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 \ /M USCLE SHOALS
LL
KF 27
.M55
HEARINGS
1930b REFORE THE)

I Copy 1
MMITTEE ON MILITARY AFFAIRS
"hOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS
SECOND SESSION

FEBRUARY 6 TO APRIL 11, 1930

UNITED STATES
GOVERNMBNT PRINTING OFFICE
101229 WASHINGTON : 1980
 MUSCLE SHOALS
.

HEARINGS
Tia REFOR0THH
BEFOR0THH

OMMITTEE ON MILITARY AFFAIRS.

HOUSE OF REPRESENTATIVES
SEVENTY-FIRST CONGRESS
SECOND SESSION

FEBRUARY 6 TO APRIL 11, 1930

UNITED STATES
GOVERNMENT PRINTING OFFICE
101229 WASHINGTON : 1930
 COMMITTEE ON MILITARY AFFAIRS

W. FRANK JAMES, Michigan, Chairman

HARRY C. RANSLEY, Pennsylvania. PERCY E. QUIN, Mississippi.
HARRY. M. WURZBACH, Texas. HUBERT F. FISHER, Tennessee.
B. CARROLL REECE, Tennessee. DANIEL E. GARRETT, Texas.
JOHN C. SPEAKS, Ohio. - JOHN J. McSWAIN, South Carolina.
J. MAYHEW WAINWRIGHT, New York. LISTER HILL, Alabama.
WILLIAM R. JOHNSON, Illinois. LEWIS W. DOUGLAS, Arizona.
HAROLD G. HOFFMAN, New Jersey. WILLIAM J. GRANFIELD, Massachusetts.
FLORENCE P. KAHN, California.
THOMAS C. COCHRAN, Pennsylvania.
WILLIAM. H. STAFFORD, Wisconsin.
GEORGE. M. PRITCHARD, North Carolina.
John M. WOLVERTON, West Virginia.

VICTOR. S. K. HOUSTON, Hawaii.

HowARD F. SEDGwick, Clerk
II

LIBRARY OF CONGRESS
RāCGIVED

May 7, 1940
| Paduwants ºvºia
 CONTENTS

Statements of—
Bell, Win. B., president American Cyanamid Co I
Brand, Charles J., executive secretary and treasurer National Fer
tilizer Association 1 245
Cottrell, Dr. F. G., chief of fertilizer and fixed nitrogen investigation,
Bureau of Chemistry and Soils, Department of Agriculture 299
Howard, Dr. P. E., chemical engineer, Bureau of Chemistry and
Soils, Department of Agriculture 283
Knight, Dr. H. G., chief Bureau of Chemistry and Soils, Department
of Agriculture ." 275
Miles, Maj. F. H., Ordnance Department, United States Army 170
Poyet, Warrant Officer Anthony, nitrate plants, Muscle Shoals 153
Riley, Capt. H. D. W., in charge Wilson Dam No. 2 177, 189
Williams, Maj. Gen. C. C., Chief of Ordnance, United States Army.. 211
Appendix (Cove Creek Dam No. 3 and Primary Power Dam No. 2),
S. J. 49 as passed by Senate and amended in House Committee, together
with House report 311
Report submitted on War Department activity at Muscle Shoals 177
in
 MUSCLE SHOALS

THURSDAY, FEBRUARY 6, 1930

HOUSE OF REPRESENTATIVES,
CoMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10.30 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. At the last meeting of the committee, a letter from
Mr. Bell, the president of the American Cyanamid Co., was read.
This meeting was called only for the purpose of giving Mr. Bell
an opportunity to reply to some newspaper articles that accompanied
his communication. The committee will be glad to hear from Mr.
Bell.
"STATEMENT OF w. B. BELL, PRESIDENT or THE AMERICAN
CYANAMID CO.
Mr. BELL. Mr. Chairman and gentlemen, I appreciate very much
this opportunity to come before you again. You did us the honor
some time ago to report out the Wright bill with favorable action—
a bill which contains the offer of our companies—and I felt when
I got back from Europe, on the 27th of last month, and read these
newspaper articles, it was no more than right, in view of the confi
dence you had reposed in us by that action, that I should make some
statement in regard to the matter that appears in those articles.
First of all, it was suggested in the articles that the Tennessee
River Improvement Association and/or Col. J. W. Worthington,
its Washington representative, were in the pay of the American
Cyanamid Co. That is not so. We have never paid them a cent,
either the association or Colonel Worthington, nor have we ever
made them any promise of compensation. The Tennessee River
Improvement Association, so I have understood, is supported by
voluntary contributions from people up and down the Tennessee
Valley who would like to see the stream improved and would like to
see industry brought to it and, obviously our offer was calculated to
accomplish those results and they supported the offer. They have
frequently criticised the offer ; they have taken the stand that unless
this were done or that were done, they would not support the offer.
They have exercised a very independent judgment and attitude in
the whole matter and I repeat that we have not paid them anything
and we have never even suggested a promise of future compensation.
While I am on that subject, I would like to add this: Some time
ago, I am told, it was suggested that we employed, or had in our
employ, or paid money to the American Farm Bureau Federation,
2 MUSCLE SHOALS

or Mr. Chester Gray, its Washington representative, or both. We

have never paid either of them a cent ; we have never made them the
slightest promise or suggestion of compensation in the future, and
that story is absolutely untrue. Some years ago, there was a great
deal of propaganda appearing in the papers against the cyanamid
offer. Nobody throughout the country seemed to know what the
Cyanamid offer was. The offer had been indorsed by the national
convention of the American Farm Bureau Federation. In fact, it
has been indorsed in their national conventions in Chicago re
peatedly.
Mr. Gray prepared an article on the subject. That article seemed
to us admirably to express and describe the situation and the offer
of the American Cvanamid Co. and we asked Mr. Gray whether he
would object to allowing us to reprint that article, so that if the
press of the country chose to print the article the people might know
what the American Farm Bureau Federation thought about it and
gain some idea of what the offer actually meant. Mr. Gray did not
object to that, but said it must appear over his name; that he was
responsible for it. He had no money available for writing to the
editors of the different papers throughout the United States, or
furnishing them with mat service, or anything of that kind. We
did not pay him any money; we did not pay his association any
money, but we instructed our advertising agents to prepare mat serv
ice showing the reprint of the article, so that men who ran stereo
type plants in connection with their newspapers might have it re
printed by using these mats, and the letter went out to the editors of
the United States over Mr. Gray's signature, offering them the use of
mat service in connection with the article, a copy of which article
was inclosed. We paid for the postage on those letters; we paid
for the postage on the returns; we paid for the postage on the mat
service; we paid for the preparation of the mats. I am not sure
that I can give the exact figure; but my recollection is that some 1.500
or 1,000 hundred editors availed themselves of that service, and the
bill was, I think, $7,050 or $7.048.
I mention that because I want you gentlemen to have a clear un
derstanding of the true relations between the American Farm Bureau
Federation and Mr. Gray on the one hand, and my companies and
our associates on the other. And I repeat that we have paid the
American Farm Bureau Federation not one cent; we have paid Mr.
Chester Gray not one cent, and we have never made any promise
of or any suggestion of compensation in the future.
Coming back to the articles which were on my desk when I re
turned, there was a charge made that the American Cyanamid Co.
had entered into an agreement with the power companies in regard
to Muscle Shoals. There was no agreement; there is no agreement.
Some years ago, when we began the preparation of this offer of
ours (some five or six years ago), we had a feeling that a sensible,
economic businesslike solution of the situation at Muscle Shoals was
complicated by the question of how to dispose of surplus power and
that the logical, sensible, businesslike way to dispose of the surplus
power was over the existing transmission lines. There was talk be
tween the representatives of the power companv and ourselves as
to how that could be done. As I have repeatedly testified to you
 MUSCLE SHOALS 6

gentlemen, there is not any great amount of power at Muscle Shoals

and when you get through with the manufacture of fertilizer, even
as of that date, we realized that the surplus power would be very
slight. On the other hand, there had been built up an expectation
of surplus power distribution from Muscle Shoals throughout the
United States, or throughout the Southern States, I should say, .
which had resulted in a demand for an equitable distribution of that
power. You gentlemen, some of you, and I have struggled with the
question of what is an equitable disbution of power. I do not know
what it would be. If it was to be distributed among cities, States,
und municipalities, what would be equitable to-day would be in
equitable to-morrow. Would it be based on population; would it
be based on existing demand ; would it be based on future demand ?
What in the world does equitable distribution of power mean?
And if we were to become responsible for the equitable distribution
of power, supposing that we had decided in our minds that the city
of Sheffield was entitled to 50,000 horsepower and then the city of
Memphis, a little later on, came in and felt that they wanted 50.000
horsepower. The supply of surplus power would have been ex
hausted and what would we do then?
The whole thing, once you embark on equitable distribution of
power, simply becomes a tangle which I do not believe anybody
could solve, and my own feeling is we could not be certain we could
solve it, because, as I have also testified to you gentlemen, we have
no guarantee that the Public Service Commission of Alabama would
grant us rights and franchises for those transmission lines and, if
we had the franchises and rights to embark on the construction of
transmission lines, what would we do when we got to the end of the
transmission lines? Suppose, for example, we ouilt a transmission
line to one of the great cities of Alabama, or Tennessee, and we had
no franchise within the city limits: What would our transmission
line be worth? We were not in a position to make a guarantee as
-to the distribution of power, because the determination of and
granting of the necessary franchise rights would not be a matter
which we could control. All that you gentlemen will no doubt
recall. Consequently, in the very beginning, when this offer was in
preparation, we were glad to talk with the representatives of the
power company, because we felt that the power company, with its
existing transmission lines, with its connections with other com
panies, possessing franchises in the different cities, was the only
company in a position to insure a distribution of the surplus power.
Further than that, we had in mind this fact, that transmission lines
require many millions of dollars of investment and, under our fer
tilizer guarantee, the power must always be available for the manu
facture of fertilizer and we might soon find ourselves in a position
where we would have but little power to distribute and that that
power, which in the first place was not of quantity sufficient to
insure or justify millions of dollars of investment in transmission
lines and francises for the distribution of the power—that that in
vestment would become absolutely worthless when the power still
further diminished because of the demands of the fertilizer opera
tions. So we talked to the power people and pointed out that that
would be a very sensible arrangement to make.
4 MUSCLE SHOALS

Now the power people had a different view of the situation and,,
in justice to them, I ought to say that, especially as of that date,
thev had some reason for their view. It was a subject that, neces
sarily, a sensible business man engaged in the power industry ought
very seriously to consider. Thev pointed out that our offer, as it
was planned, provided that all of the power should be subject to the
fertilizer guarantee and that, if we failed to make good on the fer
tilizer guarantee, what would correspond to a foreclosure would
take place and we would lose all of the power and they would be
left in the position of having invited industries to locate on their
lines, under the belief they would have an adequate supply of
power, and they would be left in the position where they would be
unable to deliver that power and that would be a very serious mat
ter. It was true, so far as I was concerned, that I was confident we
could make good on the guarantee, or else we never would have
made the offer; but their attitude was:
Well, after all. this Ammo-Phos itself is more or less a new development
and we can not afford to be put in the position that we are obligated to deliver
power from Muscle Shoals and, because of the fertilizer guarantee end of the
agreement, we have no power to deliver.
On that basis, the conference broke up. We came together once
or twice more, but in every instance that was the thing on which
the situation split and no agreement could be reached.
A year and a half or two years ago (I do not recall the exact
time), the subject was taken up again as to whether or not anything
could be worked out between the power company and ourselves.
Conferences were held again. The original difficulty about whether
or not the power should be subject to the fertilizer guarantee had
by this time disappeared. We were making so much Ammo-Phos
and it was meeting with such a successful reception throughout the
world that that no longer gave them much concern and I may also
say they were willing to agree, in principle, to a clause under which,
because of the fertilizer demand, when the fertilizer manufacture
operations required the recall of the power, they were willing to
have whatever power they might at the moment have recalled, even
to the last kilowatt. They also agreed that the fertilizer operation
should obtain its power at the lowest cost of any power distributed
from Muscle Shoals. But there still remained difficulties. It was
their judgment that Congress would not agree to the appropriation
of the additional money involved in the project outlined in our offer,
which called for the construction of Dam No. 3 and Cove Creek.
But it was my opinion that Congress would not agree to reduce the
fertilizer guarantee from the 50.000.000 tons of pure nitrogen, which
our offer provides and, therefore, the construction of Cove Creek and
Dam No. 3 were necessary in order to secure an adequate supply of
power for such a manufacturing program. Therefore, we could not
agree to discuss the situation on the basis of Dam No. 2.
Mr. McSwAiN. Of course, you mean 50.000 tons.
Mr. BELL. Fiftv thousand tons of pure nitrogen.
Mr. McSwAiN. Not 50,000.000 tons?
Mr. BELL. Yes. There was a lot of discussion about it and they
felt quite confident that was the situation, and they suggested we dis
cuss some of the details of what would happen if Congress wanted
 MUSCLE SHOALS 5

to go back to our original offer of 20,000 tons of nitrogen and Dam

No. 2 alone. I said :
Well, if your thought is that we are going to ask for a modification of our
offer, we can not agree even to discuss it, because we have made that offer of
50,000 tons; it has been indorsed by the American Farm Bureau Federation;
it has many friends in Congress, and I am not going to he put in a position
where I go back and ask that the 50,000 tons be reduced to 20,000 and rewrite
the offer. If the Congress of the United States, if the Military Affairs Com
mittee of the House, asks me to go back to the original offer on the basis of
20,000 tons, why, that Is something different ; but I am not going to ask them.
It was in that connection and these discussions that the power
people agreed, so far as they were concerned, that it would be satis
factory to take whatever power they got under the terms of tap
fertilizer guaranty and a recapture of all the power which I havft
mentioned. There was some discussion; their engineers sat down
with our engineers and they worked away very hard, and on certain
points they were able to reach some sort of an understanding—all on
the basis that the offer was confined and limited to Dam No. 2 and
20,000 tons of nitrogen. Even on that basis, however, we never
reached an agreement. There were difficulties about a coal clause.
The amount of power is so limited there that it was obvious to every
body that the power station, the steam station, would have to be
operated and there would be an enormous consumption of coal, and
the question of just how to adjust the cost of power to the cost of coal
was a very complex and intricate question on which people could very
honestly differ. There were other difficulties that I do not recall,
difficulties—well, one of them was about how the transformer sta
tion should be operated. I do not know. But, at any rate, what
finally happened was that the engineers separated and they never
got together again and no agreement was reached.
Now I want to say to you gentlemen that when we reached an
agreement with the Union Carbide Co., we felt that that was some
thing that ought to be known to Congress before they dealt with
us, and when we presented our offer, we stated that the Union Car
bide Co. and ourselves had entered into an agreement for the sale
of a certain amount of power and the agreement was printed in a
public document (I have forgotten the number), and you gentlemen
were advised of it when you took over the consideration of the
Muscle Shoals offer. The submission of that agreement occurred
before the joint committee of six which, as you may recall, was
where we made our first offer. There has been no concealment; on
the contrary, we voluntarily brought to your attention a fact which
we thought was material to vour consideration of our offer.
There is no agreement with the power company; there never has
been any agreement with the power company, and, if we ever enter
into an agreement with the power company, you gentlemen will be
apprised of it immediately.
Mr. RANSLEY. If any member of the committee desires to ask Mr.
Bell any questions, they may do so.
Mr. McSwAiN. I want to ask Mr. Bell some questions, if none of
my seniors care to question him.
Mr. RANKLEY. Very well.
Mr. McSwAiN. Mr. Bell, has your company changed its policy
with regard to not offering for sale generally to farmers, such as
cotton farmers, the Ammo-Phos that you are now manufacturing?
6 MUSCLE SHOALS

Mr. BELL. We are testing out Ammo-Phos under American condi

tions and are selling a few thousand tons ; yes.
Mr. McSwAiN. In what parts of the country ?
Mr. BELL. Well, more especially in Alabama and Louisiana.
Mr. McSwAiN. Any in South Carolina?
Mr. BELL. We may be. I am not so clear that we are, but I should
not be surprised.
Mr. McbwAiN. You should not be surprised if they are trying to
sell it in the fourth congressional district of South Carolina now ?
Mr. BELL. That may be. I really have not the slightest idea what
the district might be, Mr. McSwain.
Mr. McSwAiN. Mr. Bell, do you know Mr. A. M. English, of
Columbia, S. C.?
Mr. BELL. No; I think not.
Mr. McSwAiN. Do you know Mr. John M. May. of New York
City?
Mr. BELL. We have an employee named Mays; I do not recall his
first name. Are these people that are supposed to be connected with
our company or not, Mr. McSwain ?
Mr. McSwAiN. Well, do you know Mr. M. Y. Wright, of New
York City?
Mr. BELL. No.
Mr. McSwAiN. Do you know whether those gentlemen were au
thorized by your company to go into Laurens County; which is
mv native county, aiid in the fourth congressional district, and to
offer Ammo-Phos for sale to the farmers? ^
Mr. BELL. No ; Mr. McSwain. But I think what you really want
to know is whether we are making a special drive on the sale of
Ammo-Phos in your district, and if that is what you would like to
know, the answer is, we are not.
Mr. McSwAiN. I want to know whether you are making a special
drive on the sale of Ammo-Phos or a special drive on me?
[Laughter.]
Mr. BELL. We are not making a special drive on you ; no.
Mr. McSwAiN. Did you know these three men stopped at the hotel
nearly n week and just hired automobiles from the street without
consideration of price, and one of them paid $22 in one day for a
taxi and he ripped around over Laurens County talking about ferti
lizer and talking about your offer for Muscle Shoals and suggesting
that they write me letters to vote for your bill, and during all that
time just took orders for 15 tons of fertilizer, just half a carload?
[Laughter.]
Mr. BELL. I am quite sure no salesman of ours has been asking
customers to write to you. or asking farmers to write to you. I do
not think anything of that kind has occurred. When it comes to a
question of names, we have between ten and twelve thousand em
ployees and I am afraid I can not identify them all. But this is true,
that we have begun in parts of the country the sale of Ammo-Phos,
which, usually, is in very small quantities, because the farmers are
not familiar with it—sometimes only two or three hundred pounds,
sometimes a quarter of a ton or a half a ton. and rarely any con
siderable amount. And there may have been some sold in Laurens
 MUSCLE SHOALS 7

County ; that I do not know ; but there has been no especial effort to
sell Ainmo-Phos in your district or any other Congressman's district.
Mr. McSwAiN. Now, Mr. Bell, so far as the control by your com
pany of the policies of your company or by the Power Trust or by
the "Fertilizer Trust, of course it still remains, as has always been
the case in your company, that anybody who has the money could
buy out a controlling interest in the American Cyanamid Co., could
they not?
Mr. BELL. No ; that is not true.
Mr. McSwAiN. Why couldn't they?
Mr. BELL. Because I would not sell it.
Mr. McSwAiN. Well, how long are you going to live, Mr. Bell ?
Mr. BELL. That is a question which if I would answer I doubt
you would believe me.
Mr. McSwAiN. Well, you are reasonably certain you are not going
to live for 50 years, are you not?
Mr. BELL. If I get Muscle Shoals. I am going to try very hard.
I would like to see the thing through. I want you to live, too; I
want you to see the answer. [Laughter.]
Mr. McSwAiN. Well, I hope to live to see the answer, and I hope
vou live to see the answer, which I believe if you could live we would
have.
Mr. BELL. Thank you very much.
Mr. McSwAiN. But I do not want anybody to have the laugh on
me somewhere else, other than in this committee. I can stand laughs
here; but if my farmers who have trusted me to make a legal contract
to protect them find in 5 or 10 years from now that the power is all
going into industry, and not a kilowatt into fertilizer, they will have
die last and best laugh on me ; and that is what I am interested in,
in seriously serving them in a businesslike way. Now, let us be
serious, Mr. Bell.
Mr. BELL. Exactly.
Mr. McSwAiN. Assuming that you have got the financial ability
now to control a majority of the American Cyanamid Co.. have you
any guarantee that you will have that ability next year?
Mr. BELL. Well, I can only say, Mr. McSwain. that if I am alive
I expect to retain the direction of the American Cyanamid Co.
Mr. McSwAiN. Yes.
Mr. BELL. And it was always clearly insisted in any conversations
that we had with the power company that we were unwilling in any
way to jeopardize our control of the situation : that we were under
taking certain obligations to the Congress of the United States and
to the American farmers, and that we were the people who would
determine how much power was available for distribution.
Mr. McSwAiN. Yes, sir.
Mr. BELL. That we were the people who would determine whether
or not the power should be recalled for enlargement of the fer
tilizer operation, and we should always be in such position that we
iould deal with the fertilizer situation in accordance with the guar
anties of our offer.
Mr. McSwAiN. But you know that you have refused to agree to
put the majority stock of this American Cyanamid Co. into a voting
8 MUSCLE SHOALS

trust for 50 years to guarantee control by the American Cyanamid

Co., have you not?
Mr. BELL. That would not guarantee it, even if I did.
Mr. McSwAiN. Well, you refused to do that much, then: you re
fused even to make that inadequate guaranty?
Mr. BELL. You and I have discussed that and have agreed that
that would not be adequate.
Mr. McSwAiN. Now assuming either that you did fail financially
or that you should die, what is there to hinder any interest from
acquiring a majority control in the American Cyanamid Co. ?
Mr. BELL. It is possible that the control might be acquired. As
a matter of fact, the control would then pass to my associates whose
attitude on the subject, I think, would be mine and I believe that is
better than any voting trust that could be set up.
Mr. McSwAiN. Now who are these associates we are to rely on in
the event of your possible failure financially, or your death?
Mr. BELL. They are officers, vice presidents, and directors of the
American Cyanamid Co.
Mr. McSwAiN. Well, ought not we see and hear these men you
expect us to trust, in that contingency?
Mr. BELL. Well, I should say. if you gentlemen have reached the
point where that is the only difficulty remaining, they will be very
glad to come down and assure you on that point.
Mr. McSwAiN. I do not know what the others will say, but I say
to you now in public, what I have always said to you in private,
that if I thought W. B. Bell would remain financially solvent and
in control of this for 50 years, I am satisfied ; but I am not satisfied
in view of the contingencies I have aready enumerated in these
questions.
Mr. BELL. That is a very gratifying thing for you to say. I ap
preciate that.
Mr. McSwAiN. I hope you see the situation I am in; I am like a
lawyer trying to draw a will for a client who has some property.
This property down here belongs to the people and our farmers are
vitally interested in it, and I do not want to be taken off of my feet
by a lot of beautiful sentiment, and then vote for a bill that was
written by very skillful and shrewd attorneys.
Mr. BELL. That is a very just and honorable attitude for you
to take and certainly everybody must have every sympathy with
von in taking it.
Mr. McSwAiN. That is all I have.
Mr. HOFFMAN. Mr. Bell, you have seen this article by Hubert
Baughn in the Mobile Register of December 30. 1929. and I assume
in some other papers ?
Mr. BELL. I think that is the very article, or one of the very
articles that I had in mind. I am not quite clear, but I have no
doubt it is.
Mr. HOFFMAN. It refers to Bulletin 131 issued by the Popular
Government League and makes this statement:
Then follows a review of the secret deal made during the closing days of the
Coolidge administration, when Thomas W. Martin, power company president,
conferred in New York with W. B. Bell, cyanarald company president, and
reached some sort of understanding, which resulted In the two corporations
joining hands.
 MUSCLE SHOALS 9

Would you care to make a direct statement about that?

Mr. BELL. Of course, that is what I have made my statement
about—that statement set forth there. It is true, as I testified, that
Mr. Martin, or the representatives of the power company, did not
reach an agreement for the reasons which I have outlined.
Mr. HILL. Mr. Bell, in reference to the proposition of your death
or your losing control of this company, of course, any party or
parties, or corporation that might gain control of the company
would be as much bound by the obligations of the lease contract as
you would be ; is not that correct ?
Mr. BELL. Yes.
Mr. HILL. And, so far as your death or your losing financial con
trol of the company is concerned, that same probability or possibility
would have applied, of course, to the Ford offer; is not that true?
Mr. BELL. Yes.
Mr. HILL. Except that the Ford offer was for a lease of 100 years,
whereas yours is for a lease of only 50 years ?
Mr. BELL. Yes. I think that, in part, the Ford offer provided for
the actual purchase in fee simple of some of the property and the
rest, as you say, was for a 100-year lease.
Mr. HILL. It was for a 100-year lease. As I recall the Ford offer
was for a 100-year lease of the hydroelectric facilities.
Mr. BELL. Yes.
Mr. HILL. By that I mean the power plants and dam.
Mr. BELL. That is correct.
Mr. HILL. Whereas the nitrate plants and all supplemental plants
and houses therewith were sold to Mr. Ford in fee simple ?
Mr. BELL. Yes.
Mr. HILL. But, so far as the proposition of death or some financial
difficulty causing you to lose control, that would apply to any offer,
would it not?
Mr. BELL. I should think so, and that is my recollection of the
Ford offer as it stood.
Mr. HILL. And any other party, as I say, coming into financial
control of the company, would be bound by the obligations of your
contract ?
Mr. BELL. Yes.
Mr. HILL. So no matter how we might turn, if we saw fit to lease
this property, of course, we would be faced with an eventuality of
that kind—that whoever the leasee was he might die or might lose
the financial control?
Mr. BELL. Yes. You get back to the fact that it really becomes
an impossibility to tie up good faith for 50 years. You can struggle
with it; but, after all, what can you do?
Mr. HILL. But you do have the obligations of your contract.
Mr. BELL. Correct.
Mr. HILL. And, of course, any one not meeting the obligations
of that contract, whether you or some one else, would have to pay
the penalties provided in the contract for failure to meet those
obligations '(
Mr. BELL. That is correct.
Mr. HILL. Now, with reference to your conferences with the power
people, have you conferred with them about any phase of Muscle
10 MUSCLE SHOALS

Shoals except that phase dealing strictly with the disposition of

surplus power?
Mr. BELL. That is all.
Mr. HILL. That is all—the disposition of surplus power?
Mr. BELL. Yes.
Mr. HILL. We have power at Muscle Shoals to-day, have we not ?
Mr. BELL. Yes.
Mr. HILL. Generated by the Government of the United States?
Mr. BELL. Yes.
Mr. HILL. Who is buving that power and distributing it to-day,
Mr. Bell?
Mr. BELL. Well, I know of no change. What is going on, as I
recall it, is that the power people are buying the power and dis
tributing it over their lines. They have a contract with the Govern
ment. I did see in the papers that one of the Tennessee companies
was building a transmission line down toward Muscle Shoals; I do
not know whether that is correct, or not.
Mr. HILL. Well, the fact is, so far as surplus power is concerned,
no matter who operates Muscle Shoals, whether it be a lessee or a
Government corporation, unless that party operating Muscle Shoals
can go out and build transmission lines and can also purchase
franchises in different towns and cities and places for the sale of the
power, why there would have to be some disposition made of that
surplus power to some existing agencv ; is not that true ?
Mr. BELL. Yes. That is one of the features of an attempt at
Government operation of Muscle Shoals that I think, perhaps, has
not received all the consideration at should; in other words, the
Government would face the very difficulties that I have described
as facing us.
Mr. HILL. Well, is not the Government to-day facing those
difficulties?
Mr. BELL. Well, yes.
Mr. HILL. The Government is to-day facing those difficulties?
Mr. BELL. Yes; true.
Mr. HILL. The Government has power there, and the Govern
ment wants to sell that power?
Mr. BELL. Yes.
Mr. HILL. The only person to whom the Government can sell
that power to-day is the Alabama Power Co., is not that true?
Mr. BELL. Kegardless of the contract, yes.
Mr. HILL. Oh, j-es. Is it not really a fact that the Alabama
Power Co. and I might say " the power companies," have just about
preempted the field in the matter of franchises and rights in Ala
bama and Tennessee?
Mr. BELL. I think that is true.
Mr. HILL. So unless the Government would be willing to build
these transmission lines and could get these franchises—most of
which I think are exclusive franchises—they would have to use
the existing agencies?
Mr. BELL. Yes.
Mr. HILL. Just as you recognize you would have to use the exist-
infMr?
agencies
BELL. ? We do. We knew perfectly well... we were in the hands
of the Power Commission, the Public Service Commission, and in
 MUSCLE SHOALS 11

the hands of the local authorities, so that it was idle for us to

guarantee something which we might not be able to deliver.
Mr. HILL. The fact of the business is, before you could build
transmission lines in Alabama, you would have to get the permis
sion of the Alabama Public Service Commisison ?
Mr. BELL. That is correct.
Mr. HILL. Before you could build one in Tennessee, you would
have to get the permission of the Tennessee Public Service Com
mission ?
Mr. BELL. That is correct.
Mr. HILL. Mr. Bell, I believe in some of those articles, to which
you have referred, there was reference made to the question of
whether or not you would be willing to go to Muscle Schoals and
buy from the Government at a nominal sum, perhaps a dollar, just
the power which you think you would need to make the Ammo-
Phos, and to leave all of the hydroelectric facilities in the hands,
perhaps, of some Government agency or some Government cor
poration. Would you be interested in that?
Mr. BELL. Well are you referring now to some article which
stated that an acid test of our sincerity in our offer to make fertilizer
at Muscle Shoals might be put in this form—for the plants to be
leased to us for a dollar; that we should be limited solely to the
manufacture of fertilizer; that the cost of the power be fixed by
the Federal Power Commission; that our profit limitation of 8 per
cent and all the other conditions should be inserted, and that that
be submitted to us and that would be an acid test of our sincerity ;
is that it?
Mr. HILL. Yes, that is what I have in mind.
Mr. BELL. Well I think that would be an acid test of our sanity.
[Laughter.] If I should take or agree to embark on a project which
would involve an investment of $35,000,000 to $i0,000,000 of the
American Cyanamid Co.'s stockholders1 money, with the under
standing that all we could do was to make fertilizer on which we
could charge, in good years, 8 per cent and on which we could take
our losses in the bad years. I think you gentlemen—first of all,
I do not know what the stockholders would do to me ; in the second
place, I do not think you gentlemen would want to go on dealing
with me; you would know there was something wrong with me
individually, or the company. You can not take stockholders' money
and put it into enterprises of a manufacturing character on which
the best you can make is 8 per cent and it stands to reason, in some
years, you are not going to make anything. You can not do that
if you gentlemen get any responsible private industry interested
in this proposition on that basis, I think you had better look well
to their competence. That is an acid test of whether the institution
that makes the offer has any sense.
Mr. HILL. Mr. Bell, you testified that you have not paid any money
to Col. J. W. Worthington or held out any hope of any future com
pensation or reward to him for any support he might have given to
your bill : Have you paid out any money or held out any hope of
compensation or reward to any agent, employee, or representative
of his?
Mr. BELL. We have not.
12 MUSCLE SHOALS

Mr. HILL. You have not ?

