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(2) The granting to all states and governmental subdivisions thereof and to any public service corporation organized under the laws of any state and authorized by said state so to do, the right to receive on suitable application an indeterminate grant by the Government, but such indeterminate grant to be in the nature of a contract between the Government and the grantee; the grant being made a consideration of certain developments, improvements and public use by the grantee, with the condition that the grantor may, at any time, after a fixed period terminate the grant as above explained. (3) The grantee, if a public service corporation, shall at all times be subject and amenable to the lawful regulation of its charges for service and of the character and quality of its service; such regulation to be by any governmental body at the time having authority in the premises, but such regulation shall, if possible, be by only one governmental body. (4) In the event that the property of the grantee (whether said property be upon navigable streams or upon the public domain) shall be acquired by the Government through condemnation proceedings the grantee shall never plead any value in the way of anticipated profits in excess of such reasonable rate of return as the courts may hold under the circumstances is proper for the grantee, as a public servant, to accept. (5) The payment for water power franchise granted to be provided for by allowing the corporation to earn up to a defined per cent upon the money properly invested, such percentage to be dependent upon circumstances, and different in different parts of the country; any excess of earnings above such percentage to be divided with the Federal Government (or in the case of a grant by a state with the state) in some defined manner, the rate of division to be subject to revision at periodical intervals, the first period being the longest; and long enough to make the development financially attractive; its books to be open to Government inspection. In the case of a development in which the Federal Government has no interests, but which is under control of a state, a similar permit to be used. (6) The granting to private concerns by the Federal Government of the right to construct, maintain and operate dams on navigable streams under same conditions as above enumerated, excepting those under (5), instead of which the Secretary of War shall be authorized to make such agreement with the grantee with reference to terms of payment as he may deem just and reasonable. (7) No speculative holding of undeveloped power sites should be permitted, and no transfer or assignment of any grant should be made without authority from the Government. Finally, we repeat that for the conservation of our water powers it is essential that capital shall be attracted to these enterprises, and while we must, of curse, fully protect the interests of the public, both present and future, we are not conservationists if we advocate the imposition of terms which restrict rather than encourage development. We must also remember that under present conditions water power investments are not especially attractive, and that steam power is a more desirable form of power, since it can be located wherever needed, and the supply regulated according to demand. Water power is more variable, and furthermore, it requires, in general, a very much larger investment per horse power than steam, though its running expenses are less. Because of the large first cost of water power developments the risk of loss in case of failure of the enterprise is correspondingly large. Capital, therefore, does not need water power enterprises, and it will not take them up to any considerable degree, unless fully protected. It is from a point of view of pure conservation that the development of water power is most important. It has been estimated that we use annually over four hundred and eighty million tons of coal, worth nearly a billion dollars, in addition to many million dollars' worth of other fuels; and that some two hundred million dollars' worth of this fuel annually might perhaps be saved by the utilization of water powers. When we consider also that the development of water power not only conserves fuel, but directly serves to promote the navigability of rivers, we should be very careful how we discourage this triple conservation in order to secure other results which we may consider desirable. If we do discourage it we may be anti-monopolists, or something else, but we are certainly not conservationists. GEORGE F. SWAIN, Chairman. LEWIS B. STILLWELL. M. O. LEIGHTON. EDWIN S. WEBSTER. B. M. HALL.
