INVESTIGATION OF FEDERAL REGULATION OF POWER

WEDNESDAY, MARCH 5, 1930

UNITED STATES SENATE,

COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C.

The committee met, pursuant to adjournment on February 26, 1930, at 10 o'clock a. m., in room 416, Senate Office Building, Senator James Couzens presiding.

Present: Senators Couzens (chairman), Pine, Brookhart, Glenn, Kean, Smith, Dill, and Wheeler.

Present also: William C. Green, special counsel to the committee. The CHAIRMAN. The committee will be in order. Mr. Secretary, will you please be sworn?

(The witness was duly sworn by the chairman of the committee.)

TESTIMONY OF HON. RAY LYMAN WILBUR, SECRETARY OF THE INTERIOR AND FEDERAL POWER COMMISSIONER, WASHINGTON, D. C.

The CHAIRMAN. Mr. Secretary, this meeting is held for the purpose of considering a bill before it providing for the reorganization of the Federal Power Commission, to provide for full-time commissioners rather than having Secretaries of the several departments act as commissioners. I wondered if you cared to make a statement before the committee examines you?

Secretary WILBUR. Just as you say, Mr. Chairman.

The CHAIRMAN. You may proceed with any statement you care to make.

Secretary WILBUR. In so far as I have studied the bill, Mr. Chairman, it seems to me to be along the right lines. It does present one considerable difficulty, and that is that the Federal Power Commission has jurisdiction over the public domain and over navigable streams and practically nowhere else. The result of that is that in the public domain you have immediately the Department of Agriculture and the Department of the Interior concerned, with primary functions that they must carry out. In so far as navigable streams are concerned, you have the War Department and its responsibility which in no way can be abrogated.

So that unless representatives of these three departments are brought into immediate contact with the operations of the projected Federal Power Commission, it is inevitable that there will be many conflicts both of jurisdiction and of duty.

I hardly see how, unless there is to be a very large organization created, the commission could carry on its functions unless it called upon the existing personnel of the various departments for such

297

duties as are now exacted by the Federal Power Commission and obtained without any difficulty.

There are two elements, though, that are important in so far as a commission of an independent character is concerned. One is its imposition upon members of the Cabinet to spend the amount of time requisite to carry forward the full duties of the Federal Power Commission at its present stage.

The other is that in connection with the work of the Power Commission we are approaching the necessity of careful valuation of those who have been granted licenses or who are seeking licenses, and the valuation question has a somewhat different basis from the other problems, in that it will form the basis, necessarily, when once established in regard to a license, for many future considerations in which the National Government and the State governments are involved.

So I think that there will have to be a central accounting organization such as exists at present. The extent of that accounting organization is a subject, I think, upon which there should be very careful consideration.

When the present members started in under the chairmanship of Secretary Good we at once became aware of the fact that in so far as accounting was concerned the commission was far behind. We had immediately to ask the officers of the commission to give us reports so that we could come to decisions as to policies to be adopted in connection with accounting. At our first meeting Secretary Good brought this up and we all insisted that something definite be brought to us promptly so that we could at once begin to outline what should and should not be accepted as part of a valuation.

We have had a number of difficulties in bringing that about. At the very beginning the personnel was too small, but after the first of July there was a considerable increase in personnel of the Accounting Bureau, and things seemed likely to move forward better.

But a number of accounts that were before us in an indefinite way had never been brought forward for any decision. Certain items about them came out in the public press. That led to a good deal of confusion and disputes, which have been drifting, now, for some months, but finally, under constant and steady pressure on our part to bring the Accounting Department to the point where we could get something definite, we had at the last meeting of the commission one account presented to us in a somewhat incomplete form, and we are told that there are four others now before the commission.

I mention that historically for this reason: It shows that the accounting side is of great public interest. It also requires special consideration, because in the determinations made by the power commission there will be effects produced upon the whole rate structure of the various power companies in the country. The functions there of the power commission become almost judicial. It requires hearings so that both sides can be represented. That requires a great deal of time and careful study, for the decision must be properly made.

So that it seems to me from the standpoint of accounting that it is too much to ask a Cabinet member to spend the time requisite for that particular duty which is preeminent, not so much because of the volume of business, but because of the policies that may be laid down.

The CHAIRMAN. When you said that there would be conflict of jurisdiction between the several departments and the power commission, had you thought out any plan whereby that might be avoided?

Secretary WILBUR. I saw the suggestion that was made, I think, by yourself, that those who were appointed members of the power commission be also appointed as Assistant Secretaries in the three departments concerned, so that they would have an opportunity thereby to use all the existing forces and use them through the mechanism set up by the departments. I think that has a great deal of merit in it.

Senator WHEELER. Would it not be rather unfortunate to have the members of the power commission as Assistant Secretaries? Would they not depend more or less upon their superiors, and, by reason of that fact would not the questions come back up to the Secretaries again?

Secretary WILBUR. That is possible. Perhaps some other designation is necessary.

Senator WHEELER. If they are Assistant Secretaries and some one is dissatisfied with what the Assistant Secretaries are doing, he is immediately going to the Secretaries to bring pressure or to straighten out the Assistant Secretaries.

Secretary WILBUR. There is that element in it. But the point is, whether through an Assistant Secretary or some other device, if a representative of the department were a member of the power commission he could, as a representative of the department, use the existing force in the department and save a great deal of duplication. Senator WHEELER. Could he not do that anyway? Supposing you set up an independent commission there and it is provided in the bill that they shall work more or less in harmony with the departments; that would carry out the purpose and yet relieve the Secretaries themselves of responsibility if that were desirable.