Mr. BELL. Neither have I, nor has any officer of my company.
Mr. HILL. You testified that you had not paid any money to nor
held out any hope of compensation or reward to the Tennessee River
Improvement Association. Have you paid any money to or held out
any hope of compensation or reward to any agent, employee, or rep
resentative of the Tennessee River Improvement Association ?
Mr. BELL. We have not.
Mr. HILL. You have not ?
Mr. BELL. No. I want to make those broad statements also as
regards the American Farm Bureau Federation and Mr. Gray. I
have made them as strong as I can; but, if that is any broader, I
want to make them that way, too.
Mr. HILL. You have paid no money to nor held out any hope of
compensation or reward to Mr. Chester Gray ?
Mr. BELL. Nor his association.
Mr. HILL. Or the American Farm Bureau Federation, or any
officer, agent, or representative of Chester Gray or the American
Farm Bureau Federation ?
Mr. BELL. That is correct.
Mr. HILL. Right in that connection, Mr. Chairman, I have before
me a copy of the hearings before the joint committee of the Senate
and House, 1926. There is a short letter here written to J. W. Worth-
ington. Washington, D. C., from the Washington bureau of the
Associated Press, which I would like to put in the record. It is
very short ; I will just read it :
THE ASSOCIATED PRESS, WASHINGTON BUREAU,
March 23, 1926.
Mr. J. W. WORTHINGTON,
Washington, D. C.
DEAR MR. WORTHINGTON : On March 20 the Associated Press distributed a
dispatch relative to the Muscle Shoals matter in which you were referred to
as " formerly employed by Ford, but now retained by the American Cyanamid
Co., which has announced it will submit a bid."
You at once called niy attention to the fact that this reference was erroneous.
You stated that you never had been and were not now employed by Henry
Ford, and that you had not been retained by the American Cyanamid Co.
My own investigation convinced me that we made a mistake in making this
reference to you and I regret it very much.
Let me call your attention to the fact that on March 22, in another dispatch
we made this statement :
" J. W. Worthington of Washington, and formerly of Alabama, appeared
agnin before the committee and discussed various plans for the development
of Muscle Shoals. lie told the committee he did not represent anyone and
was interested in the Alabama property purely from a development standpoint,
and was opposed to Government operation. He declared he never had repre
sented Henry Ford or the American Cyanamid Co. or any other bidders and
never had received any pay for services in connection with proposed Muscle
Shoals legislation."
In transmitting the foregoing to members of the Associated Press, we have
done all we can to advise them that our previous statement that yon were
employed by Mr. Ford and retained by the Oyanaruid Co. was an error. It
was, of course, erroneous also to have said that you represented the Cyanamid
Co. when you appeared before the committee on March 20.
Sincerely yours,
L. C. PRORERT, Superintendent.
Mr. Bell, to go back just one minute to the power people, would
you to-day be interested in any way whatever in negotiating for or
 MUSCLE SHOALS 13

having any conversation with them or any conferences with them

with reference to any phase or phases of Muscle Shoals except per
haps the disposition of any surplus power that you might have ?
Mr. BELL. That would be our only interest. The logic of the situ
ation, as I have explained it, is that from a legal standpoint it is
impossible for us to guaranty the distribution of the power. We
can only proceed subject to the approval of the various public service
commissions of the various States into which the power might go.
When we got to the end of the transmission lines, we could only
distribute within the cities, should the various municipal councils
and commissions grant franchises within those cities. Therefore, so
long as there is any surplus power to distribute—and, naturally, we
would like to distribute any that there may be, from time to time,
a varying quantity—the sensible solution is some arrangement by
which that surplus power is put on the lines of the power companies.
That we have been unable to work out, but that is the only interest
that we have in negotiating with the power people. We have never
expected—to answer your question more specifically, we have never
expected to make any profit amounting to anything out of the sur
plus power. It will be years, in my opinion, before the market in
the South, within the range of Muscle Shoals, could absorb or would
require power at any price that would yield any profit to the opera
tion. Our interest in the surplus power, over and above the require
ments of fertilizer operation, lies in the possibility of developing at
Muscle Shoals manufacturing operations which we now conduct
elsewhere, or might hope to conduct, in the production of chemicals
without any profit limitation. And that, of course, might help the
situation materially in bad fertilizer years.
Mr. HILL. That is all.
Mr. SPEAKS. Mr. Bell, you still maintain that Ammo-phos is
superior to all other fertilizers, I presume?
Mr. BELL. Well, General, I really think that so far we have the
lead ; yes. I recognize the fact that abroad they are producing Nitro-
phoska which, in so far as plant food goes, is an admirable fertilizer;
but it is still subject to some difficulties which they no doubt will
overcome. Barring that
Mr. SPEAKS. The demand for Ammo-phos is increasing?
Mr. BELL. Oh, yes.
Mr. SPEAKS. Now, I have always understood you to maintain that
the power possibilities at Muscle Shoals were greatly overrated?
Mr. BELL. True.
Mr. SPEAKS. Now, if your product is of a superior nature and the
demand increasing, is it not conceivable that the manufacture of
Ammo-phos alone might absorb all the power produced at Muscle
Shoals?
Mr. BELL. It really seems as though that would be the way the
situation would work out and, of course, if it does work out that
way, why, then, we will be making our 8 per cent right along. Con
sequently, we can view that possibility with equanimity; but obvi
ously it is only prudent for us to recognize the fact that 50 years is
50 years, and during that time that there may be intervals when
we may not be in the lead, or it may be that the fertilizer situation
will be greatly upset as it was in 1921, when the country stopped
101229—30 2
 14 MUSCLE SHOALS

buying fertilizer for a while. And all those things are contingencies
which I hope won't happen and, which probably would be extremely
infrequent if they did happen ; nevertheless, they must be taken into
consideration in planning so large an investment.
Mr. SPEAKS. But in your personal view and consideration of the
whole subject you feel that the surplus power will be negligible?
Mr. BELL. That really is the way it looks to-day.
Mr. WAINWKIGHT. But, Mr. Bell, before you get at the real surplus
power you have to take into account that 50,000 horsepower of the
Union Carbide?
Mr. BELL. True.
Mr. WAINWRIGHT. So that on top of what you would require at any
time there would be the 50,000 horsepower to go to the Union
Carbide?
Mr. BELL. Yes ; that is a firm obligation.
Mr. DOUGLAS. I want to ask Mr. Bell whether the firm hydro
electric energy to be developed at existing generating plants is suf
ficient to meet your requirements?
Mr. BELL. No ; not as they are projected in this offer. If we under
took to manufacture only 20,000 tons of fixed nitrogen, yes; that
would be adequate; or it we were to produce our phosphoric acid
only by the wet process, which is the one which we are now using at
the moment at Warners, N. J.,' then it would be adequate; but
we are in this situation, that we have done a great deal of work
on the electric furnace phosphoric acid, and we are inclined to be
lieve it will eventually be the method by which our phosphoric acid
will be produced, and that anyone who has got himself in a position
where he must manufacture so much mixed fertilizer as is necessary to
contain 50,000 tons of nitrogen will find that if he is to stay in com
petition he must make both his phosphoric acid and his nitrogen,
both of them, with electric power. And once he gets into that boat,
then he requires more power for the phosphoric acid even than he
does for the ammonia by the cyanamide process or the electrolytic
process and synthetic process, from there on. So our estimate is, we
might require as much as 280,000 horsepower in order to meet the
guaranty, which we want to do not only for the 50,000 tons of
nitrogen but also for the corresponding amount of phosphoric acid
that goes with it. That is why, in order to meet these views as
regards the quantity of nitrogen, we found it necessary to include a
requirement that the Government construct Dam No. 3 and the
Cove Creek Dam, so that we would be sure we would have enough
power. Does that make it clear to you?
Mr. DOUGLAS. That is exactly what I was getting at.
Mr. BELL. That is it.
Mr. DOUGLAS. Now may I ask another question (
Mr. BELL. Certainly.
Mr. DOUGLAS. Would the steam standby plant operated by any
body else, when the flow of the stream was relatively low, supply
you with sufficient power? .
Mr. BELL. Well in our figures we have already included what
could be done with the steam plant; m other words, what I am
saving, when I say 280,000 horsepower, is that I am already de
pending not only on operating the steam plant, but installing the
additional unit.
 MUSCLE SHOALS 15

Mr. DOUGLAS. I see.

Mr. BELL. I do not know just how familiar you are with the
subject, but perhaps I might say when the steam station was built
it contemplated the installation of a second unit of approximately
40,000 horsepower which, added to the 80,000 horsepower, would
give a total steam capacity of 120,000 horsepower. And those fig
ures are added in in order to assure us we will have the power that
this program requires.
Mr. DOUGLAS. So that really, to go through with your program,
there must be a stabilization of the flow?
Mr. BELL. Yes.
Mr. DOUGLAS. To increase the firm hydroenergy?
Mr. BELL. Yes. I do not know whether you have had an oppor
tunity yet to study the thing, but the normal flow of that river at
Dam No. 2 gives primary hydroelectric power of—well, it is not
strictly primary, either; but, in ordinary years, something like
78,000 horsepower. It has been down in a very abnormal year, 1925,
when everyone was up against it for power in the South, to as low
ns 48,000; but, ordinarily, I think we are warranted in allowing a
figure of 78,000. Now you come along and build Cove Creek, if
YOU do, and that is approximately doubled ; so that gives you 150,000
horsepower at Dam No. 2. Dam No. 3 is, unfortunately, a very ex
pensive proposition; it really is a navigation proposition and, with
out Cove Creek, it perhaps would only give 32,000 horsepower and,
with Cove Creek, it naturally also would be doubled. So that, you
see, in order to get 280,000 horsepower and the balance of the power
already provided for, it really is necessary to include those projects
and. unless they are provided for, we may wake up some day and
find that we ought to be having 180.000 horsepower for the purpose
of the electric-furnace phosphoric-acid proposition alone, added on
to the 100.000 horsepower, more or less, that we need in the cyanam-
ide plant, or a total of 280,000 horsepower, and then we are out of
luck; because somebody else is operating the electric furnace
phosphoric acid somewhere and has the best of us.
Mr. DOUGLAS. Now, do you contemplate transmitting from Cove
Creek power to Muscle Shoals ?
Mr. BELL. No.
Mr. DOUGLAS. It is not within your expectations?
Mr. BELL. No ; you can not afford to.
Mr. DOUGLAS. The distance is too great ?
Mr. BELL. Right,
Mr. DOUGLAS. And the sole purpose of Cove Creek is to stabilize
the flow?
Mr. BELL. Yes.
Mr. DOUGLAS. So as to double the firm horsepower at the Muscle
Shoals plant?
Mr. BELL. You know, it is an almost unique situation up there.
The Cove Creek situation is such that you can impound practically
every drop of water the entire year.
Mr. DOUGLAS. Yes.
Mr. BELL. So that our program would involve, not completely re
versing the flow of the river, but almost so, and the navigation in
Tennessee would be at the same time developed, because obviously
16 Mt'SCLE SHOALS

anything that straightens out and stabilizes the flow of the Tennessee
would help very materially. So, consequently, the Clinch River com
ing into the lennessee would, during times of flood water in the
Tennessee itself, be tapered down so as just to keep the stream wet;
then, when the Tennessee began to fall, this extraordinary develop
ment up on the Clinch could be regulated accordingly and you would
have, virtually, a doubling of the flow of the Tennessee.
Mr. DOUGLAS. The construction of Cove Creek would also ma
terially increase the value of power sites
Mr. BELL. Oh. very much.
Mr. DOUGLAS. On the river below Cove Creek ?
Mr. BELL. Naturally it would double everything else. If it doubles
Dam No. 2 and Dam No. 3, it would double everything else—every
thing below the junction of the Clinch and the Tennessee.
Mr. DOUGLAS. You understand, of course, the State of Tennessee
has considered, and I think quite properly, that it has an interest,
although an undefined interest, in the Tennessee River ?
Mr. BELL. So I understand.
Mr. DOUGLAS. And that the State feels, possibly, the construction
of Cove Creek by the Government might deny it of its right to con
trol the right of power development at that project and even possibly
projects developed below it?
Mr. BELL. Yes.
Mr. DOUGLAS. And, further, it would deny the State its right to
tax. which is an inherent right. For the purpose of possibly settling
any of the questions which the State of Tennessee may have with
reference to the construction of Cove Creek, would it be just as satis
factory to your company with Cove Creek constructed by the State
of Tennessee, or by private enterprise under contract with the State
of Tennessee ?
Mr. BELL. No ; I think not.
Mr. DOUGLAS. Subject, of course, to the paramount right of the
Federal Government to control its operation in the interest of navi
gation ?
Mr. BELL. I think not. I will tell you what I am very anxious to
avoid—I am very anxious to avoid any situation in which anybody
else has the responsibility for the regular production of power neces
sary for us to fulfill our guarantee. In other words, this investment
of ours is, for a private corporation, a large investment; it is a
very large investment for the Cyanamid Co. and would be a respec -
table investment for any company, and we simply can not afford to
be in any position where there can be any argument with anybodv
about how to regulate those gates, those turbines. We must run
that thing and we do not want the right of a lawsuit against the
State of Tennessee because they are not running the water the way
we think it ought to be; we do not want to be allowed to go into
court and sue the officers of the American Army, the engineers who
might be in charge of the enterprise; we do not want to be in the
position where all we have is some litigation against the Federal
Power Commission, perhaps, because they have been put in charge
We want to be able to telephone up to our own man and say " Turn
it on"; and it will forthwith be turned on; because, if we can not
do that, the fir°t thing we will know is we are not producing at the
 MUSCLE SHOALS 17

rate of 50.000 tons of nitrogen per year and the next thing we know
somebody will be after us, or after Congress, or after the War
Department, or whoever is charged with that duty, to bring suit
for the forfeiture of our lease. So that we think it would be oetter
just to run that thing ourselves; that is an essential part of this
situation and, without that element under our control, we may find
-ourselves in the position of having involuntarily defaulted under
the contract, and we do not know—maybe some court would say,
" That is too bad, but you did not do quite the right thing in order
to get control of the situation and one fact that is clear is you did
not supply the amount of nitrogen you guaranteed, and you are
out." And we do not want to invest our money to so great an extent
on any possible hazard of that kind. Do I make that plain to you ?
Mr. DOUGLAS. Yes, you make it very clear.
Mr. BELL. May I go just a little further on that. Your question
also included this : How would we feel about the State of Tennessee
constructing that dam.
Mr. DOUGLAS. Subject, of course, to the paramount right of the
Federal Government to control its operation in the interest of sta
bilization.
Mr. BELL. Well, the point is an interesting one—but is it not more
or less academic?
Mr. DOUGLAS. I am not at all certain it is academic.
Mr. BELL. In other words, do you think the State of Tennessee
is prepared to embark on the expenditure of twenty-five or thirty
million dollars at Cove Creek and, if so, are not we getting the thing
terribly confused by introducing that new element into the
situation ?
Mr. DOUGLAS. Well I was simply asking the question for the pur
pose of obtaining your reaction to it from the point of view of your
interest.
Mr. BELL. Yes.
Mr. DOUGLAS. I think this—I do not think the State of Tennessee,
I do not know, but I do not think the State of Tennessee would be
willing to undertake an expenditure of twenty-five or thirty million
dollars for the purpose of constructing the dam at Cove Creek; but
I think it is perfectly possible for the State of Tennessee, or some
other State, to obtain a license for the construction of a dam at
Cove Creek and to contract that license, under certain terms and
conditions, to private enterprise.
Mr. BELL. Yes, that, I think, is quite possible. I agree with you
entirely on that. Then we come back to the fact that we would 'not
be willing to do this thing, to undertake this contract unless we
controlled that situation.
Mr. DOUGLAS. Not even if the operation of such a dam were sub
ject to the paramount right of the Federal Government to control
for the purpose of stabilization?
Mr. BELL. Now, if I understand your question, may be I can best
answer it in this way, that we are not willing to let anybody else oper
ate that dam. That being so
Mr. DOUGLAS. When you say " anybody else.*' do you mean any
body else other than the Federal Government?
 18 MUSCLE SHOALS

Mr. BELL. The licensee you had' in mind. For instance, suppose
the State of Tennessee and the United States licensed somebody
(most naturally a power company) to operate that dam, to build
and operate that dam, we would not be willing to have somebody else,
even a power company, regulating the operations of the power sta
tions fed by that dam. You see right away what we would be up
against.
Mr. DOUGLAS. Surely.
Mr. BELL. Over across the mountains is the Cumberland watershed
in which the power company, no doubt, would be interested. Then
we have a situation where, owing to climatic conditions and the ex
istence of this range of mountains, they might need power over on
the Cumberland side when we might not happen to need water in
the Tennessee Valley on the eastern side, and we might have quite an
argument then about whether water should be released and we be
allowed to have our power in order to meet our guaranty at a time
when they would a little rather favor the Cumberland Valley. We
do not want to get in that kind of a position, and I think the simplest
and best way to meet the issue is to meet it head on and to say the
only satisfactory operation of that dam that we can imagine is one
where we are operating it in the interest of the Tennessee Valley,
which happens to be the interest that coincides with our own opera
tions.
Mr. DOUGLAS. What do you estimate it will cost you to produce
power at the existing generating plants ?
Mr. BELL. Our impression is that the Government estimates are
about correct. We have gone over them very carefully and our ini-
pressionis about $17 a horsepower year represents the cost including
such boosting by the steam station as we believe will be required.
Mr. DOUGLAS. And what is the estimated cost of purchasing any
power which you might need?
Mr. BELL. Well, that, of course, we can not very well foresee : but
in the interest of the Government or, rather, in the interest of the
farmer who wants fertilizer cheap, we have provided that any pur
chase of power for the purpose of still further increasing the power
available shall not be allowed to raise the cost of the power as it goes
into the fertilizer operation. In the contract which is drafted, which
is embodied in our offer, you will find a clause which meets that very
difficulty: because, as you undoubtedly have in mind, it miirht be a
very sensible thing to combine power that might be available on
some other watershed with the Muscle Shoals station at a time when
Muscle Shoals was short, and that clause was drafted with that in
view; but, nevertheless, with the precaution that the Government
would not find we were charging in above the average.
Mr. DOUGLAS. What I was aiming at was to get rid of the con
troversial question of Cove Creek, a.iul I was wondering whether it
would be possible to enter into a reciprocating contract with respect
to power; that is, during those seasons in which you have a surplus
of power, you would dispose of the surplus power at a certain rate:
during those years in which you have a deficiency of power you would
purchase power at the same rate.
Mr. BELL. Well I do not know whether such an arrangement as
that is feasible or, rather, I will put it this way-I have considerable
doubt whether aA arrangement of that k.nd could be worked out
 MUSCLE SHOALS 19

over so long a period in advance. You can readily see that the
situation in that picture might change quite a bit.
Mr. DOUGLAS. Yes.
Mr. BELL. And it would be a very sensible thing to do from time
to time; but I would rather suspect any power company would
hesitate to enter into obligations of that character for 50 years;
situations might arise, in other words, where they would rather
build up their own by such an arrangement and, of course, power
companies are always building up their own by such an arrange
ment. Whether they would want to tie themselves up for 50 years
to help us out, even though we reciprocated with waste power at
certain times, I doubt. I think you are getting into a very complex
problem; but I can only give that as an offhand impression.
Mr. QUIN. Mr. Bell, there was one element in your answer
there—if the Government failed or declined to build Dam No. 3
and Cove Creek Dam, your proposition provided you could not and
would not go above 20.000 tons of nitrogen per year?
Mr. BELL. That is correct; yes, sir. At least, we provide we can
not be required to go above 20,000.
Mr. QUIN. I mean your offer is that.
Mr. BELL. Yes.
Mr. QUIN. And you could not, if you carry out the contract
with your allies, the Union Carbide Co.; unless you have that ar
rangement with the Union Carbide Co.. the physical facts would be
such as to make it impossible for your company to produce over
the 20,000 tons of nitrogen?
Mr. BELL. We could not, even regardless.
Mr. QUIN. You can not meet the 50,000?
Mr. BELL. Even regardless of the Union Carbide agreement, we
could not, on the bases of Dam No. 2 alone, meet the 50,000-ton
guaranty if we were confronted by the electric furnace phosphoric
acid.
Mr. QUIN. That is all.
Mr. GARRETT. Mr. Bell, on the question of the distribution of
surplus power, how many of the cities within a reasonable distance
from Muscle Shoals own their own power plants, or have plants
owned by power companies ; do you know ?
Mr. BELL. I do not know of any large cities that own the dis
tribution—any large cities near Muscle Shoals. I really do not
know, Mr. Garrett; I believe I had better not attempt to answer
that question.
Mr. GARRETT. Assuming that most of the city power plants are
owned by power companies, you speak of building transmission
lines to some given point and, at the end of that transmission line,
when you get there you either have to get your franchise or to
distribute your power through the agencies 'already there. Now
would not you find yourself at the end of the road in the hands of
the same company that is already connected with Muscle Shoals with
its transmission lines now all through that whole country?
Mr. BELL. Yes; either with them or an associate company of
theirs.
Mr. GARRETT. That is what I mean—either with them or some of
their associates or allies.
20 MUSCLE SHOALS

Mr. BELL. Correct.

Mr. GAKRETT. So that even then, if you make an independent dis
tribution of power, you have to build your own transmission line and
then, when you reach the city, you must get your franchise from the
city and either sell your power to the company that is there already
operating, or put up your own independent agency of distribution?
Mr. BELL. That is the situation.
Mr. GARRETT. Now, then, in doing that, it would not be so ex
pensive to put in your distributing agencies to reach industry, but
it would be quite a different thing to reach the people generally in
lighting houses ?
Mr. BELL. Oh, yes.
Mr. GARRETT. You would have to put in a complete distribution
plant in the city?
Mr. BELL. Exactly.
Mr. GARRETT. Well do not you find about the only people you can
talk to down there are the people that already have that thing
grabbed in that country—either deal with those people, or go out
and put up all independent lines ?
Mr. BELL. That is the situation.
(The committee thereupon adjourned until Tuesday, Februarv 11.
1930, at 10.30 o'clock, a. m.)
 MUSCLE SHOALS

TUESDAY, FEBRUARY 11, 1930

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10.30 o'clock a. m., Hon. Harry C. Bansley,
presiding.
Mr. RANSLEY. At our last meeting it was understood that Mr. Bell
would return to-day and speak in reference to the Wright bill. I
would like to suggest to the members of the committee that Mr. Bell
close about a quarter to 12 and then we go into executive session,
for there are some matters that your acting chairman would like to
take up with the committee as to its policy. Now, Mr. Bell, you
may proceed.
FURTHER STATEMENT OF W. B. BELL
Mr. BELL. Mr. Chairman, I am not quite clear just how the com
mittee would wish me to proceed. Do they wish to ask me questions;
or, in view of the fact there are some new members on the committee,
do they wish me to discuss the situation from the standpoint of a
more or less general summary of what we propose to do?
Mr. RANSLEY. It was my understanding, Mr. Bell, that we were
to have a general summary, and in all probability questions will be
asked during that summary that you make.
Mr. BELL. Well, if I am disrupting the program of the com
mittee at any point, do not hesitate to interrupt me. I will accommo
date myself to your program entirely.
Mr. QUIN. lou understand, Mr. Bell, that this is for the benefit
of our new members, and you want to make it explicitly plain so that
they can grasp it, and if any of us do not understand it, why it is
our fault.
Mr. BELL. Yes; I will do my best. The first thing about it that
might be of interest to the new members is that we have proceeded
on the theory that it is better to outline in complete detail the nature
of the contract we have in mind to enter upon ; in other words, we
want the Congress to know precisely what it is we propose to do
at every point; and then we hope to enjoy this advantage, if the
bill passes, that all the argument and discussion will have taken
place beforehand and all we have left to do is to operate the plant,
make the fertilizer, and sell it.
And in that respect I think it perhaps differs, certainly, from
some of the offers that have been before vou, and perhaps differs from
most of them.
21
 22 MUSCLE SHOALS

We also have another view to be served bv this program, and that

is that we think there are some features of this thing which Congress
should pass upon, both for reasons of constitutional law and also
because in that way we may be assured as to just what the policy
of Congress is. Had the situation been delegated to some officer of
the Government under general instructions, we might find ourselves
confronted later on by the opinion of some counsel or the opinion
perhaps of a court to the effect that that officer had done something
ultra vires, something that Congress did not intend that he should
do; and, therefore, we have set out in the bill an exact lease, com
plete in every respect, with instructions to the Secretary of War to
execute that lease, provided the proper authorization of the officials
of the Cyanamid Co. are exhibited to him.
Mr. STAFFORD. Has this bill, in the form of a lease, ever been
submitted to an executive department for consideration and report?
Mr. BELL. At one stage of the proceedings an Assistant Attorney
General was present at the session of the committee.
Mr. QUIN. Judge Wheat?
Mr. BELL. Yes, Judge Wheat; and my understanding is that the
bill met with his approval, and I think at the same time
Mr. STAFFORD. Purely as to its technical phraseology?
Mr. BELL. Oh, yes; he did not attempt to pass on matters of
policy.
Mr. STAFFORD. Then this offer has not been submitted to the
War Department, as Mr. Henry Ford's offer was submitted, and in
which Secretary Weeks made many decided recommendations and
corrections in the original offer?
Mr. BELL. My impression is that the Secretary of War may never
have said anything about this
Mr. STAFFORD. Not whether he has ever said anything about it,
but has it been submitted to the War Department, like Henry Ford's
offer was submitted to the War Department, for opinion as to whether
it protected the .interests of the Government?
Mr. BELL. My understanding is it was submitted to certain officials
of the War Department, and some of them have expressed disap
proval of it.
Mr. STAFFORD. Was it submitted in any formal way to the War
Department, as Mr. Henry Ford's offer was submitted/
Mr. BELL. I think not; but I am not quite clear I am competent
to give you a reply on that.
Mr. STAFFORD. Who would be competent?
Mr. BELL. I think perhaps some of the members of the committee
would know, because I was not around when Henry Ford's offer
was submitted.
Mr. STAFFORD. I am not speaking of the Henry Ford offer; I am
asking if this offer was submitted to the War Department for their
review and opinion, as the Henry Ford offer was submitted?
Mr. BELL. The difficultv is I do not know how the Henry Ford
offer was submitted. Might I appeal to Mr. McSwain on that?
Mr. McSwAiN. Mr. Quin is familiar with it.
Mr. QriN. Certain departments of the War Department have
passed on some features of this bill for the benefit of this committee,
and especially the subcommittee, but I do not think the general
 MUSCLE SHOALS 23

proposition, as the gentleman from Wisconsin, Mr. Stafford, asks,

was submitted to the War Department. However, the Attorney
General was requested to have a man up here—we could not pass on
this bill without his advice—and this gentleman is now Judge Wheat,
and he conferred with our subcommittee on the legality of it.
Mr. STAFFORD. I asked that question, because in examining the bill
this morning I notice it is all pervasive in giving everything the
Government has and more to the Nitrates Corporation and the
American Cyanamid. I do not think that any high War Department
official would recommend such broad powers as incorporated in the
proposed draft.
Mr. BELL. Well I certainly would not wish you to get from me the
impression that any Secretary of War has made any specific recom
mendation in favor of this bill. I do not so understand. I doubt
if he has made any at all. but I am sure he has not done that. I
am reminded now. however, of the fact there are some clauses that
have been dealt with by the War Department which, when you asked
your question, I had overlooked. For example, the cost accountant
of the Judge Advocate's office went over in great detail the cost
clauses and approved them. I think the Judge Advocate General
was consulted by the committee at one stage o? the proceedings.
Mr. McSwAiN. Yes, sir.
Mr. BELL. And made some recommendations which were adopted.
Mr. MoSwAiN". The Department of Agriculture also had its repre
sentative consider the matter and I think, incidentally, that the Fed
eral Power Commission has dabbled in this bill.
Mr. BELL. Oh, yes; the secretary of the Federal Power Commis
sion gave a general opinion on the bill which was quite unfavorable.
Mr. McSwAiN. Yes.
Mr. QUIN. The Commerce Department did, too. did it not?
Mr. BELL. I had forgotten that.
Mr. SPEAKS. All of the departments of the Government have been
called in to give any information they might be able to regarding it,
but never with respect to the question of whether or not a lease
should be entered into or a permit taken under which the property
might be taken over by somebody. That was for Congress to decide
ami that was the attitude of the committee—that it did not make any
difference what the War Department thought about it. or what the
Commerce Department thought about it. or any other department,
it was up to Congress to determine what should be done.
Mr. BELL. Outlining the general project as it stands in the bill,
what is proposed is that the lessee shall have turned over to it for a
period of 50 years a number of different properties. The first one
that might be mentioned is Dam No. 2 (that is the existing dam and
power station at Muscle Shoals), not only with the machinery in
stalled up to 240,000 horsepower (which, when the bill was written,
had not been completed, but now has been completed), but also with
an obligation on the part of the lessee to install, at the cost of the
Government, certain additional generating equipment, and also for
the Government to build a suitable transmission line to connect this
power station with nitrate plant No. 2. Dam No. 3 is also included,
but Dam No. 3 is in the future; it has yet to be built. Dam No. 3
is about IT miles up the river. It will add, as the Tennessee now
 24 MUSCLE SHOALS

flows, primary power of about 32,000 horsepower more. It is to

have equipment installed to generate 250,000 horsepower, and the
Government is also to connect Dam No. 3 with Dam No. 2 by a
suitable transmission line.
Then nitrate plant No. 2 is included in the lease, and with its
steam plant and the limestone quarry at Waco, which is a few miles
away, nitrate plant No. 2 is the plant which manufactures by
the cyanamide process. Then, in addition to that, there is included
nitrate plant No. 1, which was built there on the other side of Shef
field during the war. It operates by the synthetic process, or one of
the synthetic processes. It has never been operated successfully,
but, nevertheless, is included in the lease because we might at some
time as lessee feel that we wanted to operate in whole or in part by
the synthetic process.
Mr. SAFFORD. You say it has not been operated successfully ; that
is, when the attempt was made during the war ; no attempt has been
made to operate it since the war?
Mr. BELL. Oh, no ; I do not think anybody has attempted to oper
ate that since the war.
Mr. STAFFORD. And the process as there purposes in nitrate plant
No. 1 was more or less a secret process during the war which has
now become public, has it not?
Mr. BELL. My understanding is that the process there was tried on
the basis of a modification of the Haber-Bosch process, a modifica
tion worked out by the General Chemical Co., at Syracuse, N. Y.
I think, however, that was modified somewhat in the process of
construction.
Mr. STAFFORD. Well, since the war there has been much more ni
trate being manufactured by this Haber process than during the war?
Mr. BELL. There has been much more ammonia manufactured?
Mr. STAFFORD. Yes.
Mr. BELL. Which is what you are anxious to know. Very much
more. It has mainly been put in the form of sulphate, but that is a
mere detail.
Mr. STAFFORD. So that it has become a practical process?
Mr. BELL. No; that is, no process as installed in nitrate plant No.
1, synthetic process, is a practical process.
Mr. STAFFORD. That had not been developed during the war?
Mr. BELL. When I say "synthetic," I do not mean nitrate plant
No. 1 could be operated successfully, even if it is a synthetic process;
in other words, there are a number of synthetic processes.
In addition to all of that, another property is included in the
lease, namely, Cove Creek. Cove Creek has not yet been built. The
purpose of including Cove Creek was because the committee desired
that we should be able to manufacture ultimately not less than 50,000
tons of pure nitrogen in the form of concentrated fertilizer, which
means with an admixture of phosphoric acid and/or perhaps potash.
And that necessitated, inasmuch as we believe ourselves that the
phosphoric acid of the future is likely to be made by the electric
furnace, which requires more power for that operation than it does
even for cyanamide or carbide, that it would be essential for us
to be provided with adequate power. For that reason Cove Creek
was included. Cove Creek, I might say incidentally, will practically
double the power at Dam No. 2 and, of course, at Dam No. 3.
 MUSCLE SHOALS 25

Now the basis of the rental which the lessee pays on this investment
is interest at 4 per cent on the cost of Dam No. 2, exclusive of the
expenditures made prior to May 31, 1922; that is to say, what might
be called the war expenditures; and exclusive of. the expenditures
after January 1, 1928, except this additional generating equipment
that we are required to install. And the total amount, as I recall,
that that leaves, on which we are paying 4 per cent, will be approxi
mately $37,000,000, or something like that; although the total
expenditures of the Government in the entire project to date, includ
ing those expenditures during the war, the last time I heard, were
somewhere in the neighborhood of $51,000,000—or some such figure
as that.
Mr. CoCHRAN. Does that $51,000,000 include the contemplated cost
of Dam No. 3 and Cove Creek?
Mr. BELL. No ; only Dam No. 2. You see, during the war that work
was carried on under all of the handicaps of the projects built during
the war, at very heavy cost, and it was felt it was only reasonable to
charge that off as a war expenditure and as an allotment for naviga
tion improvement and to adjust the rent on the basis of 4 per cent
on the subsequent expenditures, which were more nearly normal.
Mr. STAFFORD. Then you are paying no rent at all for the expendi
tures on nitrate plant No. 2?
Mr. BELL. None whatever; or on nitrate No. 1.
Mr. STAFFORD. Nitrate No. 2 is the plant which your company is
the more interested in using ?
Mr. BELL. Yes ; because that was the plant designed to operate by
our processes and the plant that did operate.
Mr. STAFFORD. Why do not you offer to reimburse the Government
for rental for nitrate plant No. 2 that you are going to utilize ?
Mr. BELL. For this reason, that plant No. 2 is a nitrate plant, and
we are instructed to deal with the situation in the same way or better
than Henry Ford, and the purpose of the Ford offer (and I think it
is the purpose of Congress, but you gentlemen are better interpreters
of that than I), is that so far as is reasonably possible, the cost of
fertilizer produced at this plant shall be reduced and kept down as a
benefit to American agriculture. Now you gentlemen are the judges
of whether or not the American farmer should be charged interest on
the investment in plant No. 2 in the cost at which the fertilizer is
delivered to him. The theory on which this offer is built is that, so
far as the nitrate plants are concerned, they were a war product of
the Government and that they should be kept in reserve, ready to
operate for the national defense if war comes again and that, in the
meantime, the Government would prefer that those plants be oper
ated at the lowest possible cost for the benefit of the American farmer
and that there is no disposition on the part of Congress to add to the
price paid by the farmer for the purely military resources of the
Government. On the other hand, as I sense it—at any rate, this is
the way we have drawn the offer—there is a feeling that as regards
hydroelectric developments on the part of the Government, in so far
as they are not properly to be charged to navigation, the improve
ment of navigation and flood control, the Government ought to have
a reasonable amount, and when this offer was made the Government
was paying 4 per cent on its money and, therefore, the offer carries
4 per cent.
 26 MUSCLE SHOALS

