STATEMENT OF MR. M. O. LEIGHTON, WASHINGTON, D. C.

The CHAIRMAN. Will you state your name and occupation, Mr. Leighton, and your residence?

Mr. LEIGHTON. My name is M. O. Leighton. I am a consulting engineer, located at Washington, D. C., representing the Green River Co., a Utah corporation, and the Priest Rapids High Line Land Owners' Association.

Mr. SINNOTT. Is that Priest Rapids Co. a Washington company? Mr. LEIGHTON. Yes, sir.

Beginning with the year 1902 I had considerable experience with reference to water-power matters, as a member of the Geological Survey, and from 1909, or thereabouts, to May 1, 1913, I was in charge of field work with respect to water-power withdrawals and rights-ofway which came under the decisions and adjudications of the Department of the Interior. Since leaving the Geological Survey I have continued in private practice, with a reasonable amount of experience in water-power development, financing, etc. During my experience in the Geological Survey I was brought in close contact with the difficulties attendant upon financing and development of water power under the act of 1901. This induced me to give some study to the matter and I pursued diligent inquiry among the waterpower men, financiers, and lawyers. That which I will have to say this morning with respect to this bill is based upon the impressions which I gathered during that experience.

I want to say, in the first place, Mr. Chairman, that I strongly approve of the intent and purpose of this bill. I conceive that its purpose must be to lift what surely has been and now is a governmental embargo on water-power development; I believe that it seeks to make investments in water power attractive, and, more than all else, seeks to regulate and control the development and operation in the public interest. My suggestions, which will come in a moment, are based upon the fact that the authors of the measure have apparently not considered as fully as may be necessary the fact that if hydroelectric development is unimpeded it must of necessity become an enormous business, involving the investment of huge amounts of capital; that interests as great as these must have the stability which can come only from a definite policy, the details of which are fixed by the law rather than according to the discretion of an administrative officer. This is the underlying expression of every suggestion that I shall have to make with reference to this bill.

The electric business to-day, steam electric, hydroelectric, and all its utilities, involves, for extensions and betterments alone, the expenditure of about $1,000,000 a day. That was determined at a recent convention of operation men. It was also estimated that if investment in water powers is made attractive the natural consequence will be that the development in the next 10 years will equal or exceed $2.000.000,000. Interests as enormous as those ought to have some

stable basis.

Now, the necessity for public control is no longer disputed by anyone. I do not recall that it has been disputed in this hearing nor in any other. It is a matter that is behind our elbows, and every element is conceded. That, in my opinion and in the opinion of many others, applies to this case of water-power monopoly. Water power

is a natural monopoly. Large aggregations of capital must be invested in it because it costs money. It is not an industry out of which the poor man is going to be crowded, because he has not enough money to go in in the first place. The water-power monopoly has no resemblance to the monopolies which have caused us so much trouble, alleged or otherwise, like the oil or coal, because those people are manufacturing and putting upon the market a commodity which they sell at a price largely fixed by the producer. They can be reached by corrective measures only in an indirect way. A waterpower monopoly is not selling a commodity in the strict sense of the word, but rendering a service, and its relation to the people must always be under modern regulations, the relation of the servant to the master in the house.

So that, personally, I can not look with alarm on the fact that 10 or 11 or even 5 or 6 or 4 or 3 groups of interests have taken up so much of water-power property. What are they going to do with it? Suppose that only one company had it-what would they de with it under the modern regulation? Protection of the public interest is an established slogan which stands in no more danger of being wiped out of the public view than did the institution of slavery in 1862. But there is another reason, and very apparent to those who look into the thing without prejudice. Water-power development is a highly specialized thing. I believe in this country there are four or five companies-well, we will say a dozen at the outside-making water power and hydroelectric appliances. It is not something that the untrained or partially trained man can go into as he can go into the peanut business or the hat business. Naturally the people who are trained in the business are the ones who take the properties. At present the number of such persons is comparatively small. It is a perfectly natural thing and, in my view, without any possible detriment to the public, so long as the public is protected by regulation.