Secretary WILBUR. I think what you say is correct, except that I fear they may work sometimes less rather then more in harmony in connection with the way things usually operate. There is a certain esprit de corps in these different services that rather seems to make it difficult for anybody from the outside that comes into the domain. that they represent.

The CHAIRMAN. Would it not be possible to so prescribe by statute the duties, powers and responsibilities of the commissioners so that they would not be required to go to the Secretaries for instructions? Secretary WILBUR. I think so.

Senator DILL. I wanted to ask this question, Mr. Secretary. What would you think of a plan that would segregate that work in this way, that the granting of the permits would remain a duty of the Secretaries of the three departments that have control of public lands and navigable streams, and that the other work of the commission which must necessarily extend far beyond the departments if we go into the control of rates of interstate power, be performed by an independent body?

Secretary WILBUR. I think that whatever is done, that part must be done by what you would call an independent body.

Senator DILL. It has always been the policy of the Government to give away rights in the public domain through the administrative.

or executive branches under conditions laid down by the legislative branch.

Secretary WILBUR. That is correct.

Senator DILL. I, for one, am very slow to sanction any change in that policy so far as permits to use this vast resource are concerned, and I recognize the great need of a power commission to do the other work. It has seemed to me that the duties of the power commission might well be prescribed and leave the granting of permits in the hands of the present official, namely, a permit granting board.

Secretary WILBUR. What you have said, Senator, is along the lines of my thought, which was that we can hardly take away all of these functions from the departments and put them over into another organization without great expense and great difficulty; but in valuation and in judgments on the accounting side, you have a somewhat different proposition, where judicial decisions, practically, or at least quasi judicial decisions, are necessary; and a board to bring that about would be certainly a very helpful and useful thing. It seems to me, Mr. Chairman, that that can be worked out if you can get this group off to one side to settle the disputed questions that arise, since most of those disputes arise over the question of expenditures of those seeking licenses, but occasionally there is a dispute where two applicants are pressing for the same license. Under such conditions it should be referred to the board.

Senator WHEELER. You could have, of course, the commission appointed separately and distinctly to do this work, and then if there were two applicants, of course there could be an appeal to the Secretary of the Interior?

Secretary WILBUR. Yes.

Senator KEAN. Mr. Secretary, in a court when one of these questions of finding valuation, and so forth, comes up, they generally appoint a master to find out facts and make a report to the court. Could not your present board appoint masters to go over the testimony and find out the facts in regard to valuation of these different things and report to you?

Secretary WILBUR. You mean, under the existing law?

Senator KEAN. Yes.

Secretary WILBUR. I do not know whether it could or not, or whether we could get any more from a master than a report upon which we would have to take responsibility.

Senator WHEELER. You have no authority under the law to do that. Senator BROOKHART. Senator Dill has mentioned that he did not want to change from our policy of giving away the natural resources of the country. I take exactly the opposite view on that. I think we have been extravagant in giving away our natural resources. Do you not think that it would be better to have an independent commission, like the Interstate Commerce Commission, for instance, to pass upon that sort of a question, rather than to leave it to members of the Cabinet? In other words, make it more of a judicial proposition.

Secretary WILBUR. What Senator Dill has said was that this is simply a method adopted by the Federal Government of giving away certain of its natural resources. There is no question about that. This has one peculiarity as compared with the normal policy of giving a quarter section of land or a grazing permit, or whatever it may be,

in that it gives a license for a limited term of 50 years with the power of recapture at the end of 50 years. That was as far, apparently, as Congress wished to go, and its brings in a new element in the recapture of a natural resource turned over to either private or municipal development.

Senator BROOKHART. In that law we have put some conditions precedent that the applicants must comply with in order to get their permits?

Secretary WILBUR. Yes.

Senator BROOKHART. And if those are not strict enough we could enlarge them to cover every proposition and estop the permits unless they do comply with the conditions; and that would eliminate most of these troubles in valuation such as we have in connection with the railroads?

Secretary WILBUR. I do not know, I am sure. My feeling is that in looking over the records as they come to me, in most of the cases it is not difficult to get at the true valuation. There are a number of disputed cases, but not very many-30, I think.

Senator BROOKHART. If we follow the Supreme Court rule of putting in the value of the permit itself and the value of the franchise and everything of that kind, then we would have all the difficulties of railroad valuation right away-reproduction new, and all that? That can all be cut out by providing conditions precedent to the granting of the permit so that we would have none of those difficulties? Secretary WILBUR. Yes.

Senator DILL. I want to call attention to this fact, that a commission such as the Interstate Commerce Commission and certain other commissions, is a sort of hybrid in this Government which is responsible to nobody directly. It is neither legislative, judicial, nor executive. It partakes of all of them, but is not responsible; whereas the Executive is close to the people, and the giving away of rights such as water-power rights ought to be under the control of somebody who is responsible directly to the people.

Senator WHEELER. They have not paid much attention to it in the past.

Senator DILL. They have been pretty careful in granting power rights in this situation.

The CHAIRMAN. Suppose we confine our questions to the witness. Senator DILL. You spoke in your statement about having found that there was need of more help in the Commission, more assistance, in connection with these questions that were coming up. It seems that this year the commission did not ask for any more money or for any more employees. What have you to say about that?

Secretary WILBUR. When we came in we were working on the previous budget

Senator DILL. No; but I am talking about this budget.

Secretary WILBUR. Since the first of July we have added about half a dozen to our accounting staff, and even with that increase we were not getting forward as fast as we thought we should, so that we then tried to bring in some of the accounting staff of the departments of Interior, Agriculture, and War, as we could, under the law, and in that way we have hurried along this matter.