Mr. FISHER. In so far as water power is concerned, to manufacture

by the cyanamide process, in the developments that have been made
or changes that have been made by the research bureau that I under
stand the Cyanamid Co. has, has there been any change in the
amount of water power that is needed to manufacture by the cyan-
amide process?
Mr. BELL. Very little of late years.
Mr. FISHER. You have testified before this committee before, but
does the Cyanamid Co. continue the work of chemists on research as
to the up-to-dateness of the cyanamide process?
Mr. BELL. Oh, yes ; always ; yes. We could not afford to do other
wise.
Mr. FISHER. As to the charge that is frequently made that it is an
obsolete process, do your chemists report that it is an up-to-date
process ?
Mr. BELL. Yes. I think perhaps I had better repeat what I have
testified before. We consider, for the purposes of this location where
reasonable power is available, that the cyanamide process is the most
economical.
Mr. FISHER. In competition that you have with the new synthetic
process that it is claimed is advancing so rapidly, can you meet the
competition that is presented by their product?
Mr. BELL. We are meeting it all over the world.
Mr. McSwAiN. May I state, apropos of the question of Mr. Staf
ford in regard to why it has never been insisted in this offer, or the
Federal Fertilizer Co. offer, or the Henry Ford offer, or anybody
else, that there shall be interest paid on niti-ate plant No. 2, was be
cause of its being considered as a factor in national defense, and it
is realized that to save the Government the burden of keeping it in
a stand-by condition, the best way to keep it in a going condition is
to have it continuously manufacturing nitrates. Thus the Govern
ment is saved the expense of maintaining it during peace and it is
indirectly being of great benefit to agriculture by producing nitrates
at the lowest possible cost. That feature of it in all of these offers
is the same and has been regarded, I think, unanimously, as a desir
able feature.
Mr. WAINWRIGHT. Is that so—that there has been no variation in
the basis of the computation of the rent from the beginning of these
offers to the Government, Mr. Bell?
Mr. BELL. Yes, sir; there has been a variation. It is a curious fact
that in the time the bill has been before Congress the rate of interest
on long-term loans
Mr. WAINWRIGHT. I must confess it strikes my mind as a rather
new thought that the amount on which this rent was computed was
as small a part of the expenditure that the Government has made
there. I was wondering whether there was any change made there.
Mr. McSwAiN. This is more liberal to the Government, if you will
pardon me, than the Henry Ford offer, because he was to take the
title to some of the property.
Mr. WAINWRIGHT. I am not talking about the Henry Ford offer.
Mr. McSwAiN. I am talking about the attitude of the committee
and Congress, because the committee has always taken the view that
the Henry Ford offer has been the best offer ever before us, because it
 MUSCLE SHOALS 27

did not have any " ifs " and " ands " about fixing nitrates, but said,
" We will do it, and Henry Ford's millions were in back of it ; but
Henry Ford's offer was to take title in fee simple, without cost, to
nitrate plants 1 and 2.
Mr. WAINWRIGHT. Entirely apart from Henry Ford or anybody
else, but sticking just to this proposition as to Dam No. 2, what did
that cost, in round figures?
Mr. BELL. My latest information is about $52,000,000. I am sure
that is approximately correct.
Mr. WAINWRIGHT. That is Wilson Dam?
Mr. BELL. That is Wilson Dam and power station.
Mr. WAINWRIGHT. And now nitrate plant No. 2 has cost us how
much?
Mr. BELL. Some $63,000,000, or something like that; the net cost
after the materials were salvaged.
Mr. WAINWRIGHT. There is about $114,000.000 investment there;
and then the power plant cost how much ?
Mr. BELL. That includes the power plant.
Mr. WAINWRIGHT. You included the power plant in the cost of
Wilson Dam?
Mr. BELL. No.
Mr. WAINWRIGHT. I mean the steam-power plant.
Mr. BELL. I mean that, too; that is included, Colonel, in that
figure for nitrate plant No. 2.
Mr. WAINWRIGHT. That is included in the $63,000,000 for nitrate
plant No. 2 ?
Mr. BELL. Yes.
Mr. WAINWRIGHT. You included in the cost of that plant the
installing of the steam power?
Mr. BELL. Yes. As a separate figure, my impression is it was
somewhere around $10,000,000. I really do not know ; I think I had
better withdraw that.
Mr. WAINWRIGHT. Now, we have $113,000,000. Now, nitrate plant
No. 1, what did we spend on that ?
Mr. BELL. $13,000,000.
Mr. WAINWRIGHT. So that there is $126,000,000 as the cost to the
Government ?
Mr. BELL. Yes.
Mr. WAINWRIGHT. And your rental will be computed on about
Mr. BELL. Four per cent on $37,000,000.
Mr. WAINWRIGHT. The Government will not get any return on the
balance of that very considerable expenditure ?
Mr. BELL. But here is a very curious thing
Mr. WAINWRIGHT. I am just getting at the fact, that is all.
Mr. BELL. It is an interesting fact, and here is a very curious and
interesting fact : That by reason of the period through which these
negotiations have been prolonged, I do not know what the Govern
ment's Panama 3 per cents are carrying now, but some months ago
they were selling around a 3 per cent basis, and I think it would be
fenerally conceded that the long-term obligations of the United
tates Government would ordinarily sell on a 3 per cent basis or
better ; that is, better from the standpoint of the Government.
28 MUSCLE SHOALS

Mr. WAINWRIGHT. May I ask just one or two more questions right
along this line?
Mr. BELL. Certainly.
Mr. WAINWRIGHT. How much is it estimated to be the cost of
Dam No. 3?
Mr. BELL. The last figure I saw on that was somewhere in the
neighborhood of $32,500,000.
Mr. WAINWRIGHT. You are paying back 4 per cent on that?
Mr. BELL. Four per cent on so much of it as is not allocated to
navigation and flood control and in no event on more than
$26,000,000.
Mr. WAINWRIGHT. Now, Cove Creek is going to cost about how
much?
Mr. BELL. There I am very much confused, because so many esti
mates have been made. In our opinion, Cove Creek could be built
for somewhere around $23,000,000 to $25,000,000 and those were the
figures originally suggested by one of the Army engineers. Since
then that estimate has been raised from time to time and at one
stage it was estimated as high as $32,000,000.
Mr. WAINWRIGHT. As I remember, it was $35,000,000; that was
the figure we always used.
Mr. BELL. And I have been told it has been estimated at $35,-
000,000 or more, although I have not seen that estimate. I have
also been told that that figure of $35,000,000 or more includes a
$6,000.000 transmission line from Cove Creek to Dam No. 2, which
we did not ask for and do not consider we could afford to pay inter
est on. In other words, we do not regard that as a practical thing
to transmit power from Cove Creek to Dam No. 2. I am not cer
tain, Mr. Wainwright, that the $6,000,000 is included in the $35,-
000,000 or more, but I have been told it is.
Mr. WAINWRIGHT. I am not analyzing this particular bill. We
are looking at it rather generally. What would you say as a gen
eral estimate for the purpose of this computation ?
Mr. BELL. About $25,000,000 for Cove Creek. Now. on that we
agree to pay 4 per cent on $20,000,000. The other $5,000,000 is
regarded as having been allocated to navigation and flood control.
Mr. WAINWRIGHT. What other expenditures is the Government
to make besides the construction of Dam No. 3 and Cove Creek, as
contemplated in your offer ?
Mr. BELL. Those are all.
Mr. WAINWRIGHT. Well, they have to make some installations to
connect up the plants with the dam.
Mr. BELL. Those I did mention, but I did not repeat it for your
figures.
Mr. WAINWRIGHT. How much is that?
Mr. BELL. The transmission line from Dam No. 3 to Dam No. 2
is included in the $32,500,000, unless that estimate has been changed
without my knowledge, and to connect up these other transmission
lines which we do not want.
Mr. WAINWRIGHT. So that virtually you pay nothing on the cost
of Dam No. 1 and No. 3 and the nitrate plants 1 and 2 ?
Mr. BELL. We literally pay nothing on nitrate plants Numbers 1
and 2.
Mr. WAINWRIGHT. You say you pay no rent !
 MUSCLE SHOALS 29

Mr. BELL. Absolutely none whatever, and what we do in exchange

is two things : As Mr. McSwain has pointed out, we operate these
plants so that they will be a going proposition or, at least, we guar
antee to operate plant No. 2. We do not guarantee to operate plant
No. 1, although we have plans for it. Secondly, we accept the
limitation of 8 per cent on profit in an effort to give the American
farmer cheap fertilizer. Those are forms of compensation, but
they do not take a cash form.
Mr. WAINWRIGHT. You pay no rent on the cost of either of plants
1 or 2, and you pay rent on $37,000,000, practically, of the cost of
$51,000,000 for the construction of Wilson Dam?
Mr. BELL. Four per cent on $26,000,000 of Dam No. 3.
Mr. WAINWRIGHT. Why should you not pay on the whole of dam
No. 2 ; what is the argument there '(
Mr. BELL. Well it is very obvious that that dam is a navigation
structure and, consequently, it is reasonable to suppose that a certain
amount of that should be allocated to navigation. Now, in addition
to that, what if some one says " Well, there ought not to be $15,000,-
000 or $14,000,000; there ought not to be as much as $14,000,000
allocated to navigation at Dam No. 2; the locks and the dam ought
not to be charged to that extent." The answer to that, I take it,
is that probably they should be charged to that extent ; but, if not,
this is true, that the dam was built under the most expensive condi
tions, as a war-time measure, and certainly whatever the balance is,
if there is a balance, it ought to be charged to the War. Now, as a
practical proposition, as to how did we get to the $36,000.000 or
$37,000,000, the fact of the matter is that we followed the Ford
offer.
Mr. WAINWRIGHT. Please understand I am not arguing for the
Ford offer.
Mr. BELL. Oh, no; not at all.
Mr. WAINWRIGHT. I am only interested in the facts.
Mr. BELL. And you a're interested in how it came about.
Mr. WAINWRIGHT. Yes.
Mr. BELL. And, historically, how it came about, as I recollect, is
this, that Congress adopted a joint resolution in which they asked
for bids as good or better than the Ford offer and, ever since that
resolution was adopted, we have been practically forced, in a way,
to follow the lines of the Ford offer and one of those points is the
one we have just been discussing.
Now, may I resume, because I really think it is an interesting
point: As was pointed out by the late Mr. Martin Madden, chair
man of the Committee on Appropriations, as against the 4 per
cent which we have agreed to pay on these certain portions of
the Government expenditures, as matched with the 3 per cent
which the Government normally pays on its long-term obligations,
we have a situation where the 3 per cent will pay the interest
on the whole thing. If at the end of 50 years the Government
decides to take the fertilizer plant with the expenditures we have
made on it and will consider that 3 per cent was the amount of
money they wanted on the whole thing, they will come out with a
surplus. That is due to the fact that during the period of these
negotiations we have seen Government rates for interest drop.
101229—30 3
30 MUSCLE SHOALS

Mr. STAFFORD. You say " They will come out with a surplus."
If it costs the Government 3 per cent to get money and on the
total investment the amount of rent you will pay will be just the
amount of interest the Government would have to pay for money
borrowed, I do not see where we would have a surplus. We would
virtually be in the same position as at the start; there would not
be any advantage at all, in so far as rent is concerned. There is
something more in rent besides merely the interest on money loaned.
Mr. BELL. Yes. Now the other point which I am coming to is
this, that, in addition to that, we also agreed to amortize on a basis of
one hundred years the investment of the Government in Dam No. 2
and the power station, including the locks—the whole thing, naviga
tion project and all—up to $51,000,000 or whatever the figure was
on January 1, 1928; to amortize at 4 per cent Dam No. 3 for the entire
amount up to $32,500.000. which was the estimate at the time this
bill was drawn ; Cove Creek up to $25,000,000, which was estimated at
the time this offer was drawn, including the navigation and locks,
if the Government elects to install the locks.
Mr. WAINWKIGHT. Can you amortize that on a basis of 50 years?
Mr. BELL. No, on a basis of one hundred years. In other words,
it would not be all amortized out by us, but it would be all amortized
out by us and some succeeding tenant, either some one else or our
selves, if the Government chose to renew our lease.
Mr. WAINWRIGHT. This contemplates washing out all these ex
penditures in a hundred years by payments additional to the amount
of rent.
Mr. BELL. Calculated on the proportion of cost; in other words,
if the Government looked at it from this standpoint, " We want to
free ourselves of the whole thing and want it to be amortized out
on the basis of one hundred years," why this does the trick. Mr.
Staffordj I do not know whether I have met your views as to how
this project should be handled in this offer; but, at least, I want to
make
Mr. STAFFORD. I just want to say the Committee, as I understand,
has not decided on the policy at all ; we are extending to you the
courtesy of an opportunity to explain your offer. The other mem
bers of the Committee very likely have settled views; my mind is an
open one. •
Mr. BELL. Quite right.
Mr. STAFFORD. And, as the chairman of the committee has sug
gested, you come here to explain your offer.
Mr. Bell. And I appreciate the opportunity and privilege. What
I would like to make plain, however, is that the form of the offer,
in respect to these questions of policy which we have just been
discussing is the form more or less dictated by the joint resolution of
Congress, some years ago.
Now, in connection with those payments, provision is made that
during the first six years it was intended to give us an opportunity
to get the project well on its way, on its feet, and that the payments
be deferred in part; that is to say. that on Dam No. 2, the maximum
payment shall be $200.000 a year and that, on Dam No. 3, the
maximum payment shall be $i(i0.000 a year; but those payments
must, beginning with the 35th year of the lease, be made up, and
 MUSCLE SHOALS 31

that can be done by equal installments during the remaining 15

yearSj which installments bear interest. On the other hand, we are
permitted, if we ourselves elect, to anticipate those payments and get
through with it that much more rapidly.
Now, in addition to these matters of interest and amortization,
we also agree to make certain allowances for the repairs and mainte
nance of Dam No. 2 and its locks and for the operation of the
others, and the same is true of Dam No. 3. In the first instance
it is $35,000 and, in the second instance, $20,000, and we also furnish
certain small quantities of power to enable the Government to light
and operate the locks. The suggested lease also contains a pro
vision by which the Government may, in time of war, or in antici
pation of war, take possession of any part of the property; in
which case, the rents are reduced in proportion.
In addition to these payments, we agree to increase, at our own
expense, the capacity of the steam plant which is now 60,000 kilo
watts and which contains space for 30,000 kilowatts more; we also
agree to increase the capacity of Dam No. 2 to 600,000, as I ex
plained, and we also agree to pay for each
Mr. STAFFORD. As I understand, the Government is to bear the
expense of installing the turbines.
Mr. BELL. In the end they do: yes.
Mr. McSwAiN. You advance the money and charge it to the Gov
ernment in the final accounting?
Mr. BELL. Yes. I am sorry if I did not make that plain.
Mr. STAFFORD. I gained the impression you bought that equip
ment and were to furnish the installation.
Mr. BELL. Oh. no; simply that we do it, but at the cost of the
Government. And we pay 5 cents per long ton for all limestone
removed from Waco Quarry. The Government undertakes to
maintain the dams and the locks; we undertake to maintain the
spillwav gates, power houses, and generating equipment.
Mr. STAFFORD. Have you any opinion as to the cost of replace
ment of the machinery in nitrate plant No. 2 ?
Mr. BELL. Well, in our experience at Niagara, we allow approxi
mately 10 per cent a year as depreciation and obsolescence, over
and above the cost of maintenance and repairs.
Mr. STAFFORD. That may be your bookkeeping allowance: but,
in actual experience, what do you expect to be the replacement
necessity in nitrate plant No. 2. operated at full capacity?
Mr. BELL. Well, that is what I expect: that is our experience at
Niagara.
Mr. STAFFORD. Oh, it is : it is not merely figured on a bookkeeping
basis for income-tax purposes?
Mr. BELL. No. It is perfectlv feasible, of course, to have those
plants operate at their full efficiency for longer than 10 years : but
the histotry of the nitrogen industry is that anything 10 years old,
on the average, is obsolete and you can not afford to operate it even
though it would operate efficiently.
Mr. STAFFORD. How is the machinery of the Government installed
there during the war. as compared with present-day methods and
present-day machinery?
32 MUSCLE SHOALS

Mr. BELL. It all depends on which part of the plant you have
under discussion. Take the lime nitrogen ovens, for instance, they
are entirely out of date. We would have to rip those all out ; we just
could not afford to operate them.
Mr. STAFFORD. What percentage of the plant would you have to
rehabilitate?
Mr. BELL. A year or two ago our engineers gave us an estimate it
would take at least two or three million dollars to bring the things
down to date. That would be the least.
Now I think perhaps I should next take up the subject of the
fertilizer guaranty. What we undertake to do at Muscle Shoals
is to manufacture concentrated fertilizer suitable for use by the
farmers both for direct application and for home mixing and con
taining at least 40 per cent by weight of plant food. The theory of
this provision is this, that instead of doing, as the fertilizer industry
now does, marketing a less-concentrated fertilizer, let us say a mix
ture containing perhaps 3 per cent ammonia and 8 per cent acid
phosphate, giving a total of 11 per cent plant food, which necessitates
short freight hauls because material oi that grade can not stand a
long freight haul, that the operation be devoted to the manufacture
of the highly concentrated fertilizer which can pay a longer freight
haul and. by reason of the fact it can pay a longer freight haul,
lends itself to mass production. In other words, if we were to mar
ket a 8-8. or 11 per cent fertilizer, only 220 pounds out of the ton
would be what the farmer really needs to make his plants grow.
And, on the other hand, if we market a 40 per cent material, we have
880 pounds of plant food that are of real use to him and. therefore.
he can well afford to pay a somewhat higher price which, in turn,
enables us to pay a longer freight and which enables us to do the
whole job at one point, with the result that it becomes a mass propo
sition and the costs go down per ton.
Mr. STAFFOKD. Are your companies, or any of their subsidiaries,
engaged in the manufacture of fertilizers and the marketing of
them }.
Mr. BELL. Oh, yes. '
Mr. STAFFORD. Which companies and what is the total amount?
Mr. BELL. The American Cyanamid Co. manufactures cyanamkle at
Niagara Falls with a capacity of three hundred and fifty-odd thou
sand tons a year.
Mr. STAFFORD. Is that used directly for fertilizer?
Mr. BELL. A very substantial part of it goes to the fertilizer manu
facturers and they mix it in their mixed goods, as the term is in the
industry. Some part of it, a relatively small part of it. we use in
other chemical operations of one kind and another, and the major
part of it now goes to our Ammo-Phos plant belonging to the same
company, which plant is located in New York harbor. This cyana-
mide is a mixture of ammonia and lime and, when it goes into mixed
goods, it is bought by fertilizer manufacturers for the purpose of
increasing the ammonia content of their mixture.
Mr. STAFFORD. Then your company and some of its subsidiaries
does market fertilizer?
Mr. BELL. Yes.
Mr. STAFFORD. And what is the total tonnage that your company
markets, directly as fertilizer!
 MUSCLE SHOALS 33

Mr. BELL. I mentioned the tonnage of cyanamide. Of that amount,

going into fertilizer
Mr. STAFFORD. No; what your company markets directly as fer
tilizer.
Mr. BELL. You see, if I give you the figure of so many tons, and
some of the tons are cyanamide and some tons Ammo-Phos, I am
afraid I would rather mislead you.
Mr. STAFFORD. I am seeking to ascertain whether your company
or any of its subsidiaries have had practical acquaintance with the
marketing of fertilizer, so as to qualify you as an expert.
Mr. BELL. Yes. I will be very glad to give you that information.
I will try to give it to you in the way in which you want it; if it
is not, you just tell me.
Mr. STAFFORD. All fight.
Mr. BELL. We manufacture cyanamide as cyanamide for fertilizer
mixtures, approximately 125.000 tons of cyanamide. Now, in addi
tion to that, we are now manufacturing and selling at the rate,
approximately, last month I think it was, of 18,000 tons of ammo-
phos, which would be at the rate, for the 12 months, of something
less than 220.000 tons; something like that. As a matter of fact,
we think the capacity of the plant is 240,000 tons, but we only got
up, last month, to 18,000 tons.
Mr. FISHER. You used the words " suitable as fertilizer " or " ac
ceptable as fertilizer " to the farmers : Has the use of the mixed
fertilizer of the Cyanamid Co. been more extensive in the last two
years; has it grown so far as the farmers in this country are con
cerned—the farmers of the United States?
Mr. BELL. Well, we have not been selling mixed fertilizer in the
United States to any extent until the last few months, so that there
has been no particular growth in that, as there was not any to begin
with. We are selling a few thousand tons. Abroad, the growth in
our sales of ammo-phos, in the last six years, is from something
like 6.000 tons a year to a rate of over 200,000 tons.
Mr. STAFFORD. A year?
Mr. BELL. Yes.
Mr. STAFFORD. As used by the American farmers, bv the farmers
of the United States ?
Mr. BELL. No: abroad.
Mr. FISHER. But in the United States, have you any figures about
that?
Mr. BELL. Very little in the United States ; practically none.
Mr. RANSLEY. Mr. Bell, what steps, if any, have been taken to
educate the American farmer in using the concentrated fertilizer,
where they would have to supply their own filler?
Mr. BELL. The Germans have been working along those lines for
the last two years in the introduction of a material manufactured
by the I. G. and known as Nitrophoska. I do not know what their
sales have been.
Mr. RANSLEY. Have any steps been taken to educate the American
farmer in using this concentrated fertilizer?
Mr. BELL. I mean, they have in the United States, in the education
of the American farmer.
Mr. RANSLEY. Has your company attempted to educate the Ameri
can farmer in the use of your products?
34 MUSCLE SHOALS

Mr. BELL. No ; practicallv not at all ; but we have been selling some
in Alabama, Louisiana, and perhaps a few tons elsewhere. Now, Mr.
Stafford, I think, in order to give you a complete answer to your
question, I should also add that we own phosphate rock mines down
near Tampa, Fla., and we sell phosphate rock for fertilizer from
those mines, and we also send up shiploads of the phosphate rock
to our own plant at Warners. N. J.. the ammo-phos plant, from the
mines, and there we treat the phosphate rock with sulphuric acid,
which, in turn, we have made from sulphur which we get by the ship-
loan from the Gulf and convert to sulphuric acid and, when phos
phate rock is treated by sulphuric acid, we get phosphoric acid by
certain special patented processes which we have. And then this
cyanamide which we have brought down from Niagara for manu
facturing into ammo-phos is autoclaved : that is to say. it is put in
a steam cylinder, into a cylinder containing steam, and. as the steam
is turned on, we get ammonia driven off in the form of gas and that
gas is bubbled up through the phosphoric acid, the manufacture of
which I have just described, and that gives us a product chemically
known as ammonium phosphate; but to which, by reason of the fact
that it has been made by these special processes, we give the trade
name to of ammo-phos.
Mr. STAFFORD. And how much of this ammo-phos do you sell for
fertilizer now to the American market?
Air. BELL. Just a few thousand tons. We have only just begun
selling any.
Mr. STAFFORD. That is the limit, that amount, of your sales directly
as fertilizer?
Mr. BELL. Oh, no.
Mr. STAFFORD. Direct.
Mr. BELL. Oh, you mean the direct sales to the American farmer ?
Mr. STAFFORD. Yes.
Mr. BELL. I beg your pardon. No. that material, as I say, has
grown very rapidly in its sales around the world. We sell a great
many thousands of tons of it in Japan. Java. Indiana, Sumatra,
Greece, Brazil, Cuba and other countries—the Philippines, Hawaii,
and so on. It is not a small matter, however, to educate the Ameri
can fanner to use it, as has been found by others who manufacture
concentrated fertilizer. It takes time and, unless it is used with care
and according to the instructions, the farmer is very apt to put on
the same amount of this highly concentrated fertilizer as he would
the low-grade fertilizer, and then he is surprised because his seed
is all burned up; he burns his seeds up and gets nothing. It is a
slow, continual process of education.
Mr. STAFFORD. Is it used in the form of powder
Mr. BELL. Yes.
Mr. STAFFORD. Scattered over the surface of the ground, or plowed
in?
Mr. BELL. It is not a fine powder, you understand, but it is a small,
finely granulated material of a grayish-white color.
Mr. STAFFORD. What is the present market price?
Mr. BELL. The present market price for 20-20 f. o. b. plant War
ners, is somewhere around $52 : something like that, on small car
load shipments. Now, as regards the use of it, you asked me a
 MUSCLE SHOALS 35

question. Abroad, the way in which it is generally used, is concen

trated, just as it comes—the concentrated material. In some dis
tricts, however, they first mix it with some sort of carrier—sand, or
anything else that they have handy. In that way they can spread
it, they think, more evenly over a given area. There is so little of it
needed to an acre that the distributors that are used for the low-
grade materials have to be carefully adjusted, or else they feed out
too much to the acre.
Mr. STAFFORD. Is this fertilizer a fertilizer for all character of
crops, or is it more suitable for certain kinds of crops?
Mr. BELL. Why, it seems to fit most everything. In Japan, they
use it for rice; in Sumatra, they use it for tobacco and rubber; in
Java, they use it for rubber and coffee; in India, it is used for tea
and jute and rice and a little sugar; in Cuba, they use it almost
altogether for sugar; in Greece, they use it for tobacco. It seems to
work on everything.
Mr. STAFFORD. And what is it utilized for in this country—what
crops ?
Mr. BELL. In Alabama, it is used for cotton; in Louisiana, it is
used for cotton and sugar.
Mr. QUIN. Excuse me one second, but I happened to be in Japan
two years ago and saw them spreading that stuff. I do not know
what else they use it on besides rice, but they use it to produce other
things in Japan. I want to know what your knowledge is on that.
Mr. BELL. I do not know what else they use it for, but I have been
told they use it for a number of crops.
Mr. QTJIN. You see, it is just a small farm which each fellow has,
just about as big as this room.
Mr. BELL. I think it is used generally, Mr. Quin.
Mr. QUIN. Oh, I saw them in their shirt-tails spreading this stuff
on every kind of crop. [Laughter.]
Mr. McSwAiN. I used it, but I did not use it that way ; I used it on
cotton. [Laughter.]
Mr. STAFFORD. Can it be utilized for cereal production ?
Mr. BELL. Yes.
Mr. STAFFORD. Do vou know of its being utilized to any large ex
tent in the Wheat Belt or Corn Belt ?
Mr. BELL. No; and I will tell you why. It is used on wheat in
some parts of Europe ; but vou get into this situation, Mr. Stafford,
that when you come to fertilize wheat, you know there is very little
artificial fertilizer used on wheat in the Northwest, apd the reason
for it is that the margin of return is not sufficiently great and why
the margin of return is not sufficiently great appears to be a matter
of climate. For instance, two or three years ago, I visited a great
Swedish experiment station at Svalow and there they showed me
acres of wheat producing at the rate of 77 bushels to the acre, and
they were using a very large amount of nitrogen on them. It
seemed to me I had found something that we had better be doing
right away, quick, in America, and I collected a lot of information
about it. When I got back to our office, I wanted to know why we
did not sell nitrogen to the wheat farmers in the Dakotas and Min
nesota; because, there they were raising. 14 bushels of wheat to
the acre and if nitrogen would make them come up to 77 bushels
36 MUSCLE SHOALS

to the acre, we would have a large increase in our market. I was

very insistent about it and the answer I got was that there is not the
moisture each year in the Northwest that is necessary to produce 77
bushels to the acre. And while at Svalow by many years of
experiments and cross breeding, in which they used Rumanian
wheat, Dutch wheat, Russian wheat, and all the rest of the varieties,
they had, it is true, built up a grain that would produce 77 bushels
to the acre, given a certain amount of nitrogen, but also given a cer
tain amount of moisture; that the American farmers have not been
able to find a grain which, given a certain amount of nitrogen, would
under any conditions produce 77 bushels to the acre, because there
was not the moisture necessary to do the rest of it.
Mr. McSwAiN. Pardon me, and they never can, because moisture
is indispensable as a solvent whereby vegetable life is able to take
up plant food from the soil. You have to have moisture.
Mr. BELL. I am afraid you are right. At any rate, I was so
obstinate—I suppose it was just pigheadedness—I felt we ought to
accomplish something here; because, even if we could not accom
plish 77 bushels, suppose we got 50 or something like that, that in
itself would be a wonderful thing; although I had to admit if it
cost $12 to buy the fertilizer and to ship it to some point in the
Dakotas and haul it to some point on the farm, and it would cost
$10 to $12 an acre, you must have more return than a 50 per cent
increase. Suppose the crop normally is 14 bushels to the acre and
you have a 50 per cent increase, after all you would only have 7
bushels increase, and that won't net the farmer more than a dollar
a bushel.
Mr. STAFFORD. Less than that.
Mr. BELL. Call it a dollar a bushel, he only has $7 increase to
pay for $10 worth of stuff, and he can not do it.
Mr. STAFFORD. Let me ask right there, would the fertilizer add
nutriment to the soil for succeeding crops?
Mr. BELL. Yes; it would.
Mr. STAFFORD. Or is its life just merely for the current crop'1.
What is the effect of this fertilizer? I come from a dairy country
that knows the effects of manure on the soil; now what is the effect
of fertilizer on the land ; is it only an aid for the current crop, or
does it have a more lasting value or a more enduring value ?
Mr. BELL. It has an enduring value, and the exact result, I think,
we will have from your own Wisconsin Experiment Station, where
we are trying out this fertilizer and. last year, they got very satis
factory results in pasturage. The amount of nutriment to be de
rived from a field, for instance, heavily fertilized, turned out to be
surprisingly good. And I am sure the tests will show, because they
have shown in other sections, that there is a certain residual effect
which is of some value. But in Wisconsin you have an amount of
moisture that the wheat lands farther west do not have at all. On
the other hand, the fertilization of wheat lands in Lancaster, Pa.,
for example, is proving possible; they put fertilizer on their wheat
in Lancaster, Pa.
Mr. STAFFORD. They use the fertilizer around there mostly for
their tobacco crop, which is very hard on the soil, and they must
absolutely have fertilizer.
 MUSCLE SHOALS 37

Mr. BELL. Yes ; but they use it too on wheat, and the same is true
in parts of Ohio, Illinois, and a little in eastern Nebraska—they are
beginning to use it on corn, and they use it on corn in some parts of
the South and get satisfactory results. But no one has been able
to devise and I am afraid there is only too much truth in what Mr.
McSwain says about the importance of moisture and nobody will
ever be able to find a seed which will produce, with a given amount
of fertilizer, four or five times the amount of wheat to the acre that
is now produced in the Northwest. The situation would be won
derfully improved if that could be done; but nobody has gotten
there.
Mr. RANSLEY. Mr. Bell, the time allotted you has expired. We
will be glad to hear you at some time in the future, but the com
mittee will now have to go into executive session.
(The committee thereupon went into executive session, at the con
clusion on which an adjournment was taken, subject to the call of
the chairman.)
 MUSCLE SHOALS