Now, it seems to me that there are two aspects to be considered in the relation of the Government to this water-power business on the public lands. The first is the sovereign relation, covering the control of conduct. Now, this control of conduct is exercised in the case of public lands through contractual relations, it is true, but it nevertheless possesses every essential of sovereign control. Under that power of mandate it is sufficient for the Government to say "you shall" or "you shall not" do this or that or the other thing. Then there is the proprietary aspect, in which the governed must leave its sovereign robes on the throne and come down in the forum and do business according to business rules as business men do with each other.

You have here a definite business proposition which you offer, and the fact that the United States is sovereign can not change in any degree the ordinary rules and principles of business, of security, of investments, or any other fundamental thing which was settled long years before there was any such thing known as the United States Government. The trouble with this bill, and with a lot of others that have preceded it, with the intent and purpose of which we all agree, is that they mix the things which should be accomplished by sovereign mandate with those purely fundamental business relations,

and in that way attempt to achieve or secure sovereignty through property stipulation. We pass laws prohibiting murder, but we do not also pass a law providing that in order that man shall be prevented from doing murder he must wear handcuffs. That is precisely what this bill does in effect, as I hope to show.

Directing my attention now to the bill itself: Page 1, lines 1 to 3, "Authorized and empowered under the general regulations to be fixed by him."

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Now, the power given to the Secretary of the Interior by that clause is practically unlimited, except as modified by the few specifications that come subsequently in the bill. It does not provide for fixed conditions, such as are necessary to the establishment of an enormous business. Now, in saying that I do not wish to reflect upon the present Secretary of the Interior. My admiration for Secretary Lane exceeds all reasonable bounds, but neither you nor I know who his successor will be. He is not going to hold office permanently. No one knows what the views of his successor will be. I have served in the Interior Department under five Secretaries, the last one only for a few months, but in those 10 years, under five Secretaries, each one differed radically from the other on this waterpower question. It was a very significant thing that two days ago ex-Secretary Fisher came here and suggested radical amendments to the bill, which bill has been formally approved by the present Secretary of the Interior.

Now, the sentence that we have here, "Authorized and empowered," etc., is the same as in the act of 1901. Under it the Secretary may withhold a lease even though an applicant conforms to all the terms of the act.

The disadvantage is not confined, in that case, to the original power installation by any means, but it extends to subsequent ones. I do not suppose there is a power lessee in the country who is going to start out full tilt with his final installation. His business will grow. He will take up new leases. What is going to happen to this second lease It has been said here frequently if he does not like it he does not need to take a lease. That is all right when he is on the outside, but suppose he is on the inside. A public service commission comes along and says, "Increase your capacity to respond to this demand for service." He comes to the Secretary of the Interior and asks for a new lease on a new power site. A new man with different views is Secretary of the Interior. What is the result of that going to be to the integrity of the investment?

Now, Secretary Fisher said the other day that this provision, "Authorized and empowered, under general regulations to be fixed by him," was too general. I ask you to take note of the fact that the present regulations under those seven or eight words cover 24 closely printed pages, and cover many other things. They include: (1) The approval of plans and engineering work; (2) the applicant's financial standing; (3) the terms of the permit; (4) the imposition of a tax and its periodical adjustment as the Secretary may desire; (5) the time for completion and commencement; (6) the continuity of operation; (7) publicity of accounts; (8) prescribed form of accounting system; (9) that the grantee shall also sell his property to the municipality on demand and at a price that shall

finally be fixed by the Secretary; (10) the permit shall not be transferred except on permission of the Secretary. All of that and a lot more is prescribed under these six or seven words, and it is subject to change in every administration; it is subject to change at any time by the same Secretary if he so desires.

The CHAIRMAN. Let me ask you right there-you are making a very strong statement and a very worthy one, but might we not in each case require the fixing of these terms and conditions in advance of the lease and accomplish your purpose and do away with much of the trouble you suggested?

Mr. LEIGHTON. The point is just this: The first installation is a small part; subsequent developments under new leases might be made so difficult as to affect the investment under the first lease.

The CHAIRMAN. If that first lease runs for 50 years, it is not a small part, because 50 years is quite a long lease.

Mr. LEIGHTON. If I start now with one lease for 10 horsepower and the business grows, and I finally require 100 horsepower or 1,000 horsepower in my system, the first lease would cover a comparatively small part of the total property under lease.

The CHAIRMAN. Considering the aggregate energy required and not the length of the lease?

Mr. LEIGHTON. Oh, yes.

The CHAIRMAN. I thought you meant that the first lease would be a small matter with regard to succeeding leases.

Mr. LEIGHTON. Oh, not at all. Under the terms of this bill, and knowing the constructive intent and purpose of Secretary Lane as I do, I could go to him, or anybody could go to him, and have confidence of securing a square deal. But when I extend my property and require a new lease for a new site, I must go again to the Secretary who is going to succeed Secretary Lane. Now, the investor who is not familiar with the workings of the Department of the Interior, as I happen to be, who is away off there somewhere else, is still more doubtful than I am.

Before leaving that, I suggest that this provision ought to be stricken out and made to read, "Is hereby authorized and directed," because I think if Congress fixes the terms under which these power sites can be taken up, it ought to leave it open to anybody who will comply with the terms of the act. I want to suggest for your consideration the constitutionality of the clause "under general regulations to be fixed by him." I can not propound the law, but suggest that you take note of the case of Field v. Clark, 143 U. S. I will not take the time to quote from that decision, but will merely state it as my view that if the Supreme Court in that case decided that the President did have power to accomplish certain things solely and only because those things were specified by Congress it follows logically that right here you are asked to confer upon the Secretary of the Interior power to make general regulations, among which is the raising of revenue, which is not a proper delegation of power.

Now, with reference to this particular act, I will pause here a minute, with your permission.

The CHAIRMAN. Now, in order that we do not get in confusion about that one proposition, Mr. Leighton, do you assert that the Federal Government has not the power to lay down the conditions of

any kind under which its property shall be used as conditions precedent to its use?

Mr. LEIGHTON. Absolutely it has the power to lay down any conditions that it chooses. My only contention is that you ought to put them in the bill.

The CHAIRMAN. I thought you were stating a case to show that this bill was of doubtful constitutionality.

Mr. LEIGHTON. No. That particular clause with respect to the delegation of authority to an administrative office has been cited to me in a very strong way, and I suggest that you take it up.

Mr. KENT. In that connection, you speak as though the question of raising revenue was involved, and of course that brings up the question as to whether conditions precedent which may raise revenue would not be unconstitutional.

The CHAIRMAN. The case he now cites, as I understand it, has to do with the delegation of authority.

Mr. LEIGHTON. It has to do with the delegation of authority. It was the case of a tariff bill, where the President was empowered, upon the securing of certain reciprocal relations with other countries, to suspend a tariff, and the whole thing turned upon that.

Mr. RAKER. I understand Mr. Leighton's position is that Congress has the power, and the sole power in disposing of the land, to put a condition upon it, and one of those conditions could be rental or other revenue features.

Mr. LEIGHTON. Exactly.

Mr. RAKER. But you simply say that the Secretary of the Interior should not have the power to do that, you question that power? Mr. LEIGHTON. That is the whole gist of the case, yes, sir, as to whether that power can be delegated.

The CHAIRMAN. Will you get that case, Mr. Finney?
Mr. FINNEY. Yes, I will look it up.

The CHAIRMAN. Please look it up so we can inquire of you later. Take, for instance, the tariff act, and consider the commercial or the manufacturing business. Let us paraphrase the tariff act along the lines covered by this bill; supposing it should say that "the Secretary of the Treasury is authorized and empowered, under general regulations to be fixed by him, to establish such tariff rates on imports as may in his discretion seem justified by the conditions." That of course would knock business into a cocked hat. But the power business is governed by the same laws and principles and is adversely affected by precisely the same conditions of uncertainty as any other business. The fact that the contracting parties constitute the sovereign and the subject does not change this principle. It is possible that in any given case a large measure of damage may not arise from any specific act of the Secretary, but it surely will arise from the uncertainty concerning the nature of such act. It is well known that in most cases the real trouble and damage which arises from a new tariff act is the uncertainty and lack of confidence engendered during the discussion of the act. When the act is finally passed the country can, with more or less success, adjust itself to the new conditions. But under this bill as drawn, the power business will be constantly in the same position which prevails in the commercial and manufacturing business during the agitation precedent to the passage of a tariff act.

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