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3d Session

? No. 320

APPROPRIATION FOR DROUGHT RELIEF

LETTER

FROM

THE SECRETARY OF AGRICULTURE,

TRANSMITTING

IN RESPONSE TO SENATE RESOLUTION NO. 479, CERTAIN INFOR

MATION RELATIVE TO THE $20,000,000 CONTAINED IN THE INTERIOR DEPARTMENT APPROPRIATION BILL FOR DROUGHT RELIEF

FEBRUARY 17 (calendar day, March 2), 1931.-Ordered to lie on the table and

be printed

DEPARTMENT OF AGRICULTURE,

Washington, March 2, 1931. The PRESIDENT OF THE SENATE.

DEAR MR. PRESIDENT: Replying to the request contained in S. Res. 479, I have the honor to inform the Senate that because of the extended debate upon the appropriation of $20,000,000 contained in the Interior Department bill, and because of the uncertainty as to the provisions of the act, it was not possible to work out the administration and accounting problems entailed until the act was finally passed and its provisions definitely known.

Under clause (1) of the second paragraph of the appropriation, loans are authorized to individuals for the purpose of assisting in forming like agricultural credit corporations, livestock loan companies, and local organizations, or of increasing the capital stock of such corporations. The intermediate credit bank system, the Federal reserve system, the General Accounting Office and other agencies are, incidentally, involved in the administration of this clause. Many conferences have been held with them in order that our regulations might not conflict with their regular course of business. It has been necessary to call in from the field representatives of each of the intermediate credit banks which do business in the drought area. It has been necessary, also, to create State committees whose duties are to assist the department in obtaining the widest possible distribution of the funds and the maximum usefulness of the agricultural credit corporations to be set up. The plan of administration and the necessary instructions, forms and legal documents were completed and delivered to the Government Printing Office several days ago. With commendable cooperation and efficiency, the Public Printer has delivered to us this morning the completed printed material, which is to-day being forwarded to the State committees, which have been set up in nearly every State affected.

Under clause (2) of the second paragraph of the appropriation, dealing with agricultural rehabilitation, difficult questions of accounting, of definition and of regulation have been encountered. It is desirable to use the emergency organization already created for the administration of Public Resolution 112, appropriating $45,000,000 for loans for feed, seed and fertilizer, but at the same time the accounting must be kept separate. The regulations and instructions have been completed and telegraphed to each of the field officers of the department for their guidance..

There exists now no reason why applications for loans under any and all sections of Public Resolution 112 and the $20,000,000 appropriation may not now be received and payment made shortly thereafter. Sincerely,

ARTHUR M. HYDE, Secretary.

VETO MESSAGE RELATING TO DISPOSITION OF

MUSCLE SHOALS

MESSAGE

FROM

THE PRESIDENT OF THE UNITED STATES

RETURNING

WITHOUT APPROVAL THE JOINT RESOLUTION (S. J. RES. 49) ENTITLED “A JOINT RESOLUTION TO PROVIDE FOR THE NATIONAL DEFENSE BY THE CREATION OF A CORPORATION FOR THE OPERATION OF THE GOVERNMENT PROPERTIES AT AND NEAR MUSCLE SHOALS IN THE STATE OF ALABAMA; TO AUTHORIZE THE LETTING OF THE MUSCLE SHOALS PROPERTIES UNDER CERTAIN CONDITIONS; AND FOR OTHER PURPOSES

FEBRUARY 17 (calendar day, March 3), 1931.—Read; ordered

to lie on the table and be printed

To the Senate:

I return herewith, without my approval, Senate Joint Resolution 49, “ To provide for the national defense by the creation of a corporation for the operation of the Government properties at and near Muscle Shoals in the State of Alabama; to authorize the letting of the Muscle Shoals properties under certain conditions; and for other purposes."

This bill proposes the transformation of the war plant at Muscle Shoals, together with important expansions, into a permanently operated Government institution for the production and distribution of power and the manufacture of fertilizers.

Disregarding for the moment the question of whether the Federal Government should or can manage a power and fertilizer manufacturing business, we should examine this proposal from the point of view of the probabilities of success as a business, even if efficiently managed. Such an analysis involves a consideration of the capital invested, the available commercial power, the operating costs, the revenue to be expected, and the profit and loss involved from this set-up. The figures and estimates given herein are furnished by the War Department upon the authority of the Chief of Enginears.