TUESDAY, FEBRUARY 25, 1930

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. It was understood at the last meeting that Mr. Bell
would be present and we would take up the bill section by section.
The clerk will read.
The CLERK (reading) :
A RILL To authorize and direct the Secretary of War to execute a lease with Air Nitrates
Corporation and American Cyanamid Co., and for other purposes
Be it enacted by the Senate and House of Representatives of the United States
of America in Congress assembled, That the Secretary of War is hereby author
ized and directed, for and on behalf of the United States of America, to execute
and enter into with Air Nitrates Corporation, a corporation organized and exist
ing under the laws of the State of New York, and American Cyanamid Co., a
corporation organized and existing under the laws of the State of Maine, the
following lease :
" This indenture made in triplicate this day of , 192—, by and
between the United States of America (hereinafter called the lessor) acting by
and through the Secretary of War, duly authorized .so to do by act of Congress
approved ono the day of , 192—, and Air Nitrates Corporation, a
corporation organized and existing under and by virtue of the laws of the State
of New York, with offices at 535 Fifth Avenue, New York City (hereinafter
called the lessee), witnesseth :"
STATEMENT OF W. B. BELL—Resumed
Mr. BELL. May I interrupt at this point to suggest that instead of
" 192—" we make it " 193—" in each of those references.
Mr. RANSLEY. Yes.
Mr. STAFFORD. Will you kindly explain the reason why this lease
is entered into on the part of both the Air Nitrates Corporation and
the American Cyanamid Co. ?
Mr. BELL. Because it was the desire of the committee that the
American Cyanamid Co. should guarantee the lease—the obligations
of the lease.
Mr. STAFFORD. Will you specify, as I am a stranger to each com
pany, who each corporation is?
Mr. BELL. The Air Nitrates Corporation is the corporation which
designed and constructed the plant for the Government and which
holds the contract with the Government and which would be de
voted entirely to the obligations of this lease; but inasmuch as it is
3'J
10 MUSCLE SHOALS

the desire of the committee, or was, and the desire of the Cyanamid
Co., the parent company, to guarantee those obligations, it inter
venes as guarantor.
Mr. STAFFORD. What is its capital and who controls the Air Ni
trates Corporation, and when and where was it formed?
Mr. BELL. The Air Nitrates Corporation is a New York corpora
tion with a nominal capital of $1,000, which will be increased to
meet the obligations of the lease.
Mr. STAFFORD. You did not answer my question. I asked you
who controls it and when and where was it formed; who are the
stockholders ?
Mr. BF.LL. The American Cyanamid Co. is owner of all the stock
except the shares necessary to qualify some directors, or the di
rectors, and it was, at the time when the Government entered into
the war with Germany and wished the Cyanamid Co. to construct
that plant.
Mr. STAFFORD. To which plant do you refer?
Mr. BELL. No. 2 ; nitrate plant No. 2.
Mr. STAFFORD. Has the Air Nitrates Corporation had any sub
stantial dealings with the Government at any time since its creation ?
Mr. BELL. Well, during the construction of the plant, but not since
the war.
Mr. STAFFORD. What work did they have with the Government
at that time?
Mr. BELL. They designed and built nitrate plant No. 2 at Muscle
Shoals; then, subsequently, they began but did not complete the
construction of nitrate plants at Cincinnati, Ohio, and Toledo, Ohio.
Mr. SPEAKS. I would suggest you ask what activity the Air
Nitrates Corporation has been engaged in since the war?
Mr. BELL. No business since the war.
Mr. STAFFORD. These plants you refer to at these respective places :
Were they to be Government establishments, also?
Mr. BELL. Yes.
Mr. STAFFORD. At the time you negotiated with the Government,
did the capital of the Air Nitrates Corporation consist only of a
thousand dollars?
Mr. BELL. Yes.
Mr. STAFFORD. Just a paper corporation, then, virtually, with
a nominal paper capital ?
Mr. BELL. Oh, yes; the Government did all of the financing and
wished the matter kept as a separate and distinct proposition from
the American Cyanamid Co. and no expenditure was incurred by
the Air Nitrates Corporation during the war without the approval
of the Government.
Mr. STAFFORD. What was the total amount of work performed by
the Air Nitrates Corporation in conjunction with the Government?
Mr. BELL. In dollars, my recollection is that the total expendi
tures in nitrate plant No. "2 were some $65,000,000 or $66,000,000,
something like that, of which the Government salvaged four or
five millions, leaving the net expenditure, say, $62,000,000. Those
figures are approximate, Mr. Stafford, and I can not tell you what
the expenditures were, offhand. I can tell you for Toledo and Cin
cinnati they were not very large. Those plants were started, but
were stopped when the armistice was signed.
 MUSCLE SHOALS 41

Mr. STAFFORD. Then your company can not furnish the exact
amount of expenditures that the Government made in the construc
tion of nitrate plant No. 2 and nitrate plant No. 1 ?
Mr. BELL. Well, we had nothing to do with nitrate plant No. 1,
but nitrate plant No. 2—those expenditures are all a matter of record.
They in the Ordnance Department.
Mr. STAFFORD. Will you kindly give a general description now as
to the capital of the American Cyanamid Co., when it was incorpo
rated, under what laws, and what its business is to-day, so that we
may determine the responsibility of the lessee?
Mr. BELL. The American Cyanamid Co. was incorporated, as I
think I remember having been told, in 1909. When I first had any
thing to do with it, the capitalization of the company consisted of
approximately $6,000.000. or a little less—say $5.600,000, perhaps—
of preferred stock, and about $6.600.000 of common stock. The pre
ferred stock has been retired, all of it. We have outstanding deben
tures aggregating, I think, about $4,700,000. It really is less than thatr
because we have some in a sinking fund, but I think the amount
nominally outstanding is $4,700.000 of 5 per cent debentures. And
we also have now approximately 2,500,000, or a little less, shares o£
common stock. Those shares are no-par shares and are selling on
the market at somewhere around $26, making a market value of
somewhere between $62,000,000 and $63,000.000; perhaps something
like that. In addition to that. I think you asked the State in which
it is incorporated. It is a corporation of the State of Maine.
Mr. STAFFORD. And kindly also state what respective plants are
owned and operated by the American Cyanamid Co. and the total
business that you do, and the character of the business—what you
manufacture.
Mr. BELL. The company owns a plant at Niagara Falls, Ontario;
a plant at Warners, N. J. ; a plant at Azusa, Calif.; a plant at
Valencia, in Spain; mines at Brewster. Fla.: through-our subsidiaries
and ourselves, we own a plant at Bound Brook, N. J.: Elizabeth,
N. J.; Kalamazoo, Mich.: Chattanooga, Tenn.; Erie, Pa.; Waterbury,
Conn. ; mines in Dutch Guiana ; mines in Georgia ; mines in Missouri ;
a plant at Peoria. 111. Really. I do not know. I expect there are
some more. Mr. Stafford, but perhaps that will answer the purpose.
And, in addition to that, you asked what the business of the com
pany is. It manufactures chemicals of many kinds, heavy chemicals
and fine chemicals: chemicals for metallurgical purposes; it mines
rock; it manufactures fertilizer: it does a general heavy and fine
chemical business. We also manufacture pharmaceutieals—biologi
cal products.
Mr. STAFFORD. Is it a close corporation or is the stock held generally ?
Mr. BELL. The stock is divided into two classes, the A stock and
the B stock. The A stock I have the control of. the voting control.
The total number of shares is. I think, about 65.000; somewhere be
tween 65.000 and 66.000. The total number of A stockholders, the
last time I heard about it, was some 300, I think; the total number
of B stockholders, the B stock being very widely held, the last time
I heard, was about 11,000.
Mr. SPEAKS. The Air Nitrates Co. constructed or did much of the
construction work at Muscle Shoals
Mr. BELL. It acted as agent for the Government.
42 MUSCLE SHOALS

Mr. SPEAKS. On which there was some $60,000.000 of expenditure ?

Mr. BELL. Right.
Mr. SPEAKS. Was that under the cost-plus system ?
Mr. BELL. Well, cost and a fee.
Mr. SPEAKS. Cost and a fee ?
Mr. BELL. Yes.
Mr. SPEAKS. What did the Air Nitrates Co. receive as compensa
tion for all of their work?
Mr. BELL. The net result was
Mr. SPEAKS. Approximately?
Mr. BELL. The net result was they did not get anything; that is,
by the time they paid out expenses of conducting it. and so on, they
did not get much of anything. Had the plant been operated over
any considerable period of time, their fee for operation would have
shown them some profit.
Mr. SPEAKS. Well, you got a profit on all the material used ?
Mr. BELL. Well, they were supposed to get a profit on all the
material used.
Mr. SPEAKS. And all the labor employed ?
Mr. BELL. Yes. They were supposed to get a percentage with a
maximum limit and I am afraid I can not remember what that
figure was.
Mr. SPEAKS. Can you put it in the record ?
Mr. BELL. Yes : I will be very glad to.
Mr. SPEAKS. It is a matter of record, or I would not ask you the
question.
Mr. BELL. It is quite all right. I think. General, it is already in
the record, as -a matter of fact. What I think would perhaps best
facilitate the matter would be if I would simply offer in evidence,
which I will be very glad to do, the contracts between the Govern
ment and the corporation. That would cover everything. Is that
what you have in mind ?
Mr. SPEAKS. Just in the aggregate.
Mr. McSwAiN. We would like to have the contracts, also, because
I do not think we have ever seen the contract.
Mr. RANSLEY. The clerk will read.
The CLERK (reading) :
That In consideration of the sum of $1 paid by the lessee to the lessor, tlie
receipt whereof is herehy acknowledged, of the rents to he paid and of the
inutual covenants, stipulations, conditions, and agreements herein contained to
be kept and perfi rnied by the parties, the lessor has granted, demised, and
leased and by those presents doth grant, demise, and lease unto the lessee for
the possession, use. operation, advantage, and enjoyment, under and consistent
with the terms hereof, of the lessee and its successors and assigns, all the prop
erties constituting what is generally known and designated as the " Muscle
Shoals development." Including all structures, plants, buildings, machinery, tools
and equipment, franchises, rights, jxiwers. and privileges for the construction,
maintenance, use, and operation thereof, as well as all lands, tenements, ease
ments, servitudes, rights of way, riparian rights, and the appliances, fixtures,
and appurtenances thereunto belonging (as now or hereafter constituted and
supplemented during the term of this lease by the acquisitions, constructions,
and improvements hereinafter described) and embracing (but without in any
way limiting the generality of the foregoing).
Mr. STAFFORD. I assume, Mr. Bell, from my reading of this lease,
that you intend to have it all pervasive and include everything that
the Government owns down there, exclusive of the navigation rights.
 MUSCLE SHOALS 43

Mr. BELL. Yes. As a matter of fact, you will recall that the Gov
ernment retains the control and guarantees the dam as well as the
locks.
Mr. STAFFORD. Yes.
Mr. BELL. With that exception, I think that is the understanding.
Mr. STAFFORD. Well, I will question you further when we read
further along.
Mr. SPEAKS. Right at that point, Mr. Bell, so that we keep the
picture before those of- us here who are not experts, what you want
to do. now, is to go down and lease the property which you con
structed for the Government originally?
Mr. BELL. And also plant No. 1, with which we did not have any
connection.
Mr. SPEAKS. Yes; but that would include all of the construction
work which your company performed under the cost-plus contract
system ?
Mr. BELL. And also Dam No. 2, which the Government constructed
for itself with the power station.
Mr. SPEAKS. Yes.
Mr. BELL. And also Dam No. 3 and Cove Creek, which are yet to
be constructed.
Mr. SPEAKS. Yes; I understand.
Mr. BELL. And the transmission line from Dam No. 3 to Dam
No. 2.
Mr. SPEAKS. But I wanted it understood particularly that you
hope to have included in this contract all of the construction work
which your cohipany performed under the cost-plus system.
Mr. BELL. Oh, yes.
Mr. STAFFORD. And also a transmission line from Dam No. 2 to
nitrate plant No. 2?
Mr. BELL. Yes. I think most of that is there, as a matter of fact,
Mr. Stafford.
Mr. RANSLEY. The clerk will read.
The CLERK (reading) :
(1) Dam Numbered 2 with its lands, water rights, power house, structures,
and facilities, which shall include installed electrical generating equipment
sufficient to generate there two hundred find forty thousand horsepower, all
its hydroelectric and operating apparatus, appurtenances, accessories and facili
ties, trackage, transmission lines, telephone and telegraph lines, an electrical tie
connection of a capacity of not less than one hundred and twenty thousand
horsepower at suitable voltage connecting properly the power house at Dam
Numbered 2 with the steam power plant at United States nitrate plant num
bered 2, the necessary transformers and switching apparatus and all lands,
buildings, housing, easements, rights of way. and riparian rights appurtenant
thereto, and/or owned, controlled, or hereafter acquired by the lessor for or
in connection with said dam and power plant, hut excluding and excepting
from the property hereby demised and leased the locks and navigation facili
ties and such housing as the Secretary of War shall designate by notice in
writing to the lessee given within sixty days from the date hereof, as being
required for the housing of lock operators.
Mr. STAFFORD. Will you kindly explain how much of the construc
tion embodied in this paragraph just read is now in existence and
how much additional will be required by the Government to meet
the provisions of this paragraph.
Mr. BELL. Well at the time the offer was originally submitted,
the Government had not finished the installation of the 240.000
44 MUSCLE SHOALS

horsepower. I have not seen this power station, but I am fairly

clear that all of that capacity has now been installed.
Mr. STAFFORD. And how many units are there now installed there
to develop 240,000 horsepower?
Mr. BELL. My recollection is that they put in 30,000 horsepower
units, in which case there would appear to be eight.
Mr. STAFFORD. And the dam is capable of how many more—the
placing of how many more turbines in there?
Mr. BELL. Well the power station has capacity space for 600,000
horsepower. I do not think, however, the Government has put in
more than 240,000.
Mr. STAFFORD. So you only plan
Mr. BELL. Oh, yes, later on.
Mr. STAFFORD. You only plan by this paragraph to accept the
generating power as now is—eight units, to develop 240,000 horse
power ?
Mr. BELL. If there are eight, yes. You understand, however,
further on there is a paragraph dealing with further installation.
Mr. STAFFORD. Yes.
Mr. BELL. Quite right.
Mr. STAFFORD. What else does the Government have to install, as
required by this provision, that is not now in existence ?
Mr. BELL. My impression is that the Government has practically
all of that 120,000 horsepower tie-line between the dam and nitrate
plant No. 2 ; but I would not want to go so far as making an abso
lute statement on that. I think that is correct.
Mr. STAFFORD. Now as to the provision for the deeding and con
veying of all lands, buildings, houses, easements, rights of way, and
riparian rights appurtenant thereto, what do you consider as being
included in that very broad general clause, " easements, rights of
way, and riparian rights appurtenant thereto and/or owned, con
trolled, or hereafter acquired by the " Government " for or in con
nection with said dam "?
Mr. BELL. Well we would not want to be left in the position where
we could not reach some part of the property, or something of that
kind, because the Government had not given us a lease to all it has
there.
Mr. STAFFORD. Recently I believe the Government has granted to
some power company the right to extend some power lines just above
Dam No. 2, for which it received a very substantial fee. Under this
phraseology, it is so all-controlling and pervading the Government
would not be authorized to enter into any such arrangement,
would it?
Mr. BELL. I have not seen the document to whi^h you refer, but
I have seen a reference to it in the paper, at least, I presume it is
the same thing; I think it is the same arrangement under which
one of the Tennessee power companies extends a line down to the
darn. And, if so, I think it will be found, on examination of the
agreement between the AVar Department and that company, it is
subject to cancellation notice just for the very reason that the Gov
ernment policy about Muscle Shoals still remains undetermined.
Mr. STAFFORD. Yes: but the Government received a verv substan
tial amount, in the hundreds of thousands of dollars, for that privi
 MUSCLE SHOALS 45

iege ; jet here the Government would not have any right, under this
phraseology, to grant such a privilege.
Mr. BELL. You mean the War Department has leased such right
at Muscle Shoals to the Tennessee
Mr. STAFFORD. No, I mean the Government, as I am informed by
a representative of the War Department, has granted a franchise
for the construction of a transmission line just north of Dam No.
2, providing for the transmission of power across the Tennessee
River.
Mr. BELL. And is that lease of such a character that it can not be
canceled and, therefore, the Government is not free to deal with
Muscle Shoals?
Mr. STAFFORD. I am not acquainted with it; but in no wise does it
interfere with the operation of the Muscle Shoals development; it is
separate and distinct; it is just simply a transmission line going
across the river. Yet this phraseology would bar the Government
from entering into any such negotiations.
Mr. BELL. May I suggest that it might be of interest to the com
mittee to obtain a copy of that agreement from the War Depart
ment and, if the committee wishes me to look it over, I should be
very happy to do so.
Mr. STAFFORD. Yes, but I am inquiring now as to just what you
mean to obtain by this general language. " easements, rights of way,
and riparian rights appurtenant thereto and/or owned, controlled,
or hereafter acquired by the " Government " for or in connection
with said dam and power plant." It is pretty broad language.
Mr. BELL. It is meant to be and we do not want anything to
surprise us about whether we have the right to deal with that prop
erty in a sensible way in pursuance of this manufacturing project.
If anything has been done by the Government which impairs that
situation, I think it is only fair we should have an understanding
as to just what that is and, if it is something that does not interfere
with the soundness of our offer, why then we can make specific
reference to it.
Mr. STAFFORD. I do not think it impairs the work of the Muscle
Shoals development at all ; it does not connect with the development
of the dam; it is just simply the right of extending a transmission
line across the river. However, I think the suggestion of the wit
ness. Mr. Chairman, is a valuable one, that we should obtain a copy
of the agreement.
Mr. RANSLEY. Undoubtedly.
Mr. QciN. I would like to ask a question or two: What was the
object of this line? Was it to get part of the power, to use power
from the Muscle Shoals plant ?
Mr. STAFFORD. No; it is merely the right to transmit power from
one side of the river to the other.
Mr. McSwAiN. It is an easement over the land.
Mr. STAFFORD. It is an easement over the navigable waters, to
provide a connection bet\yeen the power developed on one side of
the river with the power developed on the other side of the river;
it is a connecting link.
Mr. RANSLEY. The clerk will read.
101229—30 1
46 MUSCLE SHOALS

The CLERK (reading) :

(2) Subject to the provisions of article D hereof, Dam Numbered 3 with
its lands, water rights, power house, structures, and facilities, which shall
include installed electrical generating equipment sufficient to generate there
two hundred and fifty thousand horsepower, all its hydroelectric and operating
apparatus, appurtenances, accessories and facilities, trackage, transmission
lines, telephone and telegraph lines, an electrical tie connecting the switch
house at Dam Numbered 2 with said power house, of a capacity equal to the
generating capacity installed in said power house, the necessary transformers
and switching apparatus, and all lands, buildings, housing, easements, rights
of way, and riparian rights appurtenant thereto and/or owned, controlled,
or hereafter acquired by the lessor for or in connection with said dam and
power plant, but excluding and excepting from the property hereby demised
and leased the locks and navigation facilities and such housing as said Secre
tary of War shall designate by notice in writing to the lessee given at the
time of the delivery of possession of said Dam Numbered 3, completed, as
being required for the housing of lock operators.
Mr. STAFFORD. There is no requirement in this provision for the
construction of Dam No. 3 as to the expectation when the Govern
ment is to undertake this work ?
Mr. BELL. Well, certainly there is a clear understanding implied
that the Government should proceed with reasonable speed.
Mr. STAFFORD. What do you estimate will be the total expendi
ture required by the Government to construct Dam No. 3 and install
the various units, in order to comply with the provisions of this
paragraph?
Mr. BELL. That has been variously estimated. The last estimate
that we really know about was $32,500,000. There was some story
suggestion that there was in existence somewhere a still higher esti
mate, but I am not acquainted with that. '
Mr. STAFFORD. No work whatsoever has been done, other than the
plans have been drawn?
Mr. BELL. I am under the impression drill holes have been put
down to see what kind of rock they have got; I think that is right.
Mr. STAFFORD. Have plans been drawn for the construction of
Dam No. 3?
Mr. BELL. Oh, I think the War Department has done a great deal
in the way of plans, else they would not venture an estimate, I think.
Mr. STAFFORD. Why is it' essential the Government should go to
the expense of constructing Dam No. 3? Wherein is it not economi
cally profitable for your companv to take the Muscle Shoals develop
ment as is, without the expenditure by the Government of these
other large amounts of money for construction purposes?
Mr. BELL. Well, our understanding is that the Government, or
the policy of Congress in that, may be and probably is that while
they are at it they want to clear up Dam No. 3. That is a very
important link in the navigation improvement of the stream and
once that is done, why, you have 9 feet, I think it is, all the wav to
Chattanooga, and that is the chief purpose of putting in this Jam.
As a power proposition, it is entirely unattractive; we would be
perfectly willing to have it omitted.
Mr. STAFFORD. So that it is entirely acceptable to you that there
might be incorporated here a provision that it is only to be leased
to you when the Government believes it is necessary for navigation
purposes?
Mr. BELL. Yes.
 MUSCLE SHOALS 47
*

Mr. STAFFORD. That it is not obligatory upon the Government, so

far as one of the conditions or provisions of this lease is concerned
that the Government is to go ahead with this work?
Mr. BELL. No. Mr. Stafford, for your own information, the total
amount of power to be generated at Dam No. 3, primary power, is
estimated at 40.000, or less, and you can see with the $32.500,000 in
vestment, you have $800 an installed horsepower, which, from a
power standpoint, is absurd. Now, when Cove Creek is built that
amount of power will be doubled, so that the estimated cost per
installed horsepower will be $400. As you know, that is very high;
?>200 is considered pretty high.
Mr. CoCHRAN. While we are on the subject of costs here, what
is the total additional expenditures which the contract under con
sideration would impose upon the Government?
Mr. BELL. Our idea of that is that it would call for about between
$50.000.000 and $60.000.000; less than $60,000,000.
Mr. COCHRAN. And what does this contract propose to give the
Government in return for that expenditure—that additional ex
penditure ?
Mr. BELL. May I go back and make that a little more specific—
that that is the amount which the Government is asked to invest
or would be required to invest for Dam 3 and Cove Creek Dam and,
in addition to that, there would be a much smaller investment, two
or three million dollars, perhaps, for the installation of the addi
tional equipment in Dam No. 2. I neglected to include that. Now.
what was the question (
(The question was read, as follows:)
And what does this contract propose to give the Government in return for
that expenditure—that additional expenditure?
Mr. BELL. First of all. dealing with the nitrate plants, nitrate
plant No. 2 is to be maintained at the equivalent capacity of am
monia and handed over to the Government in time of war or when
ever the Government, in contemplation of war, would take it over.
It also guarantees fertilizer to be sold to the farmer at cost plus
8 per cent. Then, coming to the hydroelectric investment which
the Government has. including the dams that go with it, it guaran
tees 4 per cent on the after-the-war expenditures of the Govern
ment in Dam No. 2. down to January 1. 1928, I believe is the date,
amounting to some $37.000,000: 4 per cent on not to exceed $26.-
500.000 at Dam No. 3: 4 per cent on not to exceed $20,000.000 on
the Cove Creek cost, plus amortization on the basis of 100 years for
all the Government's investment in Dam No. 2 down to Januarv
1. 1928; the Government's investment in Dam No. 3 up to $32.500!-
000; the Government's investment in Cove Creek, not to exceed
^25.000.000; also interest on this additional equipment to go into
the power house at Dam No. 2 : also 5 cents a ton on limestone
taken out of Waco Quarry. I hope I have not omitted anything.
It is rather complex, but I think that is correct.
Mr. CoCHRAN. Could you make it more concrete, when we are
investing this $50.000.000 or $00.000.000, how much we are going
to get back year by year, aside from those collateral benefits?
48 MUSCLE SHOALS
•
Mr. BELL. Now somewhere in the testimony given before this
committee is a letter by the late Martin B. Madden, in which there
is a tabulation which he had made up, which shows every payment
every year, both under interest and amortization, and so on, and
my recollection is that the pavments eventually run something over
$4.000.000 a year.
Mrs. KAHN. To the Government from the company?
Mr. BELL. To the Government from the company. Does that an
swer ? Let me state it this way : I believe this would be clearer, al
though it is less exact and comprehensive. So far as the nitrate
plant is concerned and the quarry, the compensation on the nitrate
plant is. in cash, nothing; it consists in maintaining in operating con
dition the big nitrate plant ready for use in time of war and, in the
meantime, furnishing fertilizer to the farmer at cost plus 8 per cent.
Now, as regards the Government's investment in the Tennessee River,
as distinguished from the nitrate plant, it consists in 4 per cent on
what may be fairly allocated to the hydroelectric part of the invest
ment as distinguished from some pre-war expenditure, and those
parts which may properly be allocated to the improvement of navi
gation and flood control on the Tennessee. That is the theory on
which the thing is constructed. Now 4 per cent, which is the return,
was taken because it was in the Ford offer, and in those days that
is what the Government was paying. As a matter of fact, with the
Government's present position on long-term bonds, over a period of
years, it is reasonable to assume the Government of the United States
will pay nearer 3 per cent, in which case the Government would, as
a matter of fact, receive 3 per cent on its entire investment in the
Tennessee River and the whole thing would be amortized out on the
basis of 100 years. Our lease runs only for 50 years, but some other
tenant going in would complete the amortization if he paid the same
rent.
Mr. CoCHRAN. Then analyzing your answer, for an expenditure of
between $50,000,000 and $60.000.000 by the Government to be made,
vour offer is to return $4.000,000 annually in addition to these col
lateral benefits?
Mr. BELL. No; that is not quite correct; because, you see, that
$4.000,000, which is not the exact figure—I think it is more than that;
I am not quite sure—that $4.000.000 only begins after the additional
£50.000.000 or $60,000.000 have been invested. During the period
before these two other dams are built it would not be $4.000,000. it
would be 4 per cent on $37.000.000 down at Dam No. 2, plus amortiza
tion, and so on.
Mr. CoCHRAN. Pardon me; I am afraid that you or I are confused.
You are asking the Government under this contract to expend the
additional sum of fifty to sixty millions of dollars.
Mr. BELL. Right. ,
Mr CoCHRAN Now. do you mean to say that in return tor that
additional expenditure the Government will receive $4.000.000 an
nuallv, in addition to these collateralljenefits you mention J
Mr BFLL No I wa« confused. The $4.000.000 would be the total
amount, approximatelv $4.000.000 would be the total amount on all
of the propertv, both the two new dams and Dam No. 2.
Mr. CoCHRAN. What I was trying to arrive at is whether the Gov
ernment is justified in expending that additional sum of some fifty
 MUSCLE SHOALS 49

to sixty millions of dollars, considering the return which this contract

proposes to give them for that expenditure.
Mr. BELL. Well, from the standpoint of a purely business invest
ment, the Government's return on that additional money would be
4 per cent on fifty to sixty million dollars, whatever it is. less an
amount which might be allocated by the Army for navigation at both
Dam No. 3 and Cove Creek, and in any event they could not ask us
under the terms of this contract to pay 4 per cent on more than
$26.500,000, which is the maximum for our liability at Dam No. 3,
or on more than $20,000,000 at Cove Creek. Now, to that 4 per cent
would be added the amortization payment, a trifling amount of
power for current for lighting and moving the locks, and something
for repairs, a few thousand dollars a year for repairs and
maintenance.
Mr. COCHRAN. Then, what the Government would actually get in
return for this increased expenditure would depend upon the value
to be placed upon navigation and these collateral benefits '(
Mr. BELL. Well, I do not suppose the Government of the United
States would be interested in putting money in anything at 4 per
cent in the Tennessee River. If they put the money in, it is pri
marily for the purpose of increasing the capacity for munitions in
time of war and fertilizer in time of peace, with this plant down
there, which promises cheap fertilizer to the farmer, for flood con
trol, for improvement of navigation, and, incidentally only, for 4
per cent on the investment.
Mr. COCHRAN. That is all, Mr. Chairman.
Mr. RANSLEY. Mr. Bell, did I understand you to say that at the
completion of Dam No. 3 there would be 32,000 primary horsepower ?
Mr. BELL. I did not say that. I think, Mr. Ransley—I am under
the impression it would be nearer 40.000 horsepower. I think it is
a little under 40,000; it is somewhere in the thirties.
Mr. RANSLEY. Then, will you explain to the committee why you
would install generators for 250,000 horsepower?
Mr. BELL. Because the committee has in the past indicated that
they wanted an offer similar in every respect or better than the
Henry Ford offer; and in the case of Dam No. 2 the Henry Ford
offer provided 600.000 horsepower, because the Army recommended
600.000 horsepower and drew the plans that way. In the case of
Dam No. 3 the Army plans, as I understand it, contemplate 250,000
horsepower. We do not see when there will ever be a use for 250,000
horsepower. Obviously, there won't be any such amount of primary
power. The primary power will be less than 80.000. Of course,
up to a certain point secondary power may have some value. It is
extremely difficult to dispose of sccondard power, and it is very un
safe to count on it as having any particular value; but, nevertheless,
it has been the policy of the War Department, and practically they
are building for all time. These dams will stay there for centuries,
and it has been their policy to lay out the program on the basis of
the largest theoretically possible power installation that could ever
be required.
Mr. QUINN. That is, you mean with the dams to be built, in con
templation, up the Tennessee River and the Clinch?
Mr. BELL. Yes. And in case of Dam No. 2. which has been built,
Mr. Quin. But you will recall the primary power at Dam No. 2
50 MUSCLE SHOALS

is estimated at 78,000 horsepower; as a matter of fact, it has been

down, one year, as low as 48.000. so it is only by courtesy that it
can be called 78,000 horsepower.
Mr. QUIN. But we have figured the estimate on 78.000.
Mr. BELL. Yes. Oh. I think it is a reasonable basis, although it
is not strictly all primary power; but perhaps it is 99 per cent of
the time, or 98 per cent of the time, or something like that. Now.
that would be doubled by the construction of Cove Creek, so that
there would be nearly 160,000 horsepower and there are various other
developments that might occur in the next 60 years which may take
place up the tributaries of the Tennessee, that I think might raise
that somewhat, but not in the way Cove Creek would raise it at all.
And when you get all through with that, why you have a situation
where, perhaps, you have 200.000 primary horsepower and yet the
dam and hydroelectric station are designed on the basis of 600,000
horsepower.
Mr. QUIN. What kind of a fantastical dream caused that?
Mr. BELL. Well, I do not know that I would put it that way. I
do not think that perhaps is quite it: but they are laying that thing
out for centuries ahead. Now. apparently, they figured when the
whole thing was complete there might, with both primary and
secondary power combined, some day be a time when there would be
use for it. I think that was a very generous estimate. Of course
they did not figure that would be primary power: that was their
idea of the primary power, plus the secondary power that might
come down the river at any time which would have any commercial
value at all.
Mr. QuiN. Give us the names of those streams that run into there
that the dam is supposed to be built on—the Clinch and what others ?
Mr. BELL. Well, the one that to-day offers the greatest possibility
of increasing the power on the Tennessee is the Clinch. Up at Cove
Creek there is a rather unique situation : it is not quite unique, as it
does occur in some parts of the world, but owing to the size of the
basin and the formation of the bluffs it would be possible to dam the
stream and impound, in any ordinary year, eveiy drop of water that
might come down the entire 12 months. Now, if you choose theo
retically you do not need to allow a single drop of water to get out
of that' basin for 12 months. As a practical proposition, what you
would do in the operation of that station and dam up there would
be you would wait until everything else was dry or began to get
dry, and then you would begin to turn on the water from Cove
Creek. It is a very interesting situation. That is why it is pos
sible, by the construction of Cove Creek, to so substantially regulate
flood control in the Tennessee, to so substantiallv increase, even to
the point of doubling, the power down stream. It would be a very
useful thing to do.
Mr. FISHER. Have you investigated the question as to the average
price of coal, as to whether or not the steam-power plant could be
utilized to supplement the primary power advantageously from a
business standpoint to make the secondary power, and make it so
 MUSCLE SHOALS 51

that you could increase practically the primary power by the con
stant use during the period when there is not the surplus power, so
that there would be a large amount of primary power by the use of
the steam plant with coal ?
Mr. BELL. Under this manufacturing program that we have offered
here it would be necessary to do that; otherwise we would not have
enough power. Our plans contemplate that.
Mr. FISHER. Have you information as to the average cost of
coal; is it obtainable at a reasonable price there; is it close to the
mines ?
Mr. BELL. Well, it is not cheap coal, but it is not bad. You know,
the coal would have to be brought in from some distance. It is not a
situation like that which exists on the Warrior River, where they
stick a pick into the hillside up above and the coal almost runs
under the boiler. It is a case where the coal would have to be brought
in, but it is a good grade of coal for steaming coal and it is all right,
and that has been contemplated in our program. We could not get
power enough without it.
Mr. STAFFORD. Have you any estimate as to the cost of coal to
you that will be utilized in supplementing the primary power by
the steam plant?
Mr. BELL. Those estimates have been made up. I do not have
them with me; I do not recall exactly what they are. That whole
subject has been gone into.
Mr. STAFFORD. Will you kindly insert that answer in the record?
Mr. BELL. I think 1 can answer approximately here. I think the
cost of coal delivered at the station will be somewhere between $3.80
and $4 in the early years of operation. It is very difficult, of course,
to predict what coal will be over so long a lease.
Mr. SPEAKS. Mr. Bell, when the war closed the Muscle Shoals
plant as originally contemplated was completed, was it not, or shortly
afterwards ?
Mr. STAFFORD. Oh, no.
Mr. BELL. My recollection is that the test runs manufactured some
700 tons of ammonium nitrate before the operation was stopped, and
that the plant generally was practically complete; but with these
two exceptions that not all of the ammonium nitrate houses had been
completed and not all of the housing projects had been completed.
Mr. SPEAKS. Well, it was practically complete ?
Mr. BELL. Yes.
Mr. SPEAKS. And those details would have made it complete
within a reasonable time?
Mr. BELL. Yes.
Mr. SPEAKS. And that construction fully met the requirements
and intentions of the original scheme, did it not ?
Mr. BELL. Oh, yes ; the operation was very successful.
Mr. SPEAKS. Then you are not interested in the plant on that
basis, are you?
Mr. BELL. I am not sure I understood your question.
Mr. SPEAKS. What I am trying to do is to eliminate these various
details and get right down to the practical question that there is a
52 MUSCLE SHOALS

plant constructed under the terms of the law, which is complete, ready
to operate. What I am asking, is your company interested in that
property ?
Mr. BELL. Oh, by itself?
Mr. SPEAKS. Yes.
Mr. BELL. No.
Mr. STAFFORD. What is your company interested in, then?
Mr. BELL. In this leasing of the whole proposition.
Mr. SPEAKS. They would like to have control of all the water power
which in any manner can be connected with Muscle Shoals, either
for purely water-power purposes or navigation purposes. I have
always wanted to go ahead and operate Muscle Shoals just as it is, in
conformity with the intent and purposes of the law
Mr. BELL. You certainly have been very patient and understand
ing.
Mr. SPEAKS (continuing). But there has always been this propo
sition hooked on to it that the gentleman from Pennsylvania (Mr.
Cochran) immediately was confronted with, of why the necessity
for expending $60,000.000 more.
Mr. BELL. Well let me clear up what I think is perhaps some
thing of a misunderstanding between us. First of all, we put in our
offer on the basis of what the Government now has, including Dam
No. 2. That was done before the joint committee of six. three Sena
tors and three Representatives, back in perhaps 1926. And on the
basis of the amount of power that was available from Dam No. 2,
why we were compelled to limit our guarantee of nitrogen in the
form of mixed fertilizer, which is what the country wants and what
the committee wanted, to 20.000 tons. That was not satisfactory and
they wanted us to go ahead on a program of at least 40.000 tons of
nitrogen fixed in the form of fertilizer and, in order to do that, we
had to protect ourselves in the matter of power and we were advised
to go ahead and include Cove Creek, because that would give us
the power, the additional power, that was necessary. We were also
advised that Dam No. 3 Congress wished to construct in order to
clear up the missing link in the navigation of the Tennessee. So
we did that. And, in fact, owing to the improvement in the efficiency
of nitrogen fixation at our plant at Niagara, we were able to meet
this committee's wish ami increase our guaranty to 50,000 tons of
fixed nitrogen. Now that is the history of how this thing happened
and. if this committee wants us to go back to the original offer and
include only Dam No. 2, 1 presume there is no reason why we should
not do that. Is that the wish of the committee ?
Mr. QUIN. Let me right there refresh your memory so that the
gentleman from Ohio, Mr. Speaks, may understand it.
Mr. BELL. Yes.
Mr. QUIN. At the time when you said you were forced to make
it on the present status of the power
Mr. BELL. No; requested to do it.
Mr. QUIN (continuing). For the manufacture of 20,000 tons, you
had a contract and still have it with the Union Carbide Co..* by
which they were to get 50.000 prime horsepower.
 MUSCLK SHOALS 53

Mr. BELi,. Yes.

