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tion facilities and power house shall have been completed, the possession, use, and control thereof shall be intrusted to the corporation for use and operation_in_connection with the general Muscle Shoals project and to promote flood control and navigation in the Tennessee River, and in the Clinch River.

SEC. 17. The corporation, as an instrumentality and agency of the Government of the United States for the purpose of executing its constitutional powers, shall have access to the Patent Office of the United States for the purpose of studying, ascertaining, and copying all methods, formula, and scientific information (not including access to pending applications for patents) necessary to enable the corporation to use and employ the most efficacious and economical process for the production of fixed nitrogen, or any essential ingredient of fertilizer, and any patentee whose patent rights may have been thus in any way copied, used, or employed by the exercise of this authority by the corporation shall have as the exclusive remedy of a cause of action to be instituted and prosecuted on the equity side of the appropriate district court of the United States for the recovery of reasonable compensation. The Commissioner of Patents shall furnish to the corporation, at its request and without payment of fees, copies of documents on file in his office.

SEC. 18. The Government of the United States hereby reserves the right, in case of war or national emergency declared by Congress, to take possession of all or any part of the property described or referred to in this act for the purpose of manufacturing explosives or for other war purposes; but, if this right is exercised by the Government, it shall pay the reasonable and fair damages that may be suffered by any party whose contract for the purchase of electric power or fixed nitrogen or fertilizer ingredients is hereby violated, after the amount of the damages have been fixed by the United States Court of Claims in proceedings instituted and conducted for that purpose under rules prescribed by the court.

SEC. 19. (a) All general penal statutes relating to the larceny, embezzlement, conversion, or to the improper handling, retention, use, or disposal of public moneys or property of the United States, shall apply to the moneys and property of the corporation and to moneys and properties of the United States intrusted to the corporation.

(b) Any person who, with intent to defraud the corporation, or to deceive any director or officer of the corporation or any officer or employee of the United States (1) makes any false entry in any book of the corporation, or (2) makes any false report or statement for the corporation, shall, upon conviction thereof, be fined not more than $10,000 or imprisoned not more than five years, or both.

(c) Any person who shall receive any compensation, rebate, or reward, or shall enter into any conspiracy, collusion, or agreement, express or implied, with intent to defraud the corporation or wrongfully and unlawfully to defeat its purposes, shall, on conviction thereof, be fined not more than $5,000 or imprisoned not more than five years, or both.

SEC. 20. In order that the board may not be delayed in carrying out the program authorized herein, the sum of $10,000,000 is hereby authorized to be appropriated for that purpose from the Treasury of the United States, of which not to exceed $2,000,000 shall be made available with which to begin construction of Cove Creek Dam during the calendar year 1931.

SEC. 21. That all appropriations necessary to carry out the provisions of this act are hereby authorized.

SEC. 22. That all acts or parts of acts in conflict herewith are hereby repealed.

SEC. 23. That this act shall take effect immediately.

SEC. 24. The right to alter, amend, or repeal this act is hereby expressly declared and reserved.

SEC. 25. That for twelve months following the passage of this act the President of the United States is hereby given authority to lease, for a term not exceeding fifty years, to any person, firm, or corporation, the nitrate plants now owned by the Government at Muscle Shoals, Alabama. Said lease shall include the Waco quarry, the railroad switches connecting said quarry with the Southern Railway, and other structures connected therewith and necessary for the operation of said railroad, for the operation of said Waco quarry and for the operation of said nitrate plants numbered 1 and 2, but not including steam generating plants. The lease shall also include the machinery, tools, and equipment connected with said quarry, said railroad switches, and said nitrate plants; also, the houses and residences in the vicinity of said quarry and said nitrate plants for the purpose of housing the employees and others needed in the operation of said quarry, said railroad, and said nitrate plants, but not including houses and buildings connected with either of said steam plants and used and occupied or useful for the occupation of employees and others operating said steam plants and not including that portion of the reservation west of Spring Creek. Said lease shall be made upon the following conditions, to wit:

(a) The rental to be paid for the leasing of such property shall be in such amounts and payable at such times as in the judgment of the President shall be fair and just.

(b) The lessee shall covenant to keep said property in first-class condition during the entire term of said lease.

(c) The lessee shall covenant to operate said plants and use said property exclusively in the production and manufacture of fertilizer and fertilizer ingredients to be used in the manufacture or production of fertilizer, and if, in the manufacture of fertilizer or fertilizer ingredients, a by-product is produced which is not an ingredient of fertilizer, the lessee shall have authority to sell and dispose of such by-product as the lessee shall see fit and shall likewise have authority to process such by-product so as to prepare the same for a market.

Provided, however, That in consideration of the lessee complying with the requirements as to the manufacture of fertilizer as prescribed in subsection (d) of this section, the lessee shall have the right during the term of the lease to purchase under provisions of section 26 hereof, an amount of primary power from the corporation equal to 15 per centum of the amount of power used by the lessee in the production of fertilizer; but such 15 per centum of power so purchased shall be entirely independent of, and not used in connection with the leased premises, nor shall the power so purchased be used for the processing or further manufacture of any product produced or manufactured on the leased premises except such by-products as are not ingredients of fertilizer, and in no way shall said power or any machinery operated by it be connected directly or indirectly with the power-used for the production of fertilizer or fertilizer ingredients on said leased premises, and no part of the property herein leased shall be used either directly or indirectly for any purpose in connection with the said 15 per centum of power to which the said lessee is given a preferential right.

Provided further, That the said lessee shall be entitled to such quantity of secondary power subject to all the conditions herein set forth applying to said 15 per centum of primary power as in the judgment of the President is fair and equitable.

(d) Said lease shall also provide that there must be manufactured under said lease annually at least a prescribed amount of nitrogenous plant food of a kind and quality and in a form available as plant food and capable of being applied directly to the soil in connection with the growth of crops; and that such lease shall also contain a stipulation requiring the lessee to produce within three years and six months from the date such lease shall become effective, such fertilizer or fertilizer ingredients containing not less than ten thousand tons of fixed nitrogen, and shall require periodic increases in quantity of such fertilizer or fertilizer ingredients from time to time as the market demands may reasonably require. Such lease shall also provide that such increases shall, within twelve years after such lease becomes effective, reach the maximum production capacity of such plant or plants as the board may find to be economically adapted to the fixation of nitrogen, if the reasonable demands of the market shall justify the same, except when the nitrogen produced is required for national defense, or when the market demands for the same are satisfied by the maintenance in storage and unsold of such fertilizer or fertilizer ingredients containing at least two thousand five hundred tons of fixed nitrogen, but whenever said stock in storage shall fall below the quantity containing two thousand five hundred tons of fixed nitrogen, the production of such nitrogen, and the manufacture of such Said fertilizer or fertilizer ingredients shall thereupon be resumed. lease shall also provide that the sale of such fertilizer or fertilizer ingredients to be used as fertilizer by the said lessee shall be at a price to include the cost of production and not exceeding 8 per centum profit on the turnover produced, and the cost shall include whatever may be paid to the Government for the use of that part of Government property employed by the lessee in manufacturing such fertilizer or fertilizer ingredients to be used as fertilizer and also not exceeding 6 per centum on any capital invested by the lessee in improvements to existing plants or in additional plants employed in the manufacture of fertilizer or fertilizer ingredients to be used as fertilizer and shall include a reasonable actual carrying charge (exclusive of 8 per centum profit thereon) on the stocks of such fertilizer and fertilizer ingredients as are held in storage and unsold for a year or more as the market demands as above provided shall be satisfied. There shall not be included as part of the cost of producing such fertilizer or fertilizer ingredients any royalty for the use by such lessee of any patent, patent right, or patented process belonging to the lessee, or in which the lessee has any interest, or belonging to any subsidiary or allied corporation, or belonging to or controlled by any officer or agent of the lessee of any such allied or subsidiary corporation, and if the lessee should buy any patent, patent right, or patented process with the hope and expectation of thereby reducing the cost of manufacturing such fertilizer or fertilizer ingredients, or of processing any by-product as hereinbefore permitted, then such sum of money as shall be so paid by the lessee shall be considered and treated in the accounting of the cost of such fertilizer or fertilizer ingredients as investment in the nature of plant account, and not as current expenses, and such costs shall be written off on the expiration of any junior patent or license so acquired. For the annual determination of

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the cost of such fertilizer and fertilizer ingredients there shall be appointed by the board a production engineer, and by the lessee another production engineer and by these a firm of certified public accountants, and these three shall proceed to ascertain and compute the cost of producing such fertilizer and fertilizer ingredients; and in the event of any disagreement the two said engineers shall select a third production engineer who shall hear and consider the contentions and decide the issues, and such decision shall be binding upon all parties for the year for which the determination shall have been made. A copy of such audit. and decision shall be filed each year with the board and by it preserved. The expenses incident to this provision shall be paid by the lessee and shall be charged as an item in the cost of producing such fertilizer or fertilizer ingredients. If such annual cost determination discloses that any purchasers have paid a cost for fertilizer or fertilizer ingredients in excess of that allowable under this act, then the lessee shall refund such excess to the respective purchasers.

(e) The said lessee shall give to the said corporation a good and sufficient bond to be approved by the President of the United States, conditioned upon monthly payments to the corporation during the term of said lease for all the power sold by the said corporation to the said lessee.

SEC. 26. The corporation hereinbefore referred to, operating the steam plants at Muscle Shoals and Dam Numbered 2 and any other stream and hydroelectric power facilities which may hereafter be constructed or built as hereinbefore provided in this act, shall supply the said lessee with the power necessary for the operation of the properties leased and for the other manufacturing purposes mentioned in subdivision (c) of section 25 hereof at a price which shall be deemed fair and just by the President and the board.

SEC. 27. For a period of twelve months after the passage of this act, all the provisions of this act relating to the activities of said corporation in the manufacture and production of fertilizer and fertilizer ingredients and to the operation of any of the property authorized to be leased by this act are hereby suspended; and if, within said period, the President leases the property authorized to be leased, such suspension shall continue during the entire time said lease is in effect.

SEC. 28. If within twelve months after the passage of this act, no lease is made by the President as herein authorized, then authority to make such lease shall cease and sections 25, 26, and 27, shall, at the end of said twelve months' period, become null and void and all the other provisions hereof, which have been suspended for said period of twelve months, shall at once go into full force and effect.

Amend the title to read as follows:

A bill 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.

And the House agree to the same.

HARRY M. WURZBACH,
CARROLL REECE,
PERCY E. QUIN,
HUBERT F. FISHER,

Managers.on the part of the House.

CHAS. L. McNARY,
G. W. NORRIS,

E. D. SMITH,

Managers on the part of the Senate.

STATEMENT OF THE MANAGERS ON THE PART OF THE HOUSE

The managers on the part of the House at the conference on the disagreeing votes of the two Houses on the amendments of the House to the joint resolution (S. J. Res. 49), providing for the leasing of the Muscle Shoals properties on certain terms and conditions, and providing for the national defense by the creation of a corporation for the operation of the Government properties at or near Muscle Shoals, in the State of Alabama, and for other purposes, submit the following statement in explanation of the effect of the action agreed upon and recommended in the conference report.

The Senate joint resolution provides for the creation of a corporation to be known as the Muscle Shoals Corporation of the United States, with authority to operate existing plants for experimental purposes for the manufacture of fertilizer or fertilizer ingredients; for donation of not exeeding 1 per cent of the total product of such plants for experimental, educational purposes to county demonstration agents and agricultural colleges; to allot to the Secretary of War certain power for use in operation of all locks, lifts, and other facilities in aid of navigation; and then to sell the surplus power to States, counties, and municipalities, corporations, partnerships, or individuals, with preferences as indicated in said resolution, and providing, that in order to place the Government upon a fair basis for making sales of such surplus power, then to construct transmission lines, within transmission distances in any direction from Dam No. 2, and the steam plant; and also provides for the building of Cove Creek Dam, and an authorization of not to exceed $2,000,000 to begin construction of said dam.

The conferees accepted the Senate joint resolution without amendment but only as an alternative, and its provisions can not, under any circumstances, become effective for a period of 12 months after the passage of the act, during which 12-month period the President of the United States is given authority to lease all of the Muscle Shoals property for private operation of the nitrate plants for fertilizer manufacture. And if a lease can be made, then for all practical purposes, never become effective.

The managers on the part of the House who have signed the report believe that the leasing language is so liberal as that the President will be able to effectuate a lease, thus consuming all of the power distributable at Muscle Shoals, leaving little, if any, power for sale, or sale and distribution, under the provisions of the Senate joint resolution. They believe further that if a lease is made, and if not quite all of the power is thus consumed, that the minor part for distribution will be taken by municipalities, willing to build their own transmission lines and thus prevent, by making wholly unnecessary, at least the construction of any transmission lines at the cost of the Government. In other words, we believe that the liberal leasing language written in this report will serve as an effectual barrier against the provisions of the Senate joint resolution from becoming operative.

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