental policy if applied generally may do much more harm to the public welfare than good. But in suggesting that the rental policy may be impracticable, I am not suggesting any abandonment of the purposes for which that policy was suggested. Excessive profits if earned must be returned to the people, but it appears to me fundamental that an excessive profit must have been actually earned before a division is due and the extent of the division must be controlled by the amount of the profit.

A remedy that will prevent excessive profits without retarding development must, it seems to me, be based either on a policy of price regulation by the Government, or of profit sharing with the Government. If there can be no regulation of price below the competitive price of coal produced power without unfair discrimination against those consumers of power who are not fortunate enough to be consumers of water power, then excessive profits should probably be distributed to the people through a sharing of profit with the Government.

But what is the measure of this share of the profit which it has been sought to secure to the people as a rental system? How much has it been suggested should be collected annually for the people from the 5,000,000 economically available horsepower now going to waste? How does the potential value of it as a gain compare with the actual loss to the nation for the three years that it has been going on and is still going on because of enforced non-development?

I may be pardoned if I take this opportunity to say parenthetically that in suggesting that we now compare our actual losses through delay with the expected benefits to flow from wise legislation, I do not mean to imply any criticism of the policy of non-development pending investigations of the questions involved.

It is often said that a person's hind-sight is better than his

fore-sight, and if the opportunity to do a complicated thing over again should be presented there are a few of us who would not do some things differently. A thing is always wisely done regardless of consequences if in the light of the knowĺedge available at the time it was the logical thing to do, and I think to halt until we could get our bearings was the logical thing to do.

I admire the courage of the men who have prevented the development of our water power sites; their patriotism; their high purpose. I am not one of those who would impugn the motives of these men if they should now insist that these sites be contained a while longer in their natural condition. I would understand that they believed this policy necessary to the public welfare, but I would question their judgment.

I do not remember having heard it suggested in any quarter that the proposed rental should exceed around one dollar per year per horsepower of a site capacity, and the fear has been expressed in some quarters that a charge exceeding fifty cents per horsepower might retard, if not prevent, the development of many otherwise economically available powers.

It may not be out of place to say here while considering the amount of the rental, that water powers may be divided into three general classes. First, those capable of producing power considerably cheaper than by coal. The number of powers in this class is not very great. In the second class the saving over coal is small, and the margin of saving may be so small that mistakes in the estimate of cost or unusually adverse conditions during construction might easily make the difference between a success and a failure of the enterprise. In this class there are a very large number of powers. But the largest class of all consists of those powers that are not now economically available as competitors of coal.

Assuming that the traffic would bear an annual rental of one dollar per horsepower of site capacity for the several million horsepower now, in the judgment of Mr. Herbert Knox Smith, economically available, then the largest sum which it has been suggested we gather into the public treasury from every undeveloped water power in the country now economically available is but $5,000,000 per annum, if by several million horsepower Mr. Smith means 5,000,000 horsepower. Let us assume for the purposes of discussion that the imposition of this rental or tax does create new wealth for the nation to the extent collected. How does this potential gain compensate for our losses, actual in the past and present, prospective in the future?

The losses which we are now suffering through waste of