Mr. QUIN. And at the same time the President of the United States
had the bids reopened and the associated power group guaranteed
in that contract to make 40,1)00 tons with the power available there
under the present construction, and of course you could not meet that,
or did not do it, because you had 50,000 tied out to the Union Carbide
Co.
Mr. BELL. Well, 50,000 would not settle the thing one way or the
other.
Mr. QUIN. At the same time, you had agreed to do it.
Mr. BELL. Oh, we did; yes, we have such a contract.
Mr. QriN. And the associated power group that was organized
said they could do it; that they would make 40,000 tons of nitrogen
under the present construction without the Government spending
any more monev.
Mr. BELL. Yes.
Mr. QUIN. And, as I understood it, that was the President's idea—
not to spend any more money.
Mr. BELL. Yes. But. Mr. Quin, if we could have made 40,000 tons
of fixed nitrogen, that would have been all right. There is power
enough there at Dam No. 2 to do it, but that would not have been
of any use to the American farmer. The American farmer has to
have something to go along with the nitrogen or it would not have
been anj- use to him. The fertilizer companies might buy the nitro
gen, but not the farmers.
Mr. QUIN. But the power group agreed to produce 40,000 tons of
fixed nitrogen.
Mr. BELL. Yes. We could do that, but the farmer would not
want it.
Mr. QUIN. I mean they would have had the fertilizer that we
wanted. The Ford offer—of course you understand that was their
contract, but of course Congress never considered it; there was too
much prejudice against it.
Mr. BELL. They probably meant they would produce it in the form
of sulphate of ammonia, which we contend would not be what the
farmer would want, not for direct application.
Mr. SPEAKS. I appreciate the courtesy of the gentleman from Mis
sissippi (Mr. Quin) and his explanation to refresh my memory, but
I think it is unnecessary. You all know my attitude. We have a
plant built in accordance with the purposes of the law. and why not
go down there and operate it?
Mr. BELL. I understand, General, but let me see if I can not make it
plain. The difficulties, as I see them, are these : We can go down
there and we can operate that plant, and we can manufacture 40.000
tons of nitrogen in the form of ammonia, which is 220,000 tons of
cyanamide. The farmer does not want it.
Mr. REECE. May I make an observation, in view of the remarks of
the gentleman from Ohio (Mr. Speaks) a while ago, who lives in the
great Ohio Valley? He spoke disparagingly of spending a few mil
lion dollars when it comes to navigation of the Tennessee River. If
my memory serves me correctly, the United States Government has
54 MUSCLE SHOALS

spent the sum of $135,000,000 for developing the navigation of the

Ohio River, that has produced hardly a horsepower.
Mr. GLYNN. Of course, that was under the protest of General
Speaks that was spent.
Mr. SPEAKS. And permit me to say that was prior tot my time as a
member of the committee.
Mr. REECE. That has produced hardly a horsepower, whereas the
Tennessee River carries a large volume of water, practically as large
a volume of water as the Ohio River, and is capable of developing
navigation into the great interior, which is becoming the industrial
center of the United States, so that it will develop a 9-foot navigation
channel and, at the same time, produce a tremendous amount of hydro
electric energy and develop this great nitrate plant at Muscle Shoals
to a point where it can, at the same time, produce cheap fertilizer for
the farmers.
Mr. QUIN. I would like to know, Mr. Bell, what is the name of that
concern in Chattanooga, Tenn., that the Cyanamid Co. bought?
Mr. BELL. It is a plant belonging to the Kalbfleisch Chemical Co.,
whose assets we took over some time ago and are operating as one of
our plants.
Mr. QUIN. What is the name ?
Mr. BELL. Kalbfleisch—k-a-1-b-f-l-e-i-s-c-h.
Mr. QUIN. A German name ?
Mr. BELL. No; it has been in existence here in America for 100
years. It is one of the oldest chemical companies in America in the
manufacture of aluminum sulphate; also heavy acids and also sup
plies for paper materials.
Mr. QUIN. What is the size of the plant, in itself?
Mr. BELL. It is not a large plant. My offhand impression is it is
something about $350,000; something like that.
Mr. QUIN. About how many hundreds of people do thev employ
in that plant?
Mr. BELL. Frankly, I am guessing, but my guess would be about
75; something like that.
Mr. SPEAKS. I just want to complete my observation on the per
sonal phase injected by the gentleman from Tennessee [Mr. Reece].
Here has always been my attitude through all of the record : The
Almighty placed the waterpower possibilities down in that section
of the United States and I do not care if a single State receives the
full benefit, I am for its proper development. Now I am also, in
practically all of the ramifications that have been suggested, willing
to go ahead with a legislative program which will, in course of time,
supply all of the things you are asking for.
Mrs. KAHN. Mr. Belf, when did you make your first offer to the
Military Affairs Committee for Muscle Shoals; in what year? Was
your first offer the offer you made to this joint committee in 1926 ?
Mr. BELL. The first offer was to the joint committee.
Mrs. KAHN. That would be in 1926.
Mr. BELL. And I think it was 1926, and my recollection is that
the House Committee on Military Affairs began hearings probably
the following year. That would be 1927. That is my best recollec
tion.
 MUSCLE SHOALS 55

Mr. STAFFORD. Was that offer incorporated in the record and was
it predicated upon just the power as is, for the making of 20,000 tons
of fertilizer?
Mr. BELL. When we handed it in. I think it was for 20,000 tons of
nitrogen in the form of concentrated fertilizer. Before the com
mittee even gave it thorough consideration, why we were requested
to change it and bring it up to 40,000 and include Cove Creek.
Mr. STAFFORD. But your company is willing to make an offer sub
stantially predicated upon the existing facilities as are?
Mr. BELL. If that guarantee is reduced to 20,000?
Mr. STAFFORD. Yes.
Mr. BELL. Yes.
Mr. STAFFORD. I would like to have you state just generally the
connection of the Union Carbide Co. with this proposition, referred
to by Mr. Quin.
Mr. BELL. Yes. The contract is in the record, and the contract is
an agreement between the Union Carbide Co. and ourselves for the
sale to them of not to exceed 50,000 horsepower, at not to exceed $17
a horsepower-year.
Now may I go back and clear up something that I think, General
Speaks, you have in mind?
Mr. SPEAKS. Surely.
Mr. BELL. It is this: General Speaks has in mind, as I understand
it. a proposition by which we would take over the nitrate plant
alone and in some way we would be supplied (which would be per
fectly feasible) with power by the Government, we will say. from
Dam No. 2, at a figure which would be reasonable. Now, apparently
it is not clear to him why it is we are not attracted by that propo
sition. The reason we are not attracted by it is that the General
wants to retain, no doubt, the 8 per cent limit on profit, which is
the most that we can make in any year, and to retain all these other
obligations, so that then we would be in the position, if we were to
accept that program, of having put manv millions of dollars into
this proposition. 20 millions, or somewhere between 15 and 20
millions of dollars, on which the most that we could hope to
profit would be the 8 per cent in the good years on the turnover
and, in a bad year, we would make nothing or would make a loss
and, consequently, we would be in a position where we would have
an investment of 15 to 20 million dollars with the most hopeful
possibility being 8 per cent and with every reason to suppose that,
sooner or later, during the 50 years, we would go bankrupt.
Mr. STAFFORD. Where do you expect to invest between 15 and
20 million dollars in this program ?
Mr. BELL. A small part of it in revamping the cyanamid plant
and bringing it down to date in accordance with the latest practice
at Niagara; a very large investment in the sulphuric-acid plant
ami the phosphoric-acid plant, which would supply the other ele
ment that the American farmers insist upon, phosphoric acid or
acid phosphate; then a very substantial amount, too, in the plant for
phosphoric acid and ammonia, so that we could unite them in
the form of ammonium phosphate or what we call, in our trade
name, Ammo-Phos. Then there would be the separate facilities
of loading, bagging, shipping, milling, and all the rest that goes
56 MUSCLE SHOALS

with it. In other words, what you have got there as Muscle Shoals
is simply a plant from which ammonia can be taken, but ammonia
is a gas. What are you going to do with the ammonia; how are
you going to carry if to the Farmer? The American farmer does
not want cyanamid for direct application; what he wants is a
mixed fertilizer that contains both ammonia and phosphoric acid
and more phosphoric acid than ammonia. So that if we are to
meet what we understand the purposes of Congress to be—that is to
say, a supply of a cheaper fertilizer, not to be sold to the fertilizer
manufacturers but to the farmers for direct application and not for
home mixing—we have to build up another element down there,
and that is even more important than the ammonia element, and
then we have to build up the unit that unites the two.
Mr. STAFFORD. What is the activating, motivating instrumentality
down there that is of interest to your company, Mr. Bell ?
Mr. BELL. Well, what we have in mind to accomplish down there
are these objects: First, we are in the fertilizer business; we are
interested in fertilizer. We think we can make the 8 per cent in
good years. That is some attraction. Secondly, this proposition
would give us not a large amount of power for sale (and, if we had
it for sale, the market at Muscle Shoals and within reach of the
plant is not a developed market like that at Niagara, where any
great amount of profit could be made on the resale of the power),
but it would give us additional power which we could use in our
other manufacturing operations. You can see from the description
I gave you of the company that we are interested in a great many
of these chemical operations. This additional power we could use
in our own manufacturing operations which, apart from the ferti
lizer operation, would be free from the limitation of 8 per cent on
the profit.
Mr. STAFFORD. And you would use this power in subsidiary plants
near-by ?
Mr. BELL. Yes.
Mr. STAFFORD. Or sufficiently approximate so that you could uti
lize the power from Muscle Shoals ?
Mr. BELL. Yes; exactly.
Mr. STAFFORD. The idea being, from a business standpoint, to
utilize this surplus power in conjunction with your other subsidiary
plants?
Mr. BELL. Exactly.
Mr. STAFFORD. Will you name those subsidiary plants?
Mr. BELL. I will name a few; I would rather not disclose some
of our operations. We have in mind, for instance, that we are
manufacturers of cyanide on a large scale; that we manufacture
large quantities of cyanide. I suppose we produce more cyanide
than any of the other makers of cyanide. We are the largest makers
of yellow prussiate of soda, which is a very important chemical and
a base for blues. We have a whole string of things like that, some
of which we can manufacture at Muscle Shoals and utilize the sur
plus power in that way.
Mr. STAFFORD. I gained the impression you were going to utilize
the surplus power in adjoining plants.
Mr. BELL. That is what I mean; to move the operations to
Muscle Shoals and expand them.
 MUSCLE SHOALS 57

Mr. STAFFORD. Not to transmit the power to the plants already

under control but to develop them there.
Mr. BELL. Yes.
Mrs. KAHN. To enlarge the whole Muscle Shoals plants and in
clude those manufactures?
Mr. BELL. Quite right.
Mrs. KAHN. Eventually, have you any idea how large an invest
ment it will represent ?
Mr. BELL. Well, the fertilizer end alone. Mrs. Kahn. under these
guarantees will eventually, even at present prices for labor and ma
terial, represent somewhere between thirty-five and forty million
dollars, according to the estimate.
Mrs. KAHN. The others you would expand?
Mr. BELL. That would depend entirely: that is approximate.
Mrs. KAHN. It would just depend entirely on the expansion.
Mr. BELL. That is it.
Mr. RANSLEY. The clerk will read.
The CLERK (reading) :
(3) United States nitrate plant numbered 2 (as officially known and desig
nated on the records of the War Department of the United States) Including
its sixty thousand kilowatt steam-power plant, the Waco limestone quarry with
equipment therefor, and all lands, buildings, housing, easements, rights of way,
materials, trackage, transmission lines, telephone and telegraph lines, fixtures,
apparatus, tools, supplies, appurtenances, accessories and facilities, such existing
service equipment as the Secretary of War shall certify by notice in writing
to the lessee given within sixty days from the date hereof as belonging thereto,
and the sulphuric-acid units now in storage on the premises, but not including
the platinum catalyzers for use in the manufacture of nitric acid, which shall
tie retained by the lessor and the lessee shall in no way he responsible therefor.
Mr. STAFFORD. Do I understand that the Government is going to
put the nitrate plant No. 2 in up-to-date condition, or are you going
to spend the $2,000.000 to put it in workable condition for your
purposes ?
Mr. BELL. We do that.
Mr. STAFFORD. The Government spends nothing whatever?
Mr. BELL. No.
Mr. STAFFORD. Will the Government be obliged to spend any
money in putting the steam-power plant in working condition?
Mr. BELL. Oh, I think not; I think that is in good operating con
dition. It is leased to the Alabama Power Co., or some subsidiary
of theirs, I believe, and my impression is it is in excellent condition.
Mr. STAFFORD. How extensive is the Waco limestone quarry?
Mr. BELL. That is quite a big quarry. I suppose it ought to be
good for at least a thousand tons a day.
Mr. STAFFORD. It is virtually unlimited in its capacitv?
Mr.. BELL. Oh, very large, yes ; but I mean it is already opened up
on quite an extensive scale.
Air. STAFFORD. What is the reason for your excepting platinum
catalyzers from this lease '.
Mr. BELL. There is about half a million dollars worth or $000.000
worth of platinum screens or catalyzers which I think are in a vault
up here in Washington, although I do not know. There was some
discussion about that, but I have forgotten what the answer was.
if I ever heard of it. At any rate, it is not needed in our proposi
tion; that is needed only when ammonia is being oxidized into
58 MUSCLE SHOALS

ammonium nitrate for explosives. We do not want the responsibility

of that platinum, and I do not think the Government wants us to
have it; I think they would rather keep it in some vault.
Mr. RANSLEY. The clerk will read.
The CLERK (reading) —
(4) United States nitrate plant numbered 1 (as officially known nud desig
nated on the records of the War Department of the United States), including
its power house and transmission line to United States nitrate plant numbered
2. and all lands, buildings, housing, easements, rights of way. materials, track
age, transmission lines, telephone and telegraph lines, fixtures, apparatus, towls.
supplies, appurtenances, accessories, and facilities, as respects the properties
described in paragraphs (1), (3), and (4) above for and during the term of
fifty years beginning on the date of delivery to the lessee of possession of said
properties, and thence ensuing and fully to be completed, and as respects the
1 properties described in paragraph (2) above for and during the term beginning
OH the day of delivery to the lessee of possession of the said properties com
pleted and thence ensuing and until the end of the aforesaid term of fifty
years, upon the terms and conditions contained in this lease, tind to that end
the parties hereto respectively covenant and agree as follows, namely.
Mr. STAFFORD. I wish merely to direct an inquiry as to your length
of tenure, 50 years: I assume if you plan to spend $17,000,000 to
$20,000,000 in investments that the tenure could not be much less
than 50 years.
Mr. BELL. No. I think that even if we go back we must adhere to
our original proposal, which was 50 vears, even when we thought
what would meet the situation was the 20,000 tons. I think that
would be acceptable.
Mr. STAFFORD. My first thought was the term might be reduced.
Mr. BELL. Oh, no.
Mr. STAFFORD. But in view of your statement that you are going
to spend such large sums of money. I can see. from a business man's
standpoint, you would have to charge it off into costs.
Mr. BELL. Too soon.
The CLERK (reading) :
A. The lessee will pay to the lessor as rental therefor within fifteen days
after the end of each fiscal year (which is hereby defined to begin July 1) of
the lease term, except as herein otherwise stated.
(1) From the aforesaid delivery of possession of the properties described
in paragraphs (1), (3), and (4) of the granting clauses hereof (a) a sum
equal to interest at the rate of 4 per centum per annum upon the total of all
sums expended by the lessor prior to January 1. 1928 (except that expendi
tures made In providing the electrical tie connection connecting properly the
power house at Dam Numbered 2 with the stenmixnver plant at United States
nitrate plant numbered 2 shall be include,l, notwithstanding the fact that such
expenditures are made subsequent to January 1, 192S), upon the acquisition and
construction of Dam Numbered 2, with its lands, water rights, power house,
structures, and facilities, as hereinabove descr'hod. and its locks and naviga
tion facilities, exclusive of expenditures and obligations paid or incurred l1v
the lessor prior to May 31. 19'22. and (h) annual amounts sullic'ent, if con
tinued for one hundred years, to amortize, on a basis of 4 per centum 'nterest
compounded annually, the entire amount (without deduction of expenditures
and obligations paid or incurred prior to May 31. 1022) so expended, except
that such payments of said sum as aforesaid and amortization coinbined for
tbe first six years from the aforesaid delivery of possess'ou shall be at the
rate of $2O0,000 per year, and thnt the difference between such $200.000 per
year and the full amount of said sum aforesaid and amortization (with simple
interest on such difference at the rate of 4 per centum per annum) shall l>e
paid in annual installments commencing not later than the end of the thirty-
fifth year of tbe lease term, each such installment to be equal to at least one-
lifteenth of the principal sum of such d'fference and interest thereon to the
date of payment.
 MUSCLE SHOALS 59

Mr. STAFFORD. What is your idea of postponing the difference in

the amount of rental between the $200,000 and the rate that you
should pay, until the expiration of 35 years?
Mr. BELL. Well, we want to be able to do that on account of the
difficulties that we may encounter in the introduction of the material
and getting the costs down to just where they ought to be, and so on.
In other words, we do not want to be in a position where, right at
the beginning, when we are having our struggles to introduce this
material in so large a market, on so large a scale, we will have to
face the full rental. I might also say to you, Mr. Stafford, that
happens to be copied—it does not happen to be; it was deliberately
copied—from the Ford offer, which contained the same provision.
In other words, what we are doing is to introduce a new material in
the fertilizer situation in America on a tremendous scale. The first
unit alone will be over 100,000 tons of Ammo-Phos, which is the
equivalent, in terms of plant food, of about half a million tons of
fertilizer. And we do not want to be loaded down with any more
than we can avoid during that preliminary period.
Mr. STAFFORD. To me, that 35 years seems to be a long time to
defer the payment of rent going to the Government, even though in
terest is being paid on the deferred rent.
Mr. BELL. I should hope what we would be able to do, as a matter
of fact, is not to take advantage of that, but to go ahead and clean
up as we go along; but I do not want to get myself in a jam where
"re are having so much trouble with our other end of the operation
that we would rather not be obligated to these extremely large sums
during this first six years.
Mr. STAFFORD. Just one other question : Why do you designate
May 31, 1922, as the potential date for determining the amount of
expenditure as the basis of rent for Dam No. 2, I believe?
Mr. BELL. My recollection is that May 31, 1922, was when the
Government began its peace-time construction of Dam No. 2. Sub
ject to correction by some member of the committee who is more
familiar with it than I am. I think the situation was this: That the
Government started the construction of Dam No. 2 during the war.
That construction was stopped at one time because it was felt there
was no hope that the dam could be completed during the war and,
there was so much other construction going on which was of im
mediate necessity, it was very unfortunate to have men drawn off on
this operation that would not help win the war ; therefore, the
whole thing was stopped. Now that had a very unfavorable effect
on the cofferdams, and so on, some of which were carried out by
spring floods. loiter on the work was resumed and again a stop
page occurred because Congress did not appropriate the money nec
essary to carry it on, and again the work received a very serious
setback. It was felt that the $17,000.000 which had been expended
before May 31, 1922, part of which was a war expenditure and
much of it lost by reason of these two stoppages, might properly be
treated either as a war expenditure, or as allocated to the improve
ment of navigation, and the total of those expenditures, amounting
to some 17.000.000. all of which, as I say, took place before this
date, was excluded for that reason.
60 MUSCI.E SHOALS

Mr. STAFFORD. When the work was authorized to be resumed as

a result of the Norris amendment carried in the War Department
appropriation bill for 1922, which the House agreed to after a fight
and contest with this committee, $17,000,000 had been expended in
construction work. As I recall, there was estimated something like
a difference between that amount and $40,000,000 for the completion
of Dam No. 2. I am at difficulty to follow j^ou—why you should not
be obligated to pay rental on that $17,000,000, unless it is just to
wipe it off and say that is for navigation purposes.
Mr. BELL. I think what we are entitled to do, I think really the
fair thing, is to wipe off $17,000,000, of which at least $6.000,000
should be allocated to navigation, and at least $11,000,000 were
swept away through those two stoppages. Why should we pay for
that? I do not see just why we should.
Mr. STAFFORD. The $11,000,000 were not swept away. We main
tained the construction at an expense of $400,000 a year in status quo.
There was nothing swept away; the work merely stopped and we
were maintaining the status quo at an expense of $400,000. There
was nothing swept away.
Mr. BELL. Are you referring to the cofferdams and so on?
Mr. STAFFORD. I am referring to the hearings given before the
Subcommittee on Appropriations, at which General Taylor, just
recently deceased, then Assistant Chief of Engineers, testified as to
the condition of Dam No. 2. There was nothing swept away, as he
represented it.
Mr. BELL. Let me put it this way. Mr. Stafford : In my judgment,
had there been no stoppages, that dam could have been constructed,
if you deduct, say. $6,000.000 for navigation, for the $36,000,000
or $37.000.000 on which we agree to pay interest. As a peace-time
proposition, I think it could have been done for that; therefore,
that is what we would like to pay interest on.
Mr. STAFFORD. You are estimating just what the dam could be
constructed for after apportioning out and reducing the amount for
navigation purposes?
Mr. BELL. Yes. I think it could be done for less than that, as a
matter of fact.
Mr. STAFFORD. I do not want to get into the question that private
construction is always cheaper than Government construction.
Mr. BELL. Yes: I understand you.
Mr. STAFFORD. So you are basing your figure on $37,000,000 ?
Mr. BELL. That is my estimate; it is approximately that.
Mr. STAFFORD. Will you just explain, in a word, how you arrive at
that figure?
Mr. BELL. Well, we consider it is fair to allocate the $17,000.000.
approximately that, of the expenditures before May 31, 1922, to
the improvement of navigation and to war-time expenditures, and
for us only to pay interest on the balance which, as I understand
it. approximates $37.000.000. or whatever the figure is.
Mr. KANSLEY. The clerk will read.
The CLERK (reading) :
(2) From delivery of possession of said Dam Numbered 3 completed (a) a
sum equal to interest at the rate of 4 per centum per annum upon the total
of all sums expended by the lessor upon the acquisition and construction of
Dam Numbered 3, with its lauds. water rights, power house, structures, and
 MUSCLE SHOALS 61

facilities, as hereinabove described, and its locks and navigation facilities,

less the sum of $6,000,000 and (b) annual amounts sufficient if continued for
one hundred years, to amortize on a basis of 4 per centum interest compounded
annually, the entire amount (without deduction of such $6,000,000) so ex
pended, except that such payments of said sum aforesaid and amortization
combined for the first three years from such delivery of possession of said
Dam Numbered 3 shall be at the rate of $160,000 per year, and that the differ
ence between such $160,000 per year and the full amount of such interest and
amortization (with simple interest on such difference at the rate of 4 per
centum per annum) shall be paid in annual installments commencing not
later than the thirty-fifth year of the lease term, each such installment to be
equal to at least one-fifteenth of the principal sum of such differences and
interest thereon to the date of payment ;
Mr. STAFFORD. I assume the deduction of $6,000,000 is what you
allocate for navigation purposes?
Mr. BELL. Quite right.
The CLERK (reading) : >
(3) During the term of the lease of said Dam Numbered 2, $35,000 annually,
in installments quarterly in advance, for repairs and maintenance of such
dam and its locks and for operation of said locks irrespective of the actual
tost thereof.
Mr. STAFFORD. How do you arrive at the sum of $35,000 which
you propose to pay in addition to the 4 per cent on the capital in
vestment ?
Mr. BELL. That is a figure determined by some one in the War
Department as to the amount that would be required for the repairs
and maintenance of that dam and locks, and for the operation of
the locks. It was suggested at one point, Mr. Stafford, that we
ought to assume it all, regardless of what the amount might prove to
be, but we do not want to do that, because we feel the War Depart
ment won't want us to be passing the boats up and down 'through
there. On the other hand, if somebody makes a slip and some boat
goes through the locks and just sweeps the gates out. we do not
want to be responsible for it unless we were the people who did it.
So the War Department officers made an estimate which seemed
to them fair of $35,000.
Mr. STAFFORD. Why would it not do, as it is entirely conjectural,
to have the deduction based upon the actual payment?
Mr. BELL. Well, you see if they get a boat in there and they are
careless about the way it is tied, the first thing you know, some
day—it probably won t happen, but might happen—that boat will
get loose and go right through the gates, and carry the gates away.
Xow, if we were operating those locks, it would be right and proper
that we should pay the bill, whatever it is; but if the Government
is operating the locks, as it does at the Soo and as it does at the
Panama Canal, and so on, we do not think we ought to be liable for
a slip of that kind. Therefore, our responsibility for repairs and
maintenance of the locks, and so on, should be limited to a definite
figure. Do I make plain the situation?
Mr. STAFFORD. Oh, I fully agree if the damage is caused through
navigation, you should not be obligated to pay; but I can not see
why $35,000 should be a set figure each year to be deducted from
your rental, when there may not be any damage.
Mr. BELL. It is added to the rental ; it is a contribution we pay
to the Government for repairs and maintenance of the locks.
101229—30 5
62 MUSCLE SHOALS

Mr. STAFFORD. Oh, I beg your pardon; I thought it was a deduc

tion.
Mr. BELL. No.
The CLERK (reading) :
(4) From such delivery of such possession of said Dam Numbered 3,
$20,000 annually, in installments quarterly in advance, for repairs and main
tenance of such dam and its locks, and for operation of said locks Irrespective
of the actual cost thereof.
Mr. STAFFORD. I was under the impression as to those two items to
be paid, you think these two stated amounts are reasonable amounts
to keep the dams in upkeep condition?
Mr. BELL. Well, I am no expert on locks, but I would suppose that
was not far out of the way and I think it has been a matter of some
study in the War Department before they announced that figure.
Mr. KANSLEY. The clerk will read.
The CLERK, (reading) :
(5) The lessee will supply to the lessor, free of all charge during the period
of the lease of Dam Numbered 2, to be delivered at any point on its lock
grounds designated by said Secretary of War by notice in writing to the lessee,
such electric power as in his judgment shall be necessary for the operation and
lighting of its said locks, and will supply to the lessor from such delivery of
such possession of said Dam Numbered 3, to be delivered at any point on its
lock grounds designated by said Secretary of War by notice in writing to the
lessee, such electric power as in his judgment shall be necessary for the opera
tion and lighting of its said locks.
If the lessee be deprived of possession of any portion of the demised proper
ties for any part of a fiscal year, the total payments to be made by way of
rental by the lessee for such, fiscal year for the demised properties shall be
reduced so that the rental to be paid, with respect to that portion of the prop
erties of which the lessee is deprived of possession, shall be the same proportion
of the total yearly rental of such portion of the demised properties, as the
time, during which the lessee enjoyed possession during such fiscal year of that
portion of the properties of which it was deprived, is of one year.
In case the lessee shall be deprived of the possession of any part of the
demised properties pursuant to the provisions of subdivision (3) of article E
hereof, the payments to be made by the lessee by way of rental hereunder shall
thereupon be reduced proportionately as may, subject to the provisions of
article N hereof, be agreed upon between said Secretary of War and the lessee
(After informal discussion, the committee adjourned until to
morrow, Wednesday, February 26. 1930, at 10 o'clock, a. m.)
 MUSCLE SHOALS

WEDNESDAY, FEBBTTARY 26, 1930

HOUSE OF KEPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS.
Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. Mr. Reece will have to take the chair, as I will have
to be absent for some 20 or 30 minutes.
Mr. STAFFORD. In the last two paragraphs that we concluded read
ing yesterday, provision is made for deferring the rent in case you
are deprived of the possession. Will you kindly specify the con
ditions whereby you might be deprived of the possession of Muscle
Shoals utility development.
STATEMENT OF W. D. BELL—Resumed
Mr. BELL. I think, Mr. Stafford, the purpose of that, as I recollect
it, was because the United States might want to take over the plant
either in preparation for a war that might be regarded as imminent,
or in time of war itself.
Mr. STAFFORD. No ; provision for that condition comes later in the
lease.
Mr. BELL. Well, the actual authorization of that does come later,
but I think this is meant to cover the question of what shall happen
to the rental if that is done. In other words, at this point, we are
dealing with the rental and, therefore, that was dealt with under
these paragraphs in this section. Then later on the express author
ization to do that and the reason for it is given. I think that is it.
The CLERK. Page 10, line 8 [reading] :
B. In addition to the payments above covenanted to be made the lessee
covenants and agrees that it will—
(1) At its own cost and expense complete the steam-power plant connected
with said United States nitrate plant No. 2 by installing such additional
electrical generating and other equipment ns will increase the generating
capacity of said plant up to at least 90,000 kilowats accord ng to plans and
specifications therefor to be approved by said Secretary of War.
Mr. STAFFORD. How approximate is the steam-power plant to
nitrate plant No. 2 ?
Mr. BELL. Oh, it is right there, so to speak.
Mr. STAFFORD. How much additional expense do you contemplate
will be required to put that in current condition?
Mr. BELL. Well, there is some question in our minds as to pre
cisely how much reserve capacity we would have in the boilers after
64 MUSCLE SHOALS

we installed a unit of at least 30.000-kilowat capacity. My own im

pression, Mr. Stafford is, there is barely boiler capacity there for
such an addition and that it would be necessary to increase the boiler
capacity somewhat, in order to be assured of an adequate reserve.
Mr. STAFFORD. Have you any estimate as to the cost the lessee will
be put to by installing that necessary equipment?
Mr. BELL. Roughly, two millions.
The CLERK (reading) :
(2) 111 accordance with plans and specifications which have been or may !>'«
prepared or approved by said Secretary of War and out of funds which the
lessor hereby covenants and agrees promptly to make available for that pur
pose, install In the power house of said Dam No. 2. which reasonable prompt
ness after such funds are so made available, such additional electrical gen
erating units, together with necessary hydroelectric and operating appurte
nances, accessories, and facilities as will increase the generating capacity «>f the
equipment of said Dam No. 2 up to approximately (j00.O00 horsepower, at the
cost and expense of the lessor and without profit to the lessee, each such addi
tional seneralii;^ uislt to be the property of the lessor and Included in the leased
property upon which rental by way of interest and amortization shall be paid
to the lessor from the time of its completed installation, such additional rental
to be paid in the manner and at the rates provided in subdivision (1) of article
A hereof.
Mr. STAFFORD. I assume this is additional to the $2.000.000 you will
invest as provided in the preceding paragraph?
Mr. BELL. Yes. In other words, this is an addition to the hydro
electric station as distinguished from the $2,000.000 addition to the
steam station.
Mr. STAFFORD. How many additional units do you contemplate will
be required to be installed to generate 600.000 horsepower, and the
cost.
Mr. BELL. I should suppose that we would probably duplicate the
present units of 30.000 each, if that is what they are, in which case
some 10 units would be required. If the Government has installed
any 35.000 units, as distinguished from 30.000 units, in its present
installation, then no doubt we would put in 35.000 horsepower units.
I would suppose that installation would require four or five million
dollars of investment. In computing that figure, of course, something
depends on what they have got in the way of switchboards and other
auxiliary equipment that could be used in connection with this.
Mrs. KAHN. Well, all this is just approximate?
Mr. BELL. Yes.
The CLERK (reading) :
(3) Tay to the lessor a royalty of 3 cents pcr long ton upon all limestone
removed by the lessee or its ngeuts from the said Waco limestone quarry, such
payments to be made on or before the 10th day of each mouth for the quantity
of 'stK-h limestone so removed during the preceding month.
Mr. STAFFORD. I do not believe it has been disclosed so far in the
hearings as to how distant the limestone quarry is from the nitrate
plant Xo. 2 or Dam No. 2.
Mr. BELL. I am afraid I have forgotten. 1 have been over that
distance in a motor, but I do not remember.
Mr. STAFFORD. Is it approximate or a considerable distance ?
Mr! BELL. Oh. it is quite some distance; 30 or 40 miles, perhaps.
Mr. STAFFORD. Is it connected by any railroad trackage?
Mr! BELL. There is a railroad.
 MUSCLE SHOALS 65

Mr. STAFFORD. Who owns that ?

Mr. BELL. One of the railroads down there.
Mr. STAFFORD. It is privately owned?
Mr. BELL. It is privately owned ; yes.
Mr. STAFFORD. "iou stated yesterday the supply was virtually un
limited, so that there would be no question of its being exhausted in
case you wanted to use it in private manufacture ?
Mr. BELL. No.
Mr. STAFFORD. Does the Government utilize limestone in the manu
facture of powder?
Mr. BELL. Not that I know of. I remember that question was
raised once; but we agreed, I think, or the estimate showed we
could operate for a hundred years and there would still be a supply
for 50 years of war, or something or other. It is tremendous.
Mr. STAFFORD. Can you speak authoritatively as to whether or not
limestone is used in the manufacture of powder?
Mr. BELL. No.
Mr. STAFFORD. It is not. or you can not speak authoritatively?
Mr. BELL. Well, we own the American Powder Co. I do not know
much about its processes, but I am sure they do not use any lime
stone in its operation.
Mr. STAFFORD. Very well.
Mr. REECE. In referring to a previous hearing I find, Mr. Stafford,
that the Waco quarry is situated 20 miles south of nitrate plant
No. 2.
Mr. STAFFORD. Thank von.
Mr. REECE. I might also insert here that it embraces an area of
4CO acres, acquired at a cost of $52,962.88. The quarry has a crush
ing plant sufficient to produce 2,000 tons of crushed and sized lime
stone per day. The plant is now in an idle, stand-by condition, and
a portion of the land is leased for farming purposes.
Mr. BELL. May I inquire whether it gives the total tonnage in the
pround among those figures; because that was one of the points upon
which Mr. Stafford questioned me, and I was unable to answer with
anv degree of exactness, except I said there were enormous quantities.
Mr. REECE. No; it only gives the capacity of the crushing plant.
We might be able to find'an estimate.
Mr. BELL. Such an estimate has been made, I know.
Mr. REECE. Yes; in the hearings. We will look it up; and if we
find that, it would be well to insert it at this place in the record.
The CLERK (reading) —
C. The lessor covenants and agrees to maintain and keep in repair (as deter
mined by said Secretary of War. subject to tin: provisions of Article N hereof)
said dams and locks. The operation of said locks shail he exclusively that of
the lessor and the lessee shall not be responsible for any loss, damage, or injury
resulting from faulty design or construction of the dams, their gates and locks,
or negligent operation of said locks. In the event the lessor fails to maintain
and keep in repair said dams and locks, the lessee may. upon giving notice
to the lessor, make any and all necessary repairs to said dams and locks at
the cost and expense of the lessor, and the lessee may deduct and retain out
of the payments to be made by it by way of rental hereumhT all such sums
3s it shall pay on account of said repairs. The lessee covenants and agrees to
maintain and keep in repair the spillway gates and power houses (substruc
tures and superstructures) and the machinery and appliances appurtenant to
the power houses, and the operation thereof shall be exclusively that of the
lessee and the lessor shall not be responsible for any loss, damage, or injury
6G MUSCLE SHOALS

resulting from negligent operation thereof. The lessee further covenants and
agrees to comply with and observe all local sanitary laws and regulations In
respect to its operation of said power developments. In the event the lessee at
any time during the term of this lease fails to maintain and keep in repair tbe
spillway gates and power houses (substructures and superstructures) and the
machinery and appliances appurtenant to the power houses, the lessor may.
upon giving notice to the lessee, make any and all necessary repairs to such
spillway gates, power houses, machinery, and appliances, at the cost and
expense of the lessee, which the lessee covenants and agrees to pay promptly.
Mr. STAFFORD. In the paragraph just read, in case the Government
fails to keep the locks in repair, the lessee, upon giving notice to
the Government, has the right to make the necessary repairs. What
do you understand would be the condition whereby the Government
would first have an opportunity to make the repairs before you, as
lessees, would have the privilege?
Mr. LELL. Well, I should suppose the only thing that could happen
under circumstances like that would be this: That the Government
officers, in charge of the locks, and ourselves would get on the long
distance phone with the War Department and the chances are that
the War Department would sav, u Well, you have six or seven thou
sand men down there ; get on the job and fix it ; we appreciate it has
to be fixed right away, and, if we would stop and fix it, it would take
several weeks before we can get the necessary men and equipment
there. Go ahead and fix it." I do not know what is going to hap
pen, but I do not want anything contained in the terms of the lease
so that we would feel that we just could not sign it because, in a situ
ation like that, we would not have quick, cooperative action.
Mr. STAFFORD. What rental and operating damage would you
suffer in case there would be any delay in the repair by the Govern
ment ?
Mr. BELL. Well, if we have reached the state, we will say, where
we ought to be in 15 years, for example, and all of this power disap
pears suddenly out of Dam No. 2. because of that situation, we would
certainly have to shut down a very large part of our capacity. The
steam plant could go on. but not the hydroelectric power. Now it is
difficult for me to say. offhand, what that would be, but the rental
alone, which would be only part of it, would run over $100.000 a day,
and the loss of the interest and depreciation on the plant and loss
of the season's business and 8 per cent profit, if we were going to
make 8 per cent that year, and various other losses, would be tre
mendous. I can not give you the amount.
Mr. STAFFORD. Are you assuming the obligation in a further clause
in this paragraph to repair the spillway; is that expense assumed in
addition to the lump sum allowance that you pay the Government as
provided in subparagraph 3 on page 8, $35,000 annually for repairs
and maintenance (
Mr BELL Yes; and $35.000 annually is for repairs and mainte
nance of the locks' gates, and dam; but we ourselves become responsi
ble for such money as is necessary in order to meet the expenses of
the spillway gate repair, which is a very difficult item to approxi
mate. Various engineers have given us figures on it and no two sets
of engineers' figures agree. It has been estimated all the way from
some^oS aKear to some $150000 a year And the fact of the
matter is Mr. Stafford, that it all depends on the river; the Tennessee
River is a river which has perhaps an unusual amount of drift
 MUSCLE SHOALS . 67

wood, fallen trees, and things of that kind coming down during the
spring floods and whether these experience tables which are based
on other rivers will prove adequate in the case of the Tennessee
remains to be seen. But, in a general way, that will give you the
nature of the problem and the difficulty of estimating it. And, in
that connection, you will notice that we accept the same conditions
here in reference to these spillway gates and power house that the
Government accepts up above.
Mr. STAFFORD. As to the locks ?
Mr. BELL. As to the locks.
Mr. STAFFORD. But you are going to pay $35,000 annually in addi
tion to the rental based on the 4 per cent ?
Mr. BELL. Oh, yes.
Mr. STAFFORD. And keep the spillway gates in repair?
Mr. BELL. At our own expense.
Mr. STAFFORD. At your expense?
Mr. BELL. Yes. In other words, up above, it provides "in event
the lessor fails to maintain and keep in repair said dams and locks
the lessee may, upon giving notice to the lessor, make any and all
necessary repairs to said dams and locks," and then down below,
where we are now, it says :
In the event the lessee at any time during the term of this lease fails to
maintain and keep in repair the spillway gates and power houses (substructures
and superstructures) and the machinery and appliances appurtenant to the
power houses, the lessor may, upon giving notice to the lessee, make any and
all necessary repairs to such spillway gates—
And so on. In other words, what is sauce for the goose is sauce
for the gander, and the question of the number of days that should
elapse is left to a reasonable interpretation. If there are going to
be any lawsuits about it, the courts will decide what would have been
reasonable under the circumstances ; but, as a matter of fact, it ought
not to be a matter of days; it ought to be a matter of minutes or
hours. It is a very serious situation if it ever arises.
The CLERK (reading) :
D. The lessor for the purposes of navigation improvement, national defense,
and to secure the maximum production of fertilizers at Muscle Shoals in time
of peace covenants and agrees to acquire and construct with reasonable prompt
ness the dam generally known and designated as Dam No. 3, and described in
paragraph (2) of the granting clauses hereof, with the lands, water rights,
privileges, power house, structures, fixtures, apparatus, and facilities necessary
for the construction, operation, and maintenance of the snme as hereinafter
provided, and to complete the same within eight years from the tlate hereof.
Said dam shall be of such dimensions and specifications and have a power
house and such installations and equipment for the generation of electric
Power as will take full reasonable advantage of the flow and fall of the
Tennessee River for utilization of the water power of said river to the best
advantage thereof in view of the other water-power developments that may
be located on said river and/or its tributaries as determined by said Secretary
of War; and the said dam shall not be construed in such a way as will
materially impair or detract from the use and enjoyment by the lessee of the
other properties, or any of them, demised to it by this lease. The total of the
sums expended by the lessor in the acquisition and construction of the prop
erties described in paragraph (2) of the granting clauses hereof shall be deemed
to be for the purpose of calculating the payments to be made by the lessee
under Article A hereof the sums actually so expended, but not exceeding
$32.500.000 (including the locks and navigation facilities) , unless such amount
be increased by mutual agreement between said Secretary of War and the
lessee.
68 MUSCLE SHOALS

Mr. STAFFORD. Yesterday you expressed a willingness that it was

not fundamental that this Dam No. 3 should be constructed so far
as the desires of your company were concerned and stated that in
your original lease you proposed to accept merely the power at Dam
No. 2. Here it is mandatory upon the Government to go ahead with
the construction of Dam No. 3. What do you wish to say on that
as far as it being essential to your proposal ?
Mr. BELL. That policy, as I think I explained yesterday, was sug-
fested to us as the policy that Congress would wish to follow. So
ar as going back to our original oner, I think we would be willing
to do that. We have not suggested it, because we did not realize that
Congress might wish it that way.
May I go back, Mr. Stafford, just a moment to this other matter
about amendments ?
Mr. STAFFORD. Surely.
Mr. BELL. What we have endeavored to do in our program here
was to submit a lease which, if adopted by Congress, would not pre
sent a difficulty that we once ran into when we were negotiating with
the Government—a difficulty that consisted in an opinion from At
torney General Daugherty to the effect that certain officers of the
Government had signed a contract which contained a provision that
was ultra vires, that they had no authority to insert a certain
paragraph in the contract and, therefore, that part of the contract
was void and null and of no effect and we were out as far as that
particular provision was concerned.
We feel that we should be in a position where Congress, first of all,
knows exactly what the lease contains and, so far as Congress can
foresee and we can foresee, everything is provided for in this agree
ment. If it is signed, it is exactly what Congress had in mind and
there is not any question of ultra vires involved; if it is signed, so
far as we know, everything has been covered and all that is left for
us to do is to go down and build the plant and make fertilizer. We
do not have to sit down with a Government officer and try to figure
out what it was all about. Now, that being so, I most heartily approve
of your suggestion that if there are any questions, let us settle them
now and let us have it amended so that everybody knows exactly
what is going on. So I would like very much, if it is agreeable to
you, to be consulted in reference to these amendments. In other
words, what we have here is something that, if it is passed, why, I
will sign it and that is the end of that, and I do not want to be put
in the very embarrassing position of having Congress pass an act
and then I find there are amendments which I think, from a business
standpoint, we can not accept and, therefore, I can not sign it. Sup
pose I should put the Congress of the United States to the trouble
of having passed something which I am not prepared to sign, it
would be a very humiliating situation, a very embarrassing situation
for me. There may be things that should still further be amended ;
there has been a great deal of time and thought given to this, but it
is not perfect and quite possibly something more should be done : but
will you be so kind as to let me know what it is before you actually
doit? Do I make clear the difficulty?
 MUSCLE SHOALS 69

Mr. STAFFORD. But you agree as the head of a great business

corporation that this lease should be submitted to some law officer
of the Government?
Mr. BELL. Oh, yes; and it has been many times.
Mr. STAFFORD. Rather than to members of this committee, who
are lawyers, perhaps
Mr. BELL. It is perfectly agreeable.
Mr. STAFFORD (continuing). But who would not give it the scru
tiny they would if they were privately employed. I have been
unable as a legal member of this committee to give this my legal
consideration the same as if I were employed by Graham Bros, of
Detroit to draw a lease. Now, in negotiating leases for large con
cerns, for a long term of years, you prepare a draft and submit it
to the lessee and then the lessee has some suggestions, and you
submit them to the lessor, and then you compromise.
Mr. BELL. Yes.
Mr. STAFFORD. It is not contemplated this committee, I take it,
shall propose a lease to be ratified by Congress, with certain changes,
before it is submitted to you to see whether those changes and
amendments meet with your approval.
Mr. BELL. That is fine.
Mr. STAFFORD. But, of course, you will agree this lease should be
submitted to the law officers of the Government?
Mr. BELL. Oh, yes. So far from my suggesting otherwise, as
a matter of fact it has already been submitted to the law officers of
the Government and it has also been submitted to the War Depart
ment and various other departments, and there is no objection on
my part at all to letting them all do it over again.
Mr. STAFFORD. That is just what I wished to obtain. I was a
stranger to that fact.
Mr. BELL. That is all right.
Mr. STAFFORD. Will you kindly specify when and to whom this
lease has been submitted in the manner just indicated by your
statement?
Mr. BELL. Judge Wheat, who was at that time an Assistant
Attorney General, I believe, represented the Attorney General's
office in reference to this lease. General Hull, who was Judge Ad
vocate General of the Army, and his accounting division, also made
numerous suggestions. You asked for dates
Mr. STAFFORD. Oh, no.
Mr. BELL. I am afraid I am unequal to dates.
Mr. STAFFORD. You say it was submitted to the W'ar Department.
When did that happen?
Mr. BELL. That happened before the joint committee of the Sen
ate and the House, and so on; but understand it is perfectly all
right with me to let them all pass on it again and make any further
suggestions. But you have relieved my mind, because, as I under
stand it, your feeling is that after any amendments are recom
mended, why, then, you will be so kind as to consult with us.
Mr. STAFFORD. That is a matter for the committee. I assume the
committee will be only too glad to submit it again to you in the
amended form.
70 MUSCLE SHOALS

Mr. BELL. That is fine.

The CLERK (reading) :
E. In order to secure the purposes of the lesser as respects national defense
the lessee convenants and agrees—
(1) To maintain during the term of this lease said United States nitrate
plant No. 2 in at least the equivalent of the condition (except that the
lessee may remove limestone from said Waco quarry upon payment of the
royalty as hereinabove provided) in which it shall be turned over to the lessee
at the commencement of the lease-term in respect of effective capacity for
manufacture of ammonium nitrate, available in suitable buildings, until such
time as the Congress of the United States shall declare that such maintenance
is no longer deemed necessary in the interest of national defense.
(2) To maintain during the term of this lease the buildings of said United
States nitrate plant No. 1 in the condition (ordinary and reasonable wear and
tear and damage by force majeure excepted) in which they shall be turned over
to the lessee at the commencement of the lease term, but the lessee shall have
the right during the lease term to alter and remodel such buildings and to
remove, remodel, substitute, and alter the machinery and equipment contained
therein, and upon removal of any such machinery or equipment the lessee
shall give written notice of such removal to the Secretary of War, which notice
shall state the place upon the land of nitrate plant No. 1 at which such
machinery or equipment is hold for delivery to the Secretary of War. If the
Secretary of War fails to take possession of such machinery or equipment and
to remove the same from the leased premises within 90 days from receipt by
him of such notice then the lessee shall store such machinery or equipment iu
such manner as, in the opinion of the lessee. Is most practicable.
(3) Upon demand of the President of the United States, to surrender, when
ever war exists, or whenever in his judsnnent it is imminent and the needs of
national defense require, tin- leased properties. In whole or in part, to the lessor
for its war uses during the period of such emergency, upon such just and
reasonable compensation to the lessee by way of suspension of payments or
obligations hereunder and/or otherwise, as may be fixed and determined by the
District Court of the United States for the Northern District of Alabama or by
the district court of the United States for any disrict adjacent to said
northern district of Alabama, or their respective successors as then constituted,
in accordance with the provisions of Article N hereof; the leased properties to
be returned to the lessee upon the termination of the emergency in at least the
equivalent of their condition when so surrendered: Provided, That the lessee
shall in no way be responsible for any loss, deterioration, damage, or injury
of or to person or property, whether or not resulting in death, occurring by
reason of such possession and/or use of the surrendered properties during the
period of such surrender.
Mr. STAFFORD. I notice the Government's taking possession is con
ditional in this clause upon war or the imminence of war. Assuming
that the Government, during peace times, should wish to engage in
the manufacture of powder, when war might not be imminent. Why
should not the Government have the right to exercise the privilege,
which would not interfere generally with your continuing the manu
facturing of your other lines; or do you assume that the Govern
ment's taking possession for the manufacture of powder would inter
fere completely with your work in the other lines?
Mr. BELL. Well, I should hesitate very much to allow a provision
or insert a provision in which the Government might, at any
moment, in time of peace and without regard to its war necessities,
come in and interfere with this picture. This is a manufacturing
situation. I do not think that would be a very happy arrangement.
Mr. STAFFORD. You think, then, if the Government desires this
plant for the manufacture of powder that then that would interfere
completely with your other operations?
 SirSCLE SHOALS 71

Mr. BELL. I do not know how it would work. That is just it;
I do not know. I should think it might, but I do not know that it
would. At any rate, if the Government wants us to manufacture
fertilizer, why not let us alone and let us make the fertilizer and
the Government set up its peace-time operations somewhere else?
Mr. STAFFORD. You are not acquainted with where the Government
wets its powder to-day are you ? Some years back I was conversant
with that and knew where the Government got its supply and stored
it—so much in private establishments. You do not know the present
policy?
Mr. BELL. No; except I know they have arsenals where thej" manu
facture powder—Picatinny, and so on.
The CLERK (reading) :
(4) At all times after the third year of the lease term, to the end that
operation iu c.ise of wur shall l>e under the direction of a trained force, to
retain in its employ at least one competent superintendent mid one or more
competent foremen of each manufactur,ng department of suid United States
nitrate plant numbered 2 for fixation of atmospheric nitrogen, or employ
substitutes therefor, until such time as the Secretary of War shall certify in
writing that 'continued maintenance of such force is not deemed necessary
in the interest of national defense.
F. In order to secure the purposes of the lessor in respect of the ut lization
-f the demised properties in times of peace for the fixation of atmospheric
nitrogen and the production of a concentrated fertilizer and its sale to fanners
in the United States at reasonable prices, the lessee covenants and agrees that
it will—
(ll Produce or cause t" he produced at said United States nitrate plant No.
2. and/or, at the option of the. lessee, at such other plant or plants adjacent or
near thereto as it may construct, using the most economical source of power
available (such other plant or plants, if any, to be constructed on property
owned by the lessor or on property acquired by the lessee and by it conveyed
t» the lessor prior to such construction, and any such property to become and
t>e. ipso facto and without any further conveyance or assignment, a part ft
the properties demised by this lease and, as such, subject to nil the applicable
terms and provisions of this lease for and during the balance of tin- unexpired
said term of 50 years hereinabove mentioned and described, as fully and com
pletely as though specifically leased and demised by this lease), and/or said
I'uited States nitrate plant No. 1. ammonium phosphate or other nitrogenous
concentrated fertilizer suitable for use by the farmers both through direct
application to the soil and through home mixing, and contain'ng at least 40
per cent by weight of plant food in the form of ammonia and/or phosphoric
acid and/or potash. The production of such concentrated fertilizer will be
commenced at said United States nitrate plant No. 2 by us:ng the cyarmmid
process.
Before the expiration of the second year of the lease term the lessee will
make such alterations as are found necessary by the lessee upon inspection and
test of the said nitrate plant and will build, on the lands of the lessor, the
necessary phosphoric acid and ammonium phosphate plants to produce annually
a quantity of such concentrated fertilizer containing not less than 10.000 net
tons of fixed nitrogen and not less than 40.000 net tons of plant food in the
form of ammonia and/or phosphoric acid and/or potash. The term "net tons"
i>» used in this article is hereby defined to mean tons of 2.0110 pounds each.
The first unit of the plant for production of such concentrated fertilizer will be
operated at full capacity not Inter than in the third year of the lease term,
and the product will he offered for sale in the manner hen inafter provided.
At any time thereafter when the lessee has for three successive fiscal years
succeeded in selling approximately the full product of such first unit at cost
plus 8 per cent (as provided in subdivision (2) of this article) the lessee
will, upon written request of the farmer board hereinafter described, provide
and place in operation a second unit of sufficient size so that there shall be
then a total capacity for annual production of such concentrated fertilizer
containing at least 20,000 net tons of fixed nitrogen and at least 80,000 net
72 MUSCLE SHOALS
tons of plant food in the form of ammonia and/or phosphoric acid and/or
potash. When at any time thereafter the lessee has for three successive liscal
years succeeded in selling approximately the combined full product of such first
two units at cost plus 8 per cent (as provided in subdivision (2) of this
article) the lessee will, subject to the provisions of Article T hereof, upon
written request of the said farmer board, provide and place in operation a third
unit of sufficient size so that there shall be then a total capacity of auuual
production of such concentrated fertilizer containing at least 30,000 nf>t tons
of fixed nitrogen.
At any time thereafter when the lessee has for three successive fiscal* years
succeeded in selling approximately the combined full product of such first three
units at cost plus 8 per cent (as provided in subdivision (2) o£ this article I
the lessee will, upon request of said fanner board, provide and place in opera
tion a fourth unit of sufficient size so that there shall he then a total cnpar-i*7
for annual production of such concentrated fertilizer continuing at lenst 40,000
net tons of fixed nitrogen. At any time thereafter when the let-set' has for th~ee
successive fiscal years succeeded in selling approximately the combined full
product of such first four units at cost plus 8 per cent (as provided in subdivi
sion (2) of this article) the lessee will, upon request of the farmer board in
crease the annual production of fixed nitrogen to 50,000 net tons, the amount of
such annual production in excess of said 40,000 net tons of fixed nitrogen to be
produced in the form of such concentrated fertilizer, or, at the option of the
les>ee, in the form of nitrogenous fertilizer containing at least 30 per cent by
weight of plant food in the form of ammonia and/or phosphoric acid and/or
potash, and to be offered for sale under the provisions of subdivision ('2) of
this article. The lessee throughout the term of this lease will annually produce
a quantity of such concentrated fertilizer equal to the plant capacity for such
production as the same shall exist from time to time as above stated, except
when the nitrogen is required for national defense or when satisfaction of
market demands is insured through the maintenance in storage of an unsold
quantity of such concentrated fertilizers equal to at least 25 per cent of the
annual capacity of said first unit: Provided, That whenever said stock in stor
age shall fall below said 25 per cent such production shall be resumed.
Such concentrated fertilizer so maintained in storage shall be in the form of
ammonium phosphate unless upon written request of the lessee the farmer
board hereinafter described shall approve such concentrated fertilizer so main
tained in storage being in some other form, such approval to be evidenced by a
resolution of said farmer board to be made a part of the record of its proceed
ings hereinafter provided for. Nothing herein contained shall deprive the
lessee of the privilege of anticipating from time to time the production of, and
the increases above mentioned In plant capacity for production of, such concen
trated fertilizers.
Mr. STAFFORD. Will you kindly give your estimate as to the cost
of construction for each of these units that will be required for this
supplementary accumulative production of fertilizer?
Mr. BELL. Yes; somewhere probably in the neighborhood of
$8,000,000 a unit.
Mr. STAFFORD. Have you any acquaintance as to the marketing of
fertilizer? I ask that question by reason of the provision here that
if ever there is a supply of 25 per cent of the annual capacity, then
I believe production is to cease. I assume from this provision it was
the idea that you shall check production when there is a storage of
25 per cent of fertilizer.
Mr. BELL. I'nles we feel that it is pretty sure to be taken out by the
market demand, why we have a right to stop.
Mr. STAFFORD. Is the demand for fertilizer seasonal, or is it general
throughout the year?
Mr. BELL. It is seasonal. In this case, Mr. Stafford, probably it
would prove even more seasonal because the theory that Congress
has in mind, as I understand it, is that this fertilizer shall go direct
to the farmer, either for home mixing or for direct application; con
sequently, we have a situation where he will wait until it is pretty
 MUSCLE SHOALS ' 73

nearly time for him to put the stuff on, allowing some margin of
safety for the transportation time, and then he will send in his order
and the stuff will go out, I would suppose over a period from the
latter part of January on down as late as the latter part of April,
or even May.
Mr. STAFFORD. Have you any acquaintance with the present method
of distribution of fertilizer?
Mr. BELL. Yes, sir.
Mr. STAFFORD. Will you kindly state how it is done, because you
mentioned just now that you contemplate that this is to be shipped
from the plant direct to the farmer, which to me seems to be rather
an uneconomical process.
Mr. BELL. Of course there are a number of methods of distribution
in the United States at present. To give a more or less complete
picture of it, I should say, first of all, there is the method which
generally prevails, in which a fertilizer manufacturer buys the basic
material, such as Chilean nitrate and sulphate of ammonia, phosphate
rock, which some of the manufacturers themselves manufacture
into acid phosphate, blood, tankage, and various other constituents
of mixed fertilizers, as they are known to-day, and he mixes those
in his plant and ships them out, sometimes with a certain amount of
filler—well, always with a certain amount of filler—to his local
distribution stations where the farmer can drive up in his truck and
get the material. And that is the way I should suppose the large
bulk of the artificial fertilizer of the United States is distributed
to-day. Now in addition to that, however
Mr. STAFFORD. I am primarily concerned with the method of dis
tribution of the finished product to the farmer under existing mer
chandizing processes.
Mr. BELL. That is the way the bulk of it is handled to-day.
Mr. STAFFORD. Is that through country-store dealers or through
general-merchandizing concerns ?
Mr. BELL. Well, to some extent many of these companies have
numerous stations, you know, scattered around all through the
country, storage warehouses with agents in charge, who handle the
stuff direct with the farmer.
Mr. STAFFORD. Is it a bulky article ?
Mr. BELL. Yes.
Mr. STAFFORD. So that warehouses are necessary?
Mr. BELL. Yes.
Mr. STAFFORD. And the local distributor has to obtain a large
quantity in advance to meet the local needs?
Mr. BELL. Yes.
Mr. STAFFORD. And you think, under this process, there is going
to be a new method of distribution whereby the farmers will call
direct upon your plant at Florence for their fertilizer?
Mr. BELL. I wotdd anticipate a great deal of this material would
be handled in this way. Mr. Stafford. The farmer will send in his
written order and the stuff will be shipped to him direct, or to him
and his friends ,who will take a carload lot. On the other hand, I
think some of it will be bought by cooperatives, granges, and farm
bureaus, who will put together carload lots and they will be the
purchaser with whom we will deal.
74 MUSCLE SHOALS

Mr. STAFFORD. I can visualize how it can be distributed through

cooperatives and groups of farmers.
Mr. BELL. Yes. It is a very- interesting subject and you know
at present it is being done in all sorts of ways. For instance some
of the big farm cooperatives, the State organizations, now purchase
direct large quantities of Chilean nitrate and sulphate of ammonia
and acid phosphate and do their own mixing for the benefit of their
members. So that to some extent we have a situation that already
parallels what might occur in this picture. The Chilean nitrate pro
ducers also sell direct to farmers and to cooperatives. I think that
probably is exactly what you have in mind.
Mr. DOUGLAS. May I ask a question right here?
Mr. BELL. Certainly. -
Mr. DOUGLAS. The phrase is used throughout this paragraph which
has just been read " fixed nitrogen." Exactly what is the technical
meaning of fixed nitrogen?
Mr. BELL. That refers to the equivalent in terms of pure nitrogen.
I think probably what you have in mind is what is the difference be
tween ammonia, which is the term ordinarily used, and fixed nitrogen
or nitrogen.
Mr. DOUGLAS. By '' fixed nitrogen " you mean simply the element
nitrogen in terms of weight, regardless of the other elements with
which it may be compounded?
Mr. BELL. Exactly ; that is it. Now I think the reason it has been
worked out that way, historically in this situation, is that abroad
it is customary to deal in terms of nitrogen rather than in terms of
ammonia, and here was a nitrogen plant and the nitrogen was what
the Government wanted in time of war, and they were given by the
Allies certain figures as to what they needed in the way of nitrogen
in order to complete those munitions programs. So that 40,000 tons
having been what the Allies suggested as the beginning unit for
the American military program, 40.000 tons of nitrogen got intro
duced into this picture; whereas if it were begun solely as a fer
tilizer picture, it would have been solely in terms of ammonia.
Mr. DOUGLAS. Yes.
Mr. BELL. Now the next thing you probably are going to ask me is
what is the ratio between nitrogen and ammonia and I think I
know. I am ashamed to say I am not quite sure, but I think the
ratio is 14 to 17.
Mr. DOUGLAS. Fourteen to seventeen?
Mr. BELL. Yes : it is some odd ratio like that.
Mr. DOUGLAS. Or 14 to 21?
Mr. BELL. I am not going to contradict you, but I think it is 14
to 17. A gentleman over here tells me it is 82i/2 per cent, which I
think is approximately 14 to 17; that is to say, if you want to know
what 40.000 tons of nitrogen means in terms of ammonia, you divide
bv 14 and multiply by 17.
"Mr. DOUGLAS. In line 21 on page 18 there is the following lan
guage : " at least 20,000 net tons of fixed nitrogen and at least 80.000
net tons of plant food in the form of ammonia and/or phosphoric
acid and/or potash." Is it your understanding that language means
that you must produce not only 20.000 tons of fixed nitrogen, regard
less of the elements with which it may be compounded, but also and
in addition 80.000 tons of other plant food?
 MUSCLE SHOALS 75

Mr. BELL. Yes, that is it exactly. You see, Mr. Douglas, the
theory of that is this: That as we see the fertilizer business to-day
we know that if we went down there and simply manufactured so
many thousands of tons of cyanamid, which would comply with the
nitrogen part of this guarantee, we would not have solved to your
satisfaction the problem of how to furnish a cheap fertilizer to the
American farmer for direct application or home mixing, because the
American farmer does not use his fertilizer that way; he wants
mixed goods. So that we have undertaken here, as regards the first
two units, we will not only manufacture nitrogen but we will also
manufacture a quantity of plant food which will include that much
nitrogen and which will also include that much plant food.
The purpose of that, therefore, is to show our good faith in an
attempt to solve the present fertilizer problem of the American
farmer, even demonstrating our good faith by such investments
as those guarantees will require, as regards the first two units.
Then we nave stopped going on with further guarantees with the
tonnage of plant food, for this reason, as regards the third and
fourth units, because we ourselves are convinced it is dangerous to
go ahead and guarantee indefinitely for the whole program the
type of fertilizer the farmer is going to use for 50 years. We do
not know. For example, we have a very interesting material in
urea. You may recall that in our agreement with the Union Car
bide Co., we have a provision by which we have the rights
to their urea process and we have given quite some thought to
urea. Now urea is an all-nitrogen fertilizer, it is true; but, on the
other hand, urea possesses certain distinct advantages for direct
application and home mixing if we can ever get the commercial
cost* of urea to the point which we have hopes they can be brought to,
and it might be urea might be the thing lor those other plants and
that the farmer would want urea quite regardless of whether or
not other materials were associated with it—a situation that we
think is not so apt to arise in the case of cyanamide. Now as regard
the fifth unit, the reason we did not do it is because we have not
enough power in sight to make the guarantee which might involve
the manufacture of that much more phosphoric acid by the electric
furnace method, in addition to the manufacture of cyanamide by the
cyanamide process. Have I made it plain?
Mr. DOUGLAS. Yes, I can readily see the necessity for giving you
flexibility with respect to the compound, or the elements with which
nitrogen shall be compounded.
Mr. BELL. Yes. But out of these first two units the farmer is
to get at least 80,000 tons of plant food, which will include at least
20.000 tons of pure nitrogen.
Mr. DOUGLAS. Which will include, but not in addition to?
Mr. BELL. No, not in addition to.
Mr. DOUGLAS. I think as this reads, it is in addition to.
Mrs. KAHN. It says " and at least."
Mr. DOUGLAS. As I take it, that means 75,000 tons of nitrogen,
regardless of the elements with which it shall be compounded.
Mr. BELL (reading) :
Provide and place in operation a second unit of sufficient size so that there
shall be then a total capacity of annual production of such concentrated fer
tilizer containing at least 20,000 net tons of fixed nitrogen and at least 80,000
net tons of plant food In the form of ammonia.
76 MUSCLE SHOALS

You see, that is another way of saying nitrogen.

Mr. DOUGLAS. Yes.
Mr. BELL. " And/or phosphoric acid and/or potash.'' So, you see,
the 80,000 includes the nitrogen. Is not that right?
Mrs. KAHN. I am not an expert, but I would take Mr. Douglas's
interpretation.
Mr. DOCGLAS. I think that is ambiguous, Mr. Bell, and some one
might read that and construe it to mean you are bound to produce
not only 20,000 tons of fixed nitrogen but, in addition, at least 80,000
tons of pure plant food.
Mr. BELL. Would it clear up the ambiguity if instead of '' am
monia " we had said " nitrogen "?
Mr. DOUGLAS. Well that would, of course, increase your tonnage
of nitrogen required to be produced, would it not?
Mr. STAFFORD. I think it would clear up the ambiguity by substi
tuting " or " for the word " and " in line 22, so as to make it read
" or so as to produce." What do you think about that, Mr. Douglas?
Mr. BELL. All right, suppose I work over that.
Mr. DOUGLAS. I think there is an ambiguity there, Mr. Bell. I
may be wrong about it.
Mrs. KAHN. I would take Mr. Douglas's interpretation of that.
Mr. DOUGLAS. As I read it, I would construe it to mean assuming
the 80,000 tons were all in the form of ammonia, under the language
used, you would be required to produce approximately 75,000 tons of
nitrogen. That would be a considerable tonnage.
Mr. BELL. It certainly would; we could not do it. May I work
over that at some time when it won't delay the committee and see
what we can do to clear that up?
Mr. STAFFORD. I think in that connection you should also consider
the phraseology just above and throughout, which runs through the
various provisions.
Mr. STAFFORD. I think in that connection you should also consider
the phraseology just above and throughout, which runs through the
various provisions.
Mr. DOUGLAS. It may be by the insertion of a comma the ambig
uity can be cleared up.
Mr. BELL. All right ; I will attend to that.
Mrs. KAHN. " Including in it at least."
Mr. STAFFORD. Or " so as to produce.''
Mrs. KAHN. Yes " or included in the 80,000 net tons/'
Mr. DOUGLAS. Of course if some one should construe it as I do, it
would be an unfair condition to impose upon you and quite impos
sible, would it not?
Mr. BELL. Yes, I am glad you called my attention to it.
Mr. REEOE. Have you also given attention to the language at the
top of page 18?
Mr. BELL. Yes ; Mr. Stafford mentioned that ; I have a note on that,
too.
Mr. SPEAKS. Mr. Bell, the Farm Board can order the discontin
uance of the fertilizer production at any time, can thev not ?
Mr. BELL. Well, I am under the impression, General, that it is the
Secretary of War or the President, is it not?
Mr. SPEAKS. I think it is left to the Farm Board. Whoever it is,
somebody representing the Government may order the discontinu
 MUSCLE SHOALS 77

ance of the manufacture. For instance, if there is a supply in excess

of that required by the contract on the ground and nobody wants it,
then they can discontinue the manufacture.
Mr. BELL. Oh, yes. We have a right to do it.
Mr. SPEAKS. Then if that situation arose, all of the power capacity
of the plant is at your disposal ?
Mr. BELL. Yes.
Mr. SPEAKS. For any use you care to make of it ?
Mr. BELL. Yes.
Mr. SPEAKS. To sell it throughout the country, or to do what you
please with it.
Mr. BELL. Yes. Now, General, in order to give a complete pic-
Mr. SPEAKS. I thought that was pretty complete; that was my
recollection of the situation arising from the questioning in other
hearings, but just the plain fact is that somebody representing the
Government can order the discontinuance of the manufacture of
fertilizer at any time. When that is done, then the whole Muscle
Shoals power plant is at the disposal of your company ?
Mr. BELL. Oh, no ; no, that is not the picture. I beg your pardon.
Nobody can order us to stop the manufacture of fertilizer at Muscle
Shoals, except when we are in a war or war is imminent ; but, on the
other hand, when that quantity of material is in storage, we our
selves, without any authorization from any officer of the Govern
ment or farmers' board, can stop the manufacture of the material.
On the other hand, dealing with the other aspect of the question,
the power is then at our iusposal to sell it or do anything we can
with it, but subject to recall.
Mr. SPEAKS. Oh, surely.
Mr. BELL. That is to say, if the stored material falls below a cer
tain quantity, we must then resume at full capacity the manufacture
of the material and, therefore, we will have to recall that power.
Further than that, if we are able to sell at a profit, which I should
say was a highly improbable thing in view 01 the situation that we
can not sell it except subject to recall, but if we can sell it at a profit,
the profit goes to the reduction of the cost of the material in storage
until it is finally sold. Further than that—I wonder if you gentle
men are sufficiently acquainted with the power business to realize
the difficulty of selling a great big block of power which comes on
the market by reason of the shut down of the plant, but in view of
the fact the cost of the stored material is being written off all the
time, sooner or later the power may be recalled and, therefore, one
is in the position where all he can do is to offer this big block of
power subject to recall. However, if it can be done, as I say, and
if any profit is made on the transaction, why that profit goes to the
writing down of the price of the material.
Mr. DOUGLAS. In other words he is to benefit by this who pur
chases this fertilizer?
Mr. BELL. Yes.
Mr. DOUGLAS. Is not that really what it amounts to?
Mr. BELL. That is what it amounts to. In other words, if the
Srice of the material at cost plus 8 per cent, to take an arbitrary
gure is $60 and we have succeeded in selling this block of power
at a profit, that profit will go to reduce the cost of $60.
101229—30 6
78 MUSCLE SHOALS

Mr. COCHRAN. Mr. Bell, if the market price of fertilizer should

be such that you could not sell your fertilizer at a profit or 8 per cent,
you would not be required to manufacture a pound of fertilizer,
would you?
Mr. BELL. Not after we had built up this storage to a certain
point; that is to say, an amount which in terms of the figures we
were talking would be somewhere in the neighborhood of one and
a half million dollars. I will tell you I have tried to sit down, don't
you know, and see ahead, which is always quite a difficult thing to
do, and I have tried to figure out what might happen. What might
happen would be this, that our competitors knowing the condition
of this lease, and so, on, our foreign competitors if you choose, or
possibly our domestic competitors, might say to themselves " now we
will just cut the life out of this operation for a while and see what
happens next," so that they might bring their price down not simply
to the point to which we had brought our price down under this cost
plus 8 per cent, but they might go away on down below that for a
while.
I do not know whether you realize or not, probably you have not
been brought in contact with it, but there are certain great chemical
manufacturers abroad who operate in some cases in protected terri
tories, in some cases in embargo territories, where only they can be
admitted, and it is possible they might think it was a shrewd com
petitive move, in order to upset the situation in America to get that
market—they might feel a shrewd way to do that would be to dump
over here for a while and make their profits abroad in the embargo
countries or, in some instances, where their freight rates on our
products from Warners, for example, would virtually amount to an
embargo. So let us suppose they start in and create a price situa
tion like that. Now you say under this program, so far as Muscle
Shoals is concerned, we can not export the material except with the
approval of the farmer board and while I expect the farmer board to
be a set of reasonable business men, and so on, yet I suspect they
would be very reluctant to give us an authorization to export the
material produced at Muscle Shoals. You can imagine there would
be an opportunity for criticism, whether it was justified or whether
it was not, because Muscle Shoals was built, first, for national de
fense and, secondly, for the American farmer, to insure a high-grade
concentrated fertilizer at a reasonable price.
So we are in the position where we may not be allowed to retaliate
even to the limited extent one can retaliate with high eastbound
freight rates on the North Atlantic; or in a case where we can not
wet into countries at all, we could not retaliate because the farmer
board would say : " Now you go ahead and make this stutf for the
American farmer; we do not want you to ship abroad." You can
readily see that situation might arise. So here we are having brought
about "a situation which is to the great advantage of the American
farmers, because we have brought the whole price level of fertilizer
all over the United States down and, for the moment, we have
brought it down to a point below what we can afford to make. And
if there were not some such provision as this in the picture, really
what would we do? Why, we would he required to go on and manu
facture about $25.000,000 worth of stuff every year and pile it up.
 MUSCLE SHOALS 79

Well, you could not pile it lip; there are not warehouses enough;
we would have to spend millions and millions more dollars in
warehouses in order to store the stuff, which we could not do. We
would just have to dump it in the Tennessee River under a provision
like that.
Mr. SPEAKS. Well, vou are not required to do that, are vou, Mr.
Bell?
Mr. BELL. Oh. no, indeed ; we have very carefully refrained from
"retting into that position.
Mr. SPEAKS. If you will pardon an interruption right there, sup
pose the fertilizer produced at Muscle Shoals does not go in the
home market?
Mr. BELL. Exactly.
Mr. SPEAKS. Or any condition arises where there is no demand?
Mr. BELL. Yes.
Mr. SPEAKS. Where there is no demand for the fertilizer?
Mr. BELL. Well, such a condition as I have described.
Mr. SPEAKS. Or officers of the Government authorize you not to
produce under the terms of the contract: in that event, of .course.
you would stop the manufacture of fertilizer. As you say, this
farmer board will be reasonable men, and they will not be asking
you to do anything unreasonable. In that event. Muscle Shoals is
turned right over to your company; is not that true?
Mr. BELL. No; there are quite a number of provisions that then
come into play. First of all, in a situation such as that, if we stop
the manufacture, as it is under this lease, we carry in stock inven
tories that will aggregate on this manufactured price I suggested,
something over a million and a half dollars on which we are out
the interest, we are out the depreciation of the plant, we are out
the interest on the investment that we have in the plant; but at
any time our competitors feel that they have got to the point where
they have had enough and the price of fertilizer goes back to the
point where we can make our costs, we start up again.
Mr. SPEAKS. Yes; I am familiar with that.
Mr. BELL. Now, let us assume a case where the situation is such
that we can not go on and ever make fertilizer at Muscle Shoals, if
you please.
Mr. SPEAKS. Yes.
Mr. BELL. Let us assume a case where the farmers use something
to make their plants grow other than fertilizer. I think that is a
rather remote and fantastic idea, yet I am not quite sure about that.
Perhaps you gentlemen are familiar with some of the bacteriological
talk that is going on now and fertilizing plants by that method and
not by fertilizer at all. Or let us assume still another case, which
is perhaps less fantastic and remote, a case in which some other type
of fertilizer comes along and it is perfectly obvious that Muscle
Shoals, whatever else it is, is not a good place to make that one. Let
us suppose one was to make a fertilizer, some material that will sup
plant all the rest that now exists, where you go on top of the coal
mine, at the pithead and make it there: Now. what will the Gov
ernment do in this case? The Government can do a number of dif
ferent things under the conditions set up in this contract. Having
80 MUSCLE SHOALS

determined that, in our opinion, fertilizer will not be manufactured

again at Muscle Shoals, there is no reaonable prospect of it, a de
termination which is made in the first instance by the farmer board
and must be confirmed by arbitration, if we insist it must be con
firmed by arbitration, the Government may then elect to treat this
whole thing as a power proposition and to arbitrate and determine
what the rental shall be.
The program in that respect, however, is limited in this way, that
they shall not fix the rental at a rate which will involve more than
5 per cent on this hydroelectric proposition of the investment of the
Government, as against the 4 per cent with which you are all familiar.
Now, that is one way of dealing with it. Now, you may say, Well,
why don't the Government have the right to fix 10 per cent, if they
want to, or anything else; if this is turned into a hydroelectric
proposition why should not you gentlemen pay whatever the arbitra
tors may decide is a reasonable rate, and if the market price or some
other price is such that the rate should be fixed on a basis which
would give 10 per cent to the Government, why not let the Govern
ment have 10 per cent? Two considerations, from our point of
view, have led us to believe that the 5 per cent maximum is reason
able. First of all, we go down there and we make investments in an
electrochemical industry and if the rate is marked up by these arbi
trators to more than f> per cent, why we will have to close up and go
out. It has been discussed on the committee before, but perhaps you
gentlemen are not so familiar with the fact that the electrochemical
industry in the United States is closing up and going out; it has
gone to Canada and gone to Norway, and the reason is that the
electrochemical industry, and if the rate is marked up by these arbi-
utilities charge their customers. We might just as well close up and
quit if that is what we are faced with, and, having gone out there on
the basis of a rate for power which we thing justifies us in the in
vestment of all this money, not only in this branch of the business
but also the electrochemical manufacture of other kinds, we do not
want to be put in a position where that has to be thrown away and
scrapped and we have to go to Canada or Norway or some other place.
Now so much from our selfish standpoint as to why that limita
tion has been placed. Now let us take it from the standpoint of
the United States, where the theory is this, as was stated in the
Federal water power act; it is the theory, as I understand it, on
which the Federal water power act is based—that the United States
Government does not wish for itself a high rate of return, either on
its own investment or on the investment of others in hydroelectric
products and, in a general way, it is considered that the benefits
of the lower rate of return should by all means, so long as it is a
reasonable rate of return, be passed on to the consumer. Therefore,
I take it that the United States Government may perhaps have
come to the view that in this instance, as in the general policy, the
Government does not desire, if you please, 10 per cent on its invest
ment, or 8 per cent on its investment, or any exorbitant figure.
Now the situation, however, may not take this form; it may not be
a situation which will develop where everybody will say " fertilizer
at Muscle Shoals is over; forget it and try the thing as a power
proposition." It may be that the situation will be that the Govern
ment, through the farmer board and its representatives and these
 MUSCLE SHOALS 81

arbitrators, will agree or reach the conclusion that fertilizer as the

Cyanamid Companv knows how to make it is all over, but perhaps
somebody else could do it and do it to better advantage.
Now in that case the Government has the right of two forms of
recapture. First, it can recapture the present fertilizer plant, that
is. the one we will have built, plus the one that is there now; it
-can recapture that at a cost which will represent our investment less
-o much for depreciation on the new money that we have put in as
has bren written off by being charged up to consumers who have
I ought the material. Say the Government takes it over on that basis
and. in order that it may be in a position to negotiate a lease with
s. niebody else whom they consider a more promising tenant as of
that date than we are, they also have a right to recapture any amount
of power up to 200,000 horsepower, or whatever it is, which would
-certainly appear to be adequate from the standpoint of some new
pror-ess that, by reason of its decreased use of power, as compared
with ours, or for some other reason, would hope to succeed where
we had failed. Or if the Government wants to start the whole
thing all over again and make an entirely new deal, so that the new
tenant, as we hope to be able to do, may be able to utilize some of
the additional power in its other chemical operations, then the Gov
ernment tan recapture the whole thing, all the power, all the prop
ertv, less these depreciation provisions.
So that the committee in the past has endeavored to set up a
situation with which it can hope to cope with most anything that
the future may have. It is an extremely difficult thing to foresee
what may happen in 50 years, and how difficult it is you can appreci
ate from the fact that 50 years ago there was not any fixed nitrogen
industry anyhow; nobody knew what was coming 50 years ago; it
was all in the laboratory, or, rather, what little there was was in
the laboratory. To-day we have this great industrv at home and
abroad, and what the future holds for us I am sure I do not know ;
but at any rate we have tried to deal with the situation in such a
way that whatever angle it takes the Government has the opportunity
to deal with it as it thinks best.
Mr. STAFFORD. How much competition is there in America among
fertilizer concerns in the production and manufacture of fertilizer?
Mr. BELL. Mr. Stafford, contrary to the usual impression, there is
terriffic competition, the wildest kind of cutthroat competition. What
really exists is this : There are certain old-line established companies
with large capital investments represented by plants for the manu
facture of these various materials into mixed goods and their weigh
ing, bagging, shipping, and so on. and all these branch warehouses
that they have, with their agents in charge, to which I have already
referred. In addition to that, we have a situation where certain of
these raw materials can be bought by almost any manufacturer at
practically the same prices as the big fellows pay; consequently we
have fertilizer manufacturers, dry mixers, at every crossroads, whose
business is conducted in a plant that represents no particular capital
investment. The owner and manager of the business is primarily
the man who owns the country store.
During the off season he tends to the store and collects the bills
of the previous winter and spring, and when the season comes around
why he starts up this plant and manufactures more, and that leads
82 MUSCLE SHOALS

to a situation where, as I say, the competition is terriffic. The

seasons frequently end, not with a profit, but actually with deficits
in many cases, stocks being sacrificed at figures that even do not rep
resent the out-of-pocket cost. It is a sawmill proposition, if I may
use a common simile. Most anybody can get into the sawmill busi
ness, don't you know; it only takes a few hundred dollars to start
a sawmill; and if he has the timber to cut, there he is; he is started;
and unless some situation is worked out by which mass production
comes in and a higher grade of material and a lower carrier content—
the useless material that accounts for nothing in the growth of the
plant—and shipments over long areas which permit this mass pro
duction, with its further economies, and so on—unless some situa
tion as that is built up, it would appear—I hate to pose in the role
of a prophet, but to tome extent it is not a prophecy at all, but a lot
of this has happened, if you will investigate the situation—it would
appear there was very little hope for further economies, improve
ments, and lower prices for the American farmer in his purchase of
fertilizer.
Mr. SPEAKS. Mr. Bell, what per cent of all the fertilizer manufac
tured in the United States is sold by the big companies—those we
usually regard as able to control the market ?
Mr. BELL. General. I am under the impression that last year, which
was a very large year in fertilizer, that some 8.000.000 tons of mixed
goods were sold. That includes some fertilizer in which only acid
phosphate was used. Now of that total
Mr. SPEAKS. Suppose approximately 8.000.000. what per cent of
the 8,000,000 do you think will have been produced and the distribu
tion actually controlled by the alleged fertilizer trust or its sub
sidiaries?
Mr. BELL. Well, to answer your question very roughly indeed, for I
am not really familiar with the figures. I would guess that if you
took the first six producers of the United States in the order of size,
I suspect that they probably sold about half of that.
Mr. SPEAKS. Well, you speak of the small manufacturers as one of
the agencies making this fierce competition
Mr. BELL. Oh, yes. I suppose there are probably 300, at least,
fertilizer manufacturers; but I imagine the first six handle about
half of it. /
Mr. SPEAKS. What you class as these small companies, what pro
portion of them are small companies and what proportion are in a
great combine or. if not a combine, an association or relation that
effects the same purpose ?
Mr. BELL. Well. I doubt very much. General Speaks, if there is any
combine and, if they have it in their hearts to combine, believe me
they are highly unsuccessful; their combination does not hold. And
to go back to the question I think you have in your mind, let me say
that, in a very rough way, and without any proper basis on which to
make the statement. I will hazard the guess that they sell about half
of the stuff. Is that what you want ?
Mrs. KAHN. Is there very much foreign competition ?
Mr. BELL. Mrs. Kahn, there is some. Up to this time, the principal
fertilizer used in the United States from the ammonia side is am
monium sulphate and there is a duty of $5 a ton, I believe it is, on
 MUSCLE SHOALS . 83

ammonium sulphate. Notwithstanding that duty, there is quite a

little ammonium sulphate that comes into the United States. The
bulk of the ammonium sulphate used in the United States comes
from the by-product coke ovens. I do not know whether you are
familiar with the old beehive oven, which produced only coke and
the gas that comes off of it and the various tars and other materials
that might have been saved just disappeared ; they were wasted. The
change over to the by-product coke oven which salvages these ma
terials began before the war, but it was tremendously accelerated by
the war, so that I am under the impression that more than 90 pei
cent of the coke ovens of the United States to-day are by-product
coke ovens. Now from that by-product coke oven we derive am
monia, among other things, and the ammonia is turned into ammo
nium sulphate by having some supply of sulphuric acid. In some
cases the by-product man has his own sulphuric acid and, in other
cases his ammonia is treated with sulphuric acid which he purchases
and you get ammonium sulphate. So that is really a by-product.
Mr. DOUGLAS. On page 20, line 14, under the language used on that
page 37ou can stop the production when you have in your warehouse
25 per cent of the fertilizer stored—concentrated fertilizers equal to
at least 25 per cent of the animal capacity of said first unit. Will
you state for the record the tonnage that would represent ?
Mr. BELL. You see that would be 2,-''00 tons of pure nitrogen
which would represent somewhere more than a million and a half
dollars. Now, as a practical proposition, looking ahead, what we
would do would be this, of course—we would manufacture not 25
per cent, but we would manufacture probably about 40 or 50 per
cent; because having shut down an operation as large as that, if we
had put in storage only 25 per cent, why when we sold one ton we
would have to start all over again. What we would do would be to
put in probably twice as much as that and then to start up again
when the demand was really active.
Mr. STAFFORD. The reason for your placing 5 per cent on the
stated investment is so that you will not be crushed out of manufac
turing by reason of the high charges that are applicable to utility
concerns ?
Mr. BELL. Exactly. No electrochemical operation can pay $35
a horsepower, or something like that, which is about what the utility
people have to charge for it or do charge for it.
The CLEKK. Page 21, line 4 (reading) :
If at any time during the term of tills lease the lessee shall suspend the pro
duction of such concentrated fertilizer, no profit shall accrue to the lessee from
the sale of power made available to it through such suspension, but for and
during such suspension all profits from the sale of such power over and above
the cost thereof (as provided in subdivision (2) of this article) shall be
credited by the lessee to the cost of such concentrated fertilizer (as provided
in subdivision (2) of this article) ; and in case the lessee, its subsidiary and/or
allied corporations, shall utilize any power so made available, such power so
utilized shall be deemed, for the purposes of this provision, to have been sold
to the lessee and/or such companies at the fair market value thereof as the
same shall be fixed and determined by said farmer board, subject to the pro
visions of Article N hereof: Provided, however, That the above provisions of
this paragraph shall not apply during any period for which the lessee shall
be required to pay additional rental as hereinafter in subsection (a) of this
subdivision (1) of this article provided, nor during any period after the lessee
-84 MUSCLE SHOALS

shall have surrendered and delivered possession to the lessor of the properties
and/or rights theretofore utilized by the lessee in the production on and ship
ment from the leased premises of such concentrated fertilizer as hereinafter in
subsection (h) of this subdivision (1) of this article provided.
Mr. STAFFORD. This is a rather important paragraph and I had
some difficulty in appreciating just the mechanism as to what would
follow as a result of the suspension of your production, especially
as to applying the benefits to the cost of concentrated fertilizer. How
will you be able to apply that continuing profit from power after
the supply has been distributed?
Mr. BELL. As soon as the supply falls below that quantity, you
see we have to start up again. Now regarding this that has just
been read, what that refers to Mr. Stafford, as I recall, is that if this
situation results in a determination by the Government and the arbi
trators that what they want to go to is a power proposition entirely
and raise the rent, then after that, of course, why we shall not be
required to distribute the profit on the power by crediting it to con
centrated fertilizer, which is no longer in the picture.
Mr. STAFFORD. To whom do you suppose you would dispose of the
excess power (
Mr. BELL. In so far as the situation works out in the beginning,
frankly I think we will be very much handicapped if we can not
sell it to the existing power companies. As I stated here two or
three weeks ago, or whenever it was, our position will be this, that
we will be faced with the disposal of a certain amount of surplus
power and, obviously, during the first year or two a very substantial
amount, all the power there is, because we won't be able to get these
plants going short of that time, and we will be faced with the fact,
if we want to sell it to anybody else, that we must make a very, large
investment in transmission lines and the nearest large cities being
over one hundred miles away. We will have to make an investment
in distribution systems unless we can make arrangements with the
companies which are doing the distribution in these cities; in some
cases where the companies may hold exclusive franchises, we prob
ably could not obtain it at any price, except through them. There
fore we are hemmed in, first by the fact that we can not build trans
mission lines without the approval of the public utility commission
of these States; second, because, if we could build the transmission
lines, that would involve so large an investment that it would be
difficult to deal with the proposition, knowing as we do that in all
probability all the power will go into the manufacture of fertilizer
eventually at Muscle Shoals; third, because of this distribution dis
ability I speak of. So it seems to me to be perfectly apparent, in
these preliminary stages, we would have to deal with the existing
power companies.
Mr. STAFFORD. Have you considered at all this project being only
a water-power project in case the fertilizer phase of it proves futile,
and what demand and serviceable area there might be for this power*
Mr. BELL. No. We have not given any serious thought to that,
because if we thought that was a real probability we would not put
.•ill this money into the fertilizer plants; we just would not start.
If it ever comes to that, it will be a very sad day for us, because
we will have all this fertilizer investment to write off.
Mr. STAFFORD. I thought the Government was to reimburse you for
the investment in the fertilizer plants.
 MUSCLE SHOALS 85

Mr. BELL. Unfortunately, the Government does not have to do

that ; that is at their option. In other words, if we can not make
fertilizer at Muscle Shoals successfully and the Government should
not be able to persuade anybody else they can make fertilizer success
fully at Muscle Shoals in order to take us over, and the Government
itself should conclude that they did not want to undertake it as a
Government operation, then we would be in the position where
Congress would, no doubt, elect the program by which they would
treat it as a hydroelectric proposition exclusivelyj raise the rent and
leave us to our troubles; at least. I suppose that is what they would
do. and that is what they ought to do.
Mr. STAFFORD. I thought you said yesterday you contemplated the
establishment of some individual manufacturing units for utilizing
the power and those lines of manufacture would be profitable.
Mr. BELL. Oh, we do and I am sure they would, but the trouble
is, as the situation stands now, I do not know how we would use the
res-t of the power; I mean, as the situation would then stand, I do not
know how we would use the rest of the power.
Mr. STAFFORD. Can you give an estimate as to the proportionate
amount of power you would likely use in your own private plants?
Mr. BELL. I think I could approximate it in a general way. That
is very difficult to do, as you can appreciate
Mr. STAFFORD. Yes.
Mr. BELL. But, in a general way, the idea is our program ought to
build up to somewhere around 50,000 horsepower.
The CLERK (reading) :
If at any time after the completion of Cove Creek Dam and delivery of
possess on thereof to the lessee under the provisions of Article T hereof (or,
if the lessor shall have been prevented by final order, judgment, or decree of
a court of competent jurisdiction and of last resort from so completing said
Cove Creek Dam and/or so delivering possession thereof to the lessee on the
ground of absence of constitutional power and authority so to do, then after
the entry of such order, judgment, or decree), and after 15 years from the
date of delivery of possession to the lessee of the properties described in
paragraphs (1), (3), and (4) of the granting clauses hereof, the production
of such concentrated fertil zer shall be suspended by the lessee for as much as
18 months in the aggregate during any period of 36 months, the farmer board
may, within 60 days after the expiration of such 36-month period, upon vote
of at least four of its members (not including any member appointed by the
lessee), file with the Secretary of War and the lessee a certificate that, in its
opinion, it is reasonably to be expected that suspension of the commercial
Production of such concentrated fertilizer will be permanent.
Thereupon within 30 days from the filing by said Farm Board of the afore
said certificate the Secretary of War and the lessee shall each notify the other
in writing of the name and address of a person designated by him or it to act
as arb trator and said two arbitrators shall, within 30 days after being notified
In writing of their designations, designate a third arbitrator. In the event
that any of the arbitrators shall not be designated in the manner and within
the time hereinabove fixed, such arbitrator or arbitrators shall, upon the
application of the Secretary of War or of the lessee, be ties gna ted by the
District Court of the United States for the Northern District of Alabama, or
its successor as then constituted, which is hereby given jurisdiction for that
Purpose, subject to the right of either the Secretary of War or the lessee to
*PPly, upon a proper showing of interest, relations!! p, or bias of the judge or
judges of said district court, for the designation of such arbitrator or arbitra
tors by the United States district court for any d,strict adjacent to said
northern district of Alabama (or its successor as then constituted), and, in
the event such application be granted, the United States district court for the
district to which the matter is transferred (or its successor as then consti
tuted) is hereby given jurisdiction for that purpose.
86 MUSCLE SHOALS

Mr. STAFFORD. Why did you fix the chronological dates as 18 com
pared with 36 months, to determine whether production should be
continued, or not?
Mr. BELL. What we had in mind was that 3 years—36 months—
ought to give us a fair opportunity to work the thing out along this
line—either the purchase of some process, if somebody else had one,
or possibly the development of a process of our own, or some remedy
for this situation. There we would be with an enormous investment
and the situation might be such that, so far as the process that we
then had was concerned, it was hopeless to proceed along that line,
and the thought is that we ought to have some time to turn around
in and to see if we could not get, or use at Muscle Shoals, something
that would get us out of our difficulties and enable us to go on.
Mr. STAFFORD. What was the purpose of your placing this excep
tion as to the building of Cove Creek Dam, as to the constitutional
objection, when there is no such provision reserved as to the building
of Dam No. 3?
Mr. BELL. First of all, the reason we put it in in connection with
Cove Creek was this, that the question has been raised whether the
Government could perform under its obligation as to Cove Creek.
I do not think anybody has any very serious doubt about it ; I know
our counsel feels it is all right ; but, nevertheless, the committee was
nervous about that when the question was raised and I felt, in view of
the advice we had, that was a theoretical academic difficulty and I
could take the chance on that. Now, having decided that, it seems
to me, and giving Congress the benefit of the doubt, that the Govern
ment ought to perform under all other conditions for this reason
that, first of all, it undertakes to build Cove Creek Dam; and, sec-
ondly, it is a fact that if we have Cove Creek Dam built and are
making 400,000 tons of ammophos, if you please, which would be
possible with Cove Creek Dam built, instead of 200,000 tons, which
is about all we have power for if Dam No. 2 alone is turned over to
us, then in the case of the 400,000 tons our overhead and so on would
be distributed over 400,000 tons instead of 200,000 tons and that
makes quite some difference in the cost of the material. And, of
course, the question of what the cost of the material is is the ques
tion that determines whether we are able to stay in the game. If
that is going to make a difference which has been estimated by our
people at as much as four to five dollars a ton, we want that ad
vantage, and if the Government should fail to give us that advantage
through failure of its obligation to go ahead and give us Cove Creek,
whv we do not think the Government ought then to be in a position
to put us out of business. I think that is the question you had in
mind.
The CLERK (reading) :
Said three arbitrators shall promptly fix a time and place for hearing the
parties, and after hearing the proofs and arguments of the parties shall, with
all reasonable speed, determine whether or not, in their opinion under all the
circumstances, it is reasonably to be expected that suspension of the commer
cial production of such concentrated fertilizer by the lessee will be perma
nent. The arbitrators shall notify the Secretary of War and the lessee in
writing of their determination, and such determination, when signed by any
two of the arbitrators, shall be final and conclusive upon all parties concerned.
The cost of such arbitration shall be borne in equal shares by the lessor and
the lessee.
 MUSCLE SHOALS 87

If the arbitrators shall determine that, in their opinion under all the cir
cumstances, it is reasonably to be expected that suspension of the commercial
production of such concentrated fertilizer by the lessee will be permanent,
then, and in that event, within a period of sixty days after the adjournment
of the then session of the Congress, or, if the Congress be not then in session,
within a period of sixty days after the adjournment of the next succeeding
session of the Congress, the Secretary of War may as hereinafter provided
elect that one of the three alternatives hereinafter set out as subsections (a),
(b), and (c) of this subdivision (1) of this Article F shall become operative,
l hi- alternative set-out in subsection (a) being hereinafter called the "addi
tional rental alternative." that set-out In subsection (b) the "fertilizer recap
ture alternative," and that set-out in subsection (c) the "total recapture
>:1 ernative." I:i the event that the Congress shall direct said Secretary of
War not to make an election, he shall make no election. In the event that the
Congress shall direct him to elect a particular alternative, he shall elect that
>'ltc-narive. In the event that the Congress shall direct him to elect an alter
native, but without specifying which particular alternative he shall elect which
ever of said alternatives will in his judgment he to the best interests of the
Inssor. Any such direction by the Congress shall be evidenced by a joint
resolut.on of the Congress. In the event that the Congress shall have failed
t'> make any such direction, said Secretary of War may elect whichever of said
alternatives will in his judgment be to the best interests of the lessor. Any
Mifh election by the Secretary of War shall he evidenced by a written certifi
cate filed with the lessee within said 60-day period.
Mr. STAFFORD. Knowing the lethargy of Congress as well as I do,
as may be exemplified bv the action of Congress on this Muscle Shoals
proposition, why did the joint committee or the lessees leave it to
Congress to determine which of the methods they would elect to
follow, and then in case Congress would not make any determination
after a long session and maybe the suspension of activities for over
a year, then leave it to the Secretary of War to determine which of
these three policies should be followed?
Mr. BELL. That provision was the suggestion of the Military Af
fairs Committee, of this committee, and I think their feeling was
this, that if through the lethargy of Congress they did not indicate
what should be done, why action should not be paralyzed, but it
should be left to the Secretary of War to elect. But they never
wanted to get into the position where, if they felt strongly about it
and were prepared to direct him, they could not do so. Therefore,
it is provided they can direct him to do this. that, or the other; or,
if they fail to direct
Mr. STAFFORD. Yes; but they fail for a year. Suppose that should
be a short session and the matter comes up in tin1 middle of March
and Congress does not take any action during the next regular ses
sion, the Secretary of War might not be privileged to act for over a
year and everybody would be in' a suspended condition during that
interval.
Mr. BELL. In other words, your thought is, there ought to be more
time given to Congress?
Mr. STAFFORD. Oh, no ; my thought is it should be delegated really
to some administrative head and to have the time shortened.
Mrs. KAHN. Congress should be wiped out.
Mr. STAFFORD. This is not a business proposition.
Mr. BELL. Well, I think. Mr. Stafford, if all the committee were
here you would find some of the members probably felt quite strongly
that no Secretary of War ought to be allowed to settle this thing
without Congress having a voice in it. So far as we are concerned,
88 MUSCLE SHOALS

you understand, we are all for having it settled soon; we want to

know the worst. So far as the committee is concerned
Mr. STAFFORD. It is just so that I have your viewpoint.
Mr. BELL. Mr. Hill, was not there a very decided feeling on the
part of the committee that they did not want the Secretary of War
settling this until they had had a chance to pass on it ?
Mr. HILL. That is true—until Congress had at least an opportunity
to direct him as to which alternative he should elect. That was the
committee's idea, rather than the suggestion of the proposed lessee—
your company.
Mr. BELL. Of course, the committee might change its mind about
that on further consideration, but that was my recollection.
The CLERK (reading) :
The three alternatives about mentioned and referred to arc as follows:
"(a) Additional rental alternative: If said certificate filed by the Secretary of
War shall state this afternative shall have been so elected, then and in that
event in addition to all other imymt'nts to be made by the lessee to the lessor
under the provisions of this lease, the lessee shall pay to the lessor annually
within fifteen clays after the end of each fiscal year until the lessee shall elect
to resume and sluill resume production as hereinafter provided, a sum nt an
annual rate to be determined as hereinafter provided, such additional pay
ments to be applied by the United States Treasury to amortization of the war
investment of the United Slates at or near Muscle Shoals find/or to such
objects as will, in the determination of the Congress, promote the development
of agriculture in the United States and/or such other purposes as the Congress
may from time to time designate: Prodded, hoiccvir. That such additional
annual payments shall not commence to accrue until thirty days after said
certificate of the Secretary of War shall have been filed with the lessee. From
and after the filing with the lessee of the aforesaid certificate of the Secretarv
of War all the provisions of this Article F, except those of this subsection (nt.
shall ipso facto terminate and the lessee shall be relieved from all its obliga
tions under this lease relating to the production of concentrated fertilizer and
the building and providing of plants therefor on the leased premises. If. how
ever, by reason of change in market conditions or improvements in processes
or otherwise, the lessee, in its discretion, shall determine that the resumption
of the production of such concentrated fertilizer is commercially feasible, it
may, fit its option, elect to revive the provisions of this Article F and to resume
such production, upon filing with the Secretary of War a written notice of
such election. Immediately upon the resumption of such production, following
the filing of such notice of election, the provisions of this Article F and the
aforesaid obligations of the lessee shall be revived, hut the additional payment*
in this subsection (a) provided for shall cease to accrue in favor of the lessor.
The provisions of this subsection (a) shall not operate in any way to reduce
any payments deferred until after the thirty-fifth year of the lease as provided
in Article A, subdivision (1), subsection (b), and Article A, subdivision (a),
subsection (b)."
Mr. STAFFORD. Just what will the lessee be obliged to pay during
this period of cessation ?
Mr. BFJ.L. It will be obliged to pay the rentals which have been
adjusted in accordance with this arbitration; it will be obliged to pay
the amortization set out here ; the payment for the repair and main
tenance of the locks and dams which is set forth in relation to each
dam; to furnish the small amount of power required to light and
operate the locks: and at its own expense to maintain the power sta
tions and spillway gates. I think that fairly states it-
Mr. STAFFORD. Then, as I understand, the real rental based on
the amount of capitalization and investment in the locks will be sus
pended until adjudication by the board of arbitrators?
Mr. BELL. Oh, no; we have to go on paying on the 4 per cent
basis.
 MUSCLE SHOALS 89

Mr. STAFFORD. You do?

Mr. BELL. Yes.
Mr. STAFFORD. I want to ascertain just what you will be obligated
to pay after fertilizer production is stopped and while awaiting the
action of Congress or the Secretary of War?
Mr. BELL. We have to go on with that.
Mr. STAFFORD. What will you be obliged to pay to the Government
as rental ?
Mr. BELL. The regular rental set out. Now, if Congress elects to
go on the basis, we will say, of the adjusted rental—the power basis,
let us call it. the hydroelectric-power basis—then after that has been
determined the rent is stepped up by whatever that adjustment may
turn out to be.
Mr. STAFFORD. So that the Government will continue to be paid
on the 4 per cent basis?
Mr. BELL. Yes.
Mr. STAFFORD. Plus whatever might be determined by. the board of
arbitrators?
Mr. BELL. That is right. Now, this part, Mr. Stafford, relates to
the situation if it were to work out as a power proposition; that is to
say, having made all of this investment in the fertilizer plant, even
after we have gone over on a power basis at the higher rental, if we
succeed in working out a situation which in our opinion warrants
the installation of a new process, then we begin with fertilizer pro
duction over again and then automatically we go back to the old
rental.
The CLEKK (reading) :
The amount of the additional payment hereirmbove provided for shall he
.letermined as follows: Three arbitrators shall be. designated in the same man
ner as the arbitrators heroinabove provided fur, except that the notification
l>y each party to the other of the person designated shall be made within thirty
days affpr the filing by the Secretary of War with the lessee of tbo aforesaid
certificate. The three arbitrators shall promptly fix a time and place for the
lien ring, and after hearing the proofs and arguments of the parties shall with
al! reasonable speed determine a total sum which, in their opinion, under all
circumstances is the fair annual rental value of the demised premises, less all
Mims provided by other provisions of this lease to be paid by the lessee by way
«f rental : Provided, hoircver. That said total sum so determined shall in no
event be less than an amount equal to 4 per cent, nor greater than an amount
, qual to Ti per cent, Interest on the aim unts on wh'ch the payment "f rental
by way of interest is provided in Article A. subdivision (1). subsection fa) ;
Article A. subdivision (2), subsection (a) ; and article T. subsection (a), sub
ject to the proviso thereto. The additional payments hc.reinabove provided
for shall be at the rate of annual payments equal to the amount bv which the
total sum determined as above provided exceeds the aggregate amounts pro
vided to be paid as rental by way of interest in Article A. subdivision (1) ;
subsection (a) : Article A. subdivision (2), subsection (a) ; and Article P. sub
section (a), subject to the prov'so thereto. The arbitrators shall notify the
Secretary of War and the lessee in writinsr of tbeir determination, and such
determination, when signed by any two of the arbitrators, shall be final and
conclusive upon all parties concerned. The cost of such arbitration shall be
home in equal shares by the lessor and the lessee.
(h) Fertilizer recapture alternative: If said certificate filed by the Secretary
t,t War shall state that this alternative shall have been so elected, then and in
that event, within fifteen days from the filina with the lessee of said certificate.
the lessee shall nominate to the Secretary of War three reputable firms of certified
public accountants. The Secretary of War shall select one of the three so nomi
nated, or if no one of the three be satisfactory to him. he shall in turn, within a
further period of fifteen days, nominate to the lessee three such firms. Within a
further period of fifteen days, the lessee shall select one of the three firms nomi
90 MUSCLE SHOALS

nated by the Secretary of War, or, if no one of said three firms be satisfactory to
it, then, upon the application of the Secretary of War or of the lessee, the Dis
trict Court of the United States for the Northern District of Alabama (or its
successor as then constituted ) , which is hereby given jurisdiction for that purpose,
shall designate a reputable firm of certified public accountants, and it shall act.
Such firm of certified public accountants shall forthwith proceed to make up
an inventory containing a definite and complete description of the above-meii-
tioned Waco Quarry and all buildings, machinery, and equipment, including
necessary storage space and trackage and/or trackage rights, theretofore uti
lized by the lessee in the production on and shipment from the leased premises
of such concentrated fertilizer (which, however, shall not be interpreted to
include any property used in producing power utilized for the production of such
concentrated fertilizer), and to determine the amount of the investment of the
lessee therein, less such depreciation of said buildings, machinery, and equip
ment as shall have been charged in the cost of such concentrated fertilizer there
tofore sold, and shall file with the Secretary of War and the lessee such,
inventory and a certificate of the amount of such investment so determined.
The cost of such proceeding by the accountants shall be borne in equal share by
the lessor and the lessee.
Mr. STAFFORD. Will you give a brief narration stating just what
the respective authorizations are under these three respective privi
leges—additional rental recapture, fertilizer recapture, total recap
ture?
Mr. BELL. Well, in the first one, adjusted rental, the situation con
templated is a situation in which everybody has given up the idea of
making fertilizer at Muscle Shoals and that fact is officially deter
mined, first, by the farmer board and then by the arbitrators. In that
case the situation is treated as a hydroelectric proposition and, as
such, the Government may claim that the rental should be adjusted
upward. In order that it may not be adjusted beyond a point where
electrochemical industry can survive or for that matter, beyond the
point which Congress has determined they want power to cost, the
maximum limitation of 5 per cent is placed on the Government's
return on its investment, and the rent is recalculated on that basis.
Under the second provision is contemplated a situation where it is
felt the fertilizer should be manufactured even if we can not do it
successfully, and that either the Government or some other tenants
will undertake it. Then what they want is the fertilizer part of the
plant and enough power to proceed. In that case, the Government
may elect, either by direction of Congress or through the election of
the Secretary of War, to recapture the fertilizer features of the plant
plus enough power to proceed, the total power to be recaptured to be
limited, as I recall, to not more than 200,000 horsepower.
Mr. STAFFORD. Why in that case do you include an appraisal of
the Waco Quarry?
Mr. BELL. I suppose that would be necessary, perhaps, in order to
determine the amount of depreciation of the plant which has been
charged to fertilizer consumers in the product sold. In other words,
the basis of recapture provides for reimbursement to the lessee of his
investment in the plant, less, however, the depreciation that may have
been charged to consumers.
Mr. STAFFORD. I can not follow you why the Government should
reimburse you or reimburse the lessee for the remaining value of the
substance of the Waco Quarry?
Mr. BELL. Well, we may have made an investment in further-
quarry equipment, you see.
 MUSCLE SHOALS 91

Mr. STAFFORD. But it is not limited merely to equipment. On

page 29, beginning in line 10, it says " such firm of certified public
accountants shall forthwith proceed to make up an inventory con
taining a definite and complete description of the above-mentioned
Waco Quarry and all buildings, machinery, and equipment, includ
ing necessary storage space and trackage. Why should the Gov
ernment be obligated to reimburse you for something you do not
pay for?
Mr. Hiix. Does not this answer that question? I think if you
will look on line 19. pa^gre 29, it answers your question, " and to
determine the amount of the investment of the lessee therein, less
such depreciation of said buildings, machinery, and equipment."
In other words, it is only for what the lessee has expended; is that
right. Mr. Bell?
Mr. BELL. That is my understanding.
Mr. STAFFORD. I do not get that.
Mr. HILL. It says " and to determine the amount of the invest
ment of the lessee therein, less such depreciation." In other words,
they charge off such depreciation and the reimbursement is only for
the expenditures of the lessee, less depreciation ; is not that correct ;
rather than for the quarry per se ? Is not that right, Mr. Bell ?
Mr. BELL. Well, we will have to make some investment at Waco
to begin with and we undoubtedly will have to make investment
in equipment as we go along.
Mr. STAFFORD. In the case of the third one?
Mr. BELL. In the case of the third, what happens is that the Gov
ernment elects to take the whole thing over and, in that case, they
reimburse us for our investment and they take all the power; they
take the dams, hydroelectric stations, and everything complete.
The CLERK (reading) :
If, within ninety days after such filing of such inventory and certificate,
the lessor shall pay to the lessee in cash the amount of investment set forth
in such certificate, the lessee shall upon such payment surrender and deliver
possession to the lessor of all the properties and/or rights set forth in such
inventory. The lessee shall also then be obligated to sell to the lessor and to
hold for delivery at any of the delivered properties, upon the order of the
Secretary of War (who shall be required In giving such order to comply with
any directions that shall have been given by the Congress), such amount of
electric power, not exceeding 200,000 horsepower-years of power per annum
if Cove Creek Dam shall have been completed and possession thereof delivered
to the lessee under the provisions of Article T hereof, and not exceeding
100.000 horsepower-years of power per annum if Cove Creek Dam shall not
have been so delivered, as the Secretary of War shall require in a written
notice to be given to the lessee within ninety days from such filing of such
inventory and certificate of said accountants.
Said written notice shall state the number of horsepower-years of each class
of power annually so required year by year durirtg the unexpired portion of
the lease term. The lessor shall pay to the lessee for such power so sold and
held for delivery the cost of such power, computed as provided in subdivision
(2) of this Article F. Payment for said power shall be made monthly by the
lessor to the lessee, on or before the twentieth day of each month, for the
amount of power so held for delivery during the previous month, whether
delivery of the same was actually taken or not; and if the lessor shall fail
to make any payment for said power when due, the lessee may deduct the
amount thereof from the rental payment next becoming due from the lessee to
the lessor.
92 MUSCLE SHOALS

Mr. STAFFORD. Will you explain what is purposed by that para

graph limiting the amount of horsepower to 200,000 horsepower, in
line 13, page 30, and then further down " and not exceeding 100,000
horsepower-years of power per annum if Cove Creek dam shall not
have been so completed " ?
Mr. BELL. Well, I suppose what that must mean, Mr. Stafford, is
that unless Cove Creek has been built we can not give up 200.000
horsepower.
Mr. STAFFORD. No; what is the idea that is involved here as to the
Government taking this power ? '
Mr. BELL. Why. the Government having recaptured the fertilizer
plant or having elected to recapture either for its own production of
fertilizer or some other tennant, will want to have some amount of
power with which to conduct its operations.
Mr. STAFFORD. And it is predicated upon the idea that you will
continue utilizing the remainder of the power?
Mr. BELL. Yes.
Mr. STAFFORD. For your own private manufacture?
Mr. BELL. Yes. What we are doing here is dealing with the sec
ond possible program, which is simply the fertilizer recapture as
distinguished from the third program, which is the whole thing.
Mr. STAFFORD. So you plan, under this second provision, to con
tinue the use of the surplus power for your own private purposes?
Mr. BELL. Exactly; yes.
Mr. STAFFORD. You estimate you will need fifty thousand, perhaps,
for your private plants and then you dispose of the rest for other
purposes?
Mr. BELL. Yes.
The CLERK (reading) :
In the event that the lessor itself (through one of the departments of the
United States, or through a commission appointed by the t'nlted States, or
thr ngh a corporation the capital stock of which is wholly owned by the lessor)
shall then operate such properties in the production of fertilizers, or one or
more constituents thereof, tlv lessee hereby covenants and agrees that the
lessor will not be required to pay any royalties on such of the pr 'et-sses utilized
by the lessee, prior to the surrender of such properties. In the production of
such concentrated fertilizer on the leased premises and owned, at the time of
the surrender of such properties, by the lessee and/or by said American Cyana-
mid Company, and/or by any subsidiary and/or allied corporation of said
lessee and/or of said American Cyauamid Company, MS shall be used by the
lessor in such operation of said properties in the production of fertilizers, or
one or more constituents thereof.
Mr. STAFFORD. I notice you do not here incorporate the other
lessee, the Air Nitrates Corporation, but confine the rights only to
the American Cyanamid Co. What is the need of having this con
tract entered into at all with the Air Nitrates Corporation?
Mr. BELL. Well, it seems to me that what we want to do is this:
That we want this situation set up in such a way that the operating
company engaged in the manufacture of fertilizer is a separate,
independent corporation whose books are audited by these certified
accountants referred to and independent of the Cyanamid Co/s oper
ations which extend to many other fields, and having nothintr what
ever to do with this. I do not think the company that manufactures
the fertilizer at Muscle Shoals should be the company which deals
with other operations that have nothing whatever to do with Muscle
Shoals, operating all over the world, and whose operations ought not
 MUSCLE SHOALS 93

to be made subject to that degree of investigation, publicity, and so

on, that may result.
Mr. STAFFORD. I notice you limit the rights to the American Cyana-
mid Co., or any subsidiary, or allied corporation; you do not carry
the customary clause found in such leases, " or its successors or
assigns."
Mr. BELL. I think you will find further along some clause that
does that for the whole lease; I think so; I am almost sure of that.
Mr. STAFFORD. All right.
The CLERK (reading) :
From and after such delivery of possession of such properties and/or rights,
all the provisions of thiB Article F, except the provisions of this subsection (b)
and by reference therein the provisions of subdivision (2) relating to the
computation of the cost of power, shall Ipso facto terminate, and the lessee
shall be relieved from all Its obligations under this lease relating to the
production of concentrated fertilizer and the building and providing of plants
therefor on the leased premises. The lessee shall then also be relieved of
its obligations under Article E hereof, so far as they relate to properties the
possession of which shall have been delivered to the lessor, and such prop
erties shall no longer be deemed to be part of the demised premises.
(c) Total recapture alternative: If said certificate tiled by the Secretary
of War shall state that this alternative shall have been so elected, then and
in that event, within ninety days from the filing with the lessee of said certifi
cate, the Secretary of War, the lessee, and its subtenants may agree upon a
sum to be paid to the lessee by the lessor for the surrender and delivery of
possession of the lessor of the demised premises and the termination of this
lease as hereinafter provided. In the event that the Secretary of War, the
lessee, and its subtenants shall not have agreed within said period of ninety
days, then .either the Secretary of War or the lessee may notify the other
in writing that he or it desires such sum to be determined by arbitration, and
such sums shall then be determined by arbitration as follows : Within thirty
days from the giving of such notice the Secretary of War and the lessee shall
each notify the other in writing of the name and address of a person desig
nated by him or it to act as arbitrator and either the Secretary of War or the
lessee may apply to the person who shall then be Chief Justice of the United
States for the designation by him of a person who shall then be one of the
justices of the Supreme Court of the United States to act as the third
arbitrator.
In the event that any arbitrator shall not be designated in the manner
above provided, such arbitrator shall upon the application of the Secretary of
War or of the lessee be designated by the District Court of the United States
for the Northern District of Alabama, or its successor as then constituted,
which is hereby given Jurisdiction for that purpose, subject to the right of
either the Secretary of War or the lessee to apply, on a proper showing of
Interest, relationship, or bias of the judge or judges of said district court, for
the designation of such arbitrator by the United States District Court for any
district adjacent to said northern district of Alabama (or its successor as then
constituted), and, in the event such application be granted, the United States
district court for the district to which the matter is transferred (or its suc
cessor as then constituted) is hereby given jurisdiction for that purpose: Pro
vided., That in the event that the Chief Justice of the United States -shall de
cline, or shall fail within thirty days after application shall have been made
to him as aforesaid, to designate a person who shall then be a justice of the
Supreme Court of the United States, or in the event that such person so desig
nated shall decline, or fail within thirty days thereafter, to accept such desig
nation three persons shall be designated by the district court as aforesaid in
lieu of such person. In case any of the arbitrators designated as hcreinabove
provided shall die or become incapacitated or decline or fail to act, a successor
arbitrator shall be designated within a reasonable time in the manner herein-
above provided with respect to the designation of the arbitrator so dying, becom
ing incapacitated, declining, or failing to act. The arbitrators shall promptly
fix a time and place for the hearing and, after hearing the proofs and argu
ments of the parties shall, with all reasonable speed, determine severally as
to the lessee and each of Its subtenants the amount of the actual investment
101229—30 7
94 MUSCLE SHOALS
of the lessee and its subtenants, respectively, in any and all steam-power plauts
or any additions or extensions thereto, transmission lines, or other electric or
hydroelectric installations or extensions, manufacturing, community, or service
plants, buildings, machinery, equipment, fixtures, facilities, appurtenances, struc
tures, improvements, extensions, additions, and betterments placed or erected
on the demised premises by or for the lessee or Its subtenants, less proper
depreciation based upon the reasonably to be expected useful life of the respec
tive properties. Thereupon the arbitrators shall ndd together all such amounts
so determined and the total sum arrived at shall be the sum to be paid
to the lessee by the lessor.
Mr. STAFFORD. Will you kindly explain the reason why you pro
vide a different method of determining the arbitrators in this para
graph from the provisions made for taking over the plant, or partial
plant, in the other provisions ? Here you are calling upon the Chief
Justice to designate one of the Justices of the Supreme Court, which
would be rather a presumptuous appeal to the court and one which
I hardly think is proper, in view of the heavy work imposed upon
the Supreme Court of the United States.
Mr. BELL. I think there were several members of the committee
who had a very strong feeling that this total recapture was such a
large operation and so complex, and so on, if possible the highest
judicial authority ought to be represented and they requested that
we set up this method. We did that ; but, owing to the fact that our
counsel nad some of the same misgivings that you have just ex
pressed as to whether the court would be willing to undertake that,
we provided if the Chief Justice failed to do so, why then it would
be dealt with in the same method as everything else is dealt with that
calls for arbitrators, namely, the appointment of the arbitrators
by the Northern District Court of Alabama.
Mr. STAFFORD. In that condition, you authorize the District Court
of Alabama to appoint three in lieu of one.
Mr. BELL. Yes.
Mr. STAFFORD. So that the board of arbitrators would then consist
of five.
Mr. BELL. Yes.
Mr. STAFFORD. Why do you provide for three to be appointed by
the court in this instance, whereas you provide for only one in the
other?
Mr. BELL. I do not know whether I can adequately state the views
of these members of the committee, but my recollection was they
thought one Supreme Court Justice might suffice and it was all we
hoped to appoint ; but if we went to the northern district of Alabama,
we had better have a little larger board in the other case. Was not
that about it?
Mr. HILL. That is my understanding.
Mr. STAFFORD. Now what do you construe is the meaning of the
words where you provide to receive reimbursements, " the actual in
vestment of the lessee and its subtenants ? " Do vou intend the
present cost value or the cost you had put into the plant originally f
Mr. BELL. Down to that date; not simply the original investment
in the plant, but having made the original investment, then over a
period, of say, 20 years, having spent further money in the plants,
that also would be taken into consideration.
Mr. STAFFORD. You have no idea, though, of seeking the present
value of the replacements?
 MUSCLE SHOALS 95

Mr. BELL. No—less proper depreciation, based upon the reason

ably to be expected useful life of the respective properties.
Mr. STAFFORD. You are only seeking reimbursement of the exact
amount of money you put in the plant during the period of occupa
tion, and not the cost of reconstruction as of the date the Government
is taking it over ?
Mr. BELL. Yes. That is covered over here, line 22, page 34, which
shows the actual investment.
Mr. STAFFORD. That is what I had reference to—that clause.
Mr. BELL. Yes.
(The committee thereupon adjourned until Tuesday, March 4,
1930, at 10 o'clock a. m.)
 MUSCLE SHOALS

TUESDAY, MAKCH 4, 1930

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10 a. m., Hon. Harry C. Ransley presiding.
Mr. RANSLEY. Mr. Bell, will you again continue to give evidence.
STATEMENT OF W. B. BELL—Resumed
Mr. BELL. Mr. Chairman, may I do two or three things that I
was requested by the committee to do at the last hearing? First of
all, I was asked to put in a copy of the contract between the Air
Nitrates Corporation and the Government. Here it is.
Mr. RANSLEY. That will be incorporated.
Mr. BELL. Secondly, I was asked what the Air Nitrates Corpora
tion and the Cynamid profits were on the work done by the Air
Nitrates Corporation for the Government and, also, the amount of
the work done at Toledo and Cincinnati. Approximately $15,000,000
was the amount expended on those two plants which were salvaged
when the armistice was signed.
The gross fees that the Air Nitrates Corporation and the American
Cyanamid Co., together, received, were $1,524,000, of which
$1.500,000 was the construction fee and $24.000 was for the royalty
and operating fees during the trial run oj the nitrate plant No. 2.
The amount by which the taxes of the consolidated return of the
consolidated companies, of the Air Nitrates Corporation, exceeded
the taxes for which the Cyanamid Co. would have been liable had
the Air Nitrates Corporation not been consolidated, reduced this
amount of $1,524,000 by, approximately, $818,000. From that, there
were certain other deductions. The Cyanamid Co. was required
under the contract to loan 10 officers without charge, to the Gov
ernment and the compensation which it paid those officers reduced
by the amount credited against its tax made a further reduction of
about $180,000. Then there were certain other expenditures which
were not reimbursed, amounting to a net of about $170.000. Then
there were further expenditures in connection with the closing up
of the contract, including the expenses of arbitration awards on roy
alty, expenses before the Court of Claims, and expenses relative to
taxes and some other expenses which made a further deduction of
$146,000. And the total, therefore, of deductions from the gross
profits of $1,524,000 aggregated $1,314,000, which left a net return
from the contract with the Government of about $210,000—which is
something less than a quarter of 1 per cent.
97
98 MUSCLE SHOALS

Mr. McSwAiN. What is the total of the claims that the company
has against that, Mr. Bell, now pending, unsatisfied ?
Mr. BELL. Those were finally settled last year, I believe it was.
Mr. McSwAiN. What was the claim ?
Mr. BELL. Four hundred and eight thousand.
Mr. McSwAiN. Is that included in this statement ?
Mr. BELL. Yes. Now, I was also asked certain questions
Mr. STAFFORD. What is the basis of these claims?
Mr. BELL. Well, they were the amount which the company claimed
was due them. After some years of negotiation, the company entered
suit against the Government and the Government finally confessed
judgment on it, and the $406,000 or $408,000—I think it is $408.000—
was paid us for that.
Mr. STAFFORD. What is the basis for those claims, Mr. Bell ?
Mr. BELL. For the services performed.
Mr. STAFFORD. Not for material or equipment left at the plant ?
Mr. BELL. No. Now, it was suggested to me that an amendment
would clear up a possible ambiguity on page 18 of the Wright bill
and I am inclined to think there is an ambiguity there, and I would
like very much to adopt the suggestion of certain members of the
committee and insert, page 18, line 5, after the word " tons," the
words " (including the fixed nitrogen content)." And in line 23,
page 18, after the word " tons " the same language " (including the
fixed nitrogen content)."
Mr. Stafford, you raised the question of whether or not in every
case it was provided that the lease should apply to the successors
and assigns, and so on—do you recall—and I told you I thought it
was provided in every case. For instance, on page 68, line 4, there
is the provision :
This lease and all the covenants, conditions, stipulations, promises, and
agreements herein contained shall extend to and be holding upon and inure to
the benefit and run in favor of the parties aud their respective successors and
assigns.
Now, I had supposed that that covered everything and I think it
does, but, nevertheless, the Cyanamid Co. intervenes in this lease
and, therefore, in order to clear up any possible doubt, I think it
might be advisable to say, beginning at the end of line 8 on that
same page :
" * * * and all references in this lease to American Cyanamid Company shall
be deemed to include its successors and assigns and any such successor or assignee
shall, upon becoming such, be substituted in this lease for said American
Cyanamid Company with the same force and effect as if it had been named at
each and every place in this lease in which said American Cyanamid Company
Is named, and such successor or assignee shall upon the request of the lessor
expressly assume in writing the due and punctual performance of all the
covenants and conditions of this lease on the part of said American Cyauauiid
Company to be performed.
Now, perhaps I might simply leave that for the consideration of
the committee, as they may not care to adopt that offhand. I
am under the impression that covers everything I was requested to
do at the last meeting.
The CLERK. At the last meeting we read up to page 35, line 9.
Beginning on line 10 it reads : . .
 MUSCLE SHOALS 99

The arbitrators shall notify the Secretary of War and the lessee in writing
of their determination, both severally as to the lessee and each of its sub
tenants and also as to the sum to be paid to the lessee by the lessor, and
such determination, when signed by a majority of the arbitrators, shall be
final and conclusive upon all parties concerned. The cost of such arbitration
shall be borne in equal shares by the lessor and the lessee.
If, within ninety days after the Secretary of War, the lessee, and its sub
tenants shall have agreed upon said sum, or, in the event of arbitration, within
ninety days after the arbitrators shall have notified the Secretary of War and
the lessee in writing of their determination, the lessor shall pay to the lessee
Sn cash the sum so agreed upon or determined by the arbitrators, as the case
may be, the lessee shall upon such payment surrender and deliver possession
to the lessor of all the demised premises.
In the event that the lessor Itself (through one of the departments of the
United States, or through a commission appointed by the United States, or
through a corporation the capital stock of which is wholly owned by the
lessor) shall then operate such properties in the production of fertilizers, or
one or more constituents thereof, the lessee hereby covenants and agrees that
the lessor will not be required to pay any royalties on such of the processes
utilized by the lessee, prior to the surrender of such properties, in the produc
tion of such concentrated fertilizer on the leased premises and owned, at the
tune of the surrender of such properties, by the lessee and/or by said Ameri
can Cyanamid Company, anil/or by any subsidiary and/or allied corporation
of said lessee and/or of said American Cyauamid Company as shall be used
by the lessor in such operation of said properties in the production of ferti
lizers, or one or more constituents thereof.
Mr. STAFFORD. I notice in reading the bill there is some over
lapping or, rather confusion that may possibly arise in view
of the fact that in the opening paragraph the lease is made not
only with the Air Nitrates Corporation but, as well, with the Amer
ican Cyanamide corporation as a joint lessee, and yet all the bill
is predicated upon the idea that these covenants are largely with
the Air Nitrates Corporation as the operating corporation. Here is
an instance of it where, by the use of the word " lessee " you intend
very probably the Air Nitrates Corporation ; yet in the body of the
bill the American Cynamid Co. is as much a lessee as the Air
Nitrates Corporation.
Mr. BELL. Well the lessee is the Air Nitrates Corporation and
the American Cynamid Co. is the guarantor; but in this case, we
have before us what we are endeavoring to do is to protect the
Government on the question of rayalties; that is to say, if by
any chance any process necessary to the operation of this plant, the
title to it should be in the Cyanamid Co., nevertheless the Cyanamid
Co. are to turn over the right to use that process at that plant with
out a royalty.
Mr. STAFFORD. I am fully aware that the language is very clear
as to that obligation of the American Cyanamid Co., but I am
thinking that here you have in the very opening paragraph the
two corporations named as joint lessees; yet you just state now,
and the bill is largely predicated upon that idea, the real lessee is
the Air Nitrates Corporation with the American Cynamid Co. to
guarantee the performance of the covenants. Yet there is nothing
specifically in the bill that says the American Cyanamid Co. is the
guarantor of the Air Nitrates Corporation.
Mr. BELL. Well dealing with the first situation first, would it in
you opinion clarify the situation if in line 7, or somewhere along
there, we said " The Air Nitrates Corporation, a corporation or
ganized ? "
100 MUSCLE SHOALS

Mr. STAFFORD. I just merely suggest it now for you to give

further consideration, Mr. Bell, and we can take it up in another
meeting.
The CLERK (reading) :
From and after such delivery of possession of the demised premises, this
lease shall cease and terminate and the lessor and the lessee shall be relieved
of all obligations hereunder except obligations which shall have accrued
before such delivery of possession, and the rental payments which are de
ferred under the provisions of article A, subdivision (1), subsection (b), and
article A, subdivision (2) subsection (b) shall not be deemed to have accrued
prior to the years in which they are payable as therein provided.
(2) Such concentrated fertilizer will be offered for sale to farmers and
other consumers in the United States at a maximum selling price free on
board factory consisting of the fair actual cost (as hereinafter defined) of
manufacture and sale, plus 8 per centum thereof. Such cost shall include
Mr. STAFFORD. Is there any provision later on in the bill which
enables the lessee and the farmer board to get together as to a
different method of the disposal of the fertilizer, in case it is found
that this method of selling it at the factory is not economically
feasible. I say " economically : " I mean is not a business method ?
Mr. BELL. I would think the clauses that follow were broad
enough. We will bear that in mind when we come to them.
The CLERK (reading) :
(a) All expenses incurred in and/or properly incident to the manufacture
and sale of much concentrated fertilizer, including the cost (as hereinafter