UNANIMOUS RECOMMENDATIONS OF THE COMMITTEE ON WATER POWER
HoN. HENRY L. STIMSON, of New York—Mr. President, I am happy to be made, through the courtesy of Dr. Swain, the medium of this statement which is, as he has stated, the unanimous statement of all the members of the Committee on Water Power who have attended its meetings. It is, therefore, the statement of Professor George F. Swain, the chairman; President Van Hise, Mr. Gifford Pinchot, Mr. E. S. Webster, Mr. M. O. Leighton, Mr. Lewis B. Stillwell, Mr. B. M. Hall and myself. The fact that so many members of the Committee, who might differ as to certain details, have been able to unite in a statement of the general principles and in so many of the rules of application as this paper contains, seems to me to be an earnest that this entire matter may be treated and decided by this convention in perfectly reasonable good will, without the imposition of any gag rule. The report is as follows: To the Fifth National Conservation Congress: The Committee on Water Power, while finding a difference of opinion among its members as to certain details of the subject, feels very strongly the importance of making clear the general principles which control it and realizes keenly the consequences which would follow a failure to agree upon a constructive program of progress. It has, therefore, framed the following brief statement of the recommendations upon which it is unanimous. A grant of the right to use a water power, while differing in some details, is essentially similar to a grant of any other privilege or franchise from the Government, state or National, and its terms, regulation and control should be guided by essentially the same principles necessary to safeguard the rights of the public and of posterity as have been found essential in the case of other classes of franchises from the Government. Particularly is this true in view of the fact that a water power being perpetual will surely tend to increase in value as other sources of power, such as coal and oil, become exhausted. At the same time, for the very purpose of preserving our other power resources which are capable of exhaustion, the development of water power, under proper safeguards of the public interest should be earnestly encouraged and hastened. We recommend that the following principles should govern the granting of a privilege to use a water power: (a) For a definite period, sufficient to be financially attractive to investors, the privilege should be irrevocable except for cause, reviewable by the courts; (b) Thereafter the privilege should continue subject to revocation in the absolute discretion of the Government exercised through its administrative board or officer upon giving reasonable notice and upon payment of the value of the physical property and improvements of the grantee as below provided under (h). (c) After the expiration of the period provided for in (a) above, at recurring intervals of not more than ten years the amount of compensation to be paid to the Government for the privilege and all the terms and conditions of the grant during the next succeeding period of not more than ten years shall automatically come up for determination by the granting officer of the Government.
(d) The privilege shall be unassignable except with the approval of the Government in order to safeguard the interests of the Government against speculation in water powers and against appropriation without prompt development. (e) The privilege shall be granted only on condition of development of the whole capacity of the power site as rapidly as the granting officer may from time to time require, giving due consideration to reasonable market demands and conditions and also on condition of continuous operation, subject to such demands and conditions. (f) The right to receive compensation for the value of the privilege varying according to the proper conditions of each case shall be reserved to the Government, state or Federal, from whom the privilege comes. We believe that the reservation of such a right to compensation is a vital essential towards the end of proper regulation. It is not sufficient to trust that the public will always receive its proper share by means of regulation of rates alone. Local authorities may neglect or may be unable, under conflict of jurisdiction, or for other reasons, to exact in the interest of the public the full value of the public's right. The value of a water power may in the course of time increase far beyond the power of local regulation to adequately distribute its benefits. At the same time, the method of exacting compensation must be carefully safeguarded so that in case full compensation by rate regulation is exacted by local authorities, an additional burden shall not be imposed. We believe that in normal cases the best method is for the Government to share increasingly in the net profits of the enterprise, provided, those profits exceed a certain reasonable percentage, the right of the Government being recognized otherwise merely by the imposition of a small annual fee or its euivalent. (g) The Government shall have the right to prescribe uniform methods of accounting for the grantee and to inspect its books and records. (h) Upon revocation of a privilege by the Government the grantee shall be paid a compensation equivalent to the fair valuation of its property, exclusive of franchise and consequential damages; this compensation shall include such appurtenances as are necessary for the operation of the water power and the transmission of electricity therefrom but shall not include such properties as railroads, lighting systems, factories, etc., which are of themselves separate industries.
In such transfer all contracts for the sale or delivery of power made in good faith previous to such notice of transfer should be assumed by the transferee so that the said grantee may operate and maintain the power business during his occu. pancy of the property under such stable guarantees as may beget confidence therein by prospective long term contractors, provided, that the Government or said transferee shall not assume any contracts made at a price or under conditions which shall be determined by the proper administrative officer of the Government to be unreasonable or confiscatory.
GEORGE F. SWAIN, Chairman.
B. M. HALL.
MR. HENRY L. St. MSON.—Mr. President, three members of the Committee on Water Power, who, after long and careful deliberation, were not able to unite in the majority report presented by Dr. Swain, have united in a report which has been prepared by Mr. Pinchot, and I ask to have that presented at this time. PRESIDENT PACK–Mr. Pinchot has a statement which he wishes to make at this time. MR. GIFFoRD PINchot—Mr. President, ladies and gentlemen: I have observed that it is after five o'clock, and I have also observed that copies of this minority report, signed by Secretary Stimson, Mr. Teal and mystelf, are available at the door. Therefore, in mercy to you and with the permission of the President, I shall ask you to allow me to postpone the reading of the report, which is short, until the water power question comes up tomorrow morning. PRESIDENT PACK–Without objection, that may be done. (After a pause.) Hearing no objection, it is so ordered.