(1)

22880—31

VALUE OF THE OLD PLANT AND FURTHER CAPITAL OUTLAY REQUIRED

The following properties and proposed extensions are embraced in the proposed project:

(a) Wilson Dam and its hydroelectric equipment valued at $37,000,000 being the original cost of $47,000,000 less $10,000,000 applicable to navigation.

(b) The steam power plant at Muscle Shoals valued at $5,000,000 being a reduction for depreciation of $7,000,000 from the original cost of $12,000,000.

(c) Proposed further additions to the electrical plant at Muscle Shoals costing $9,000,000.

(d) Proposed construction of Cove Creek Dam with hydroelectric plant with transmission line to Wilson Dam $41,000,000 of which $5,000,000 may be attributed to flood control and improvement of navigation or, say, $37,000,000.

(e) Proposed construction of transmission lines for wholesale distribution of power within the transmission area-$40,000,000.

(f) Nitrate plants, quarries, etc., at Muscle Shoals which originally cost $68,555,000 but upon which no valuation is placed at present.

The total valuation of the old property to be taken over for the power portion of the project is therefore $42,000,000 after the above deductions from original cost. The new expenditures from the Treasury applicable to the power business are estimated at $90,000,000, less $5,000,000 which might be attributable to flood control, or a total of $127,000,000 of capital in the electrical project. This sum would be further increased by accumulated interest charge during construction. As shown later on several millions further would be required for modernizing the nitrate plants. The total requirement of new money from the Federal Treasury for the project is probably $100,000,000 even if no further extensions were undertaken.

AMOUNT OF POWER AVAILABLE FROM THIS PROJECT

Assuming the additional power given by the construction of the Cove Creek Dam and the use of steam power for five months in the dry season each year, and taking the average load factor from experience in that region, about 1,300,000,000 kilowatt-hours of continuous power could be produced annually. Considered as a general power business a portion of this must be held in reserve to protect consumers, leaving a net of about 1,000,000,000 kilowatthours annually of salable power. This amount would be somewhat increased if a large proportion of 24-hour load were applied to fertilizer manufacture.

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The secondary power for a period of less than seven months in the year is not regarded as of any present commercial value.

OPERATING COSTS

The following is the estimated annual overhead and operating cost of the electrical end of the project including the steam plant necessary to convert 7-month secondary power into primary power as stated above: Interest at 4 per cent per annum on capital of $127,000,000_. $5, 080, 000 Amortization

1, 890,000 Operating and maintenance cost of hydroelectric plant-

775, 000 Operating and maintenance cost of steam plant.---

850, 000 Operation and maintenance cost of transmission lines.

550,000 Total.----

$9, 145, 000 The estimated cost of production and distribution is, therefore, about 9.1 mills per kilowatt-hour. If only part of the transmission lines were constructed it would decrease capital and operating charges but would not comply with the requirement of equitable distribution through the transmission area.

ESTIMATED GROSS INCOME

The purpose of the bill is to provide production and wholesale distribution of surplus power and to give preference to States, municipalities, and cooperative organizations. It further provides that the policy of the Government must be to distribute the surplus power equitably amongst States, counties, and municipalities within transmission distance of Muscle Shoals and provides for the construction of transmission lines to effect this purpose. Such a transmission system for wholesale purposes only is estimated to cost $40,000,000. If it is proposed to sell power at retail to householders, then there would need be a great increase in the estimates of capital outlay and operation costs for such distribution.

The average gross income of the power companies in that territory, including retail as well as wholesale power, is about 12 mills per kilowatt-hour. This includes retail residential power averaging something over 50 mills per kilowatt-hour. Miscellaneous industrial power realizes about 10 mills per kilowatt-hour. The power sold wholesale to other companies and those engaged in municipal distri. bution averages about 7.2 mills per kilowatt-hour.

It is impossible to compute Muscle Shoals income under this project upon a basis which includes retail power sales, as this is a project for wholesale distribution only. It is impossible to compute it upon the basis of miscellaneous industrial rates as sales for industrial purposes irom Muscle Shoals would presumably be mainly for manufacture of fertilizers and it would not be possible to average 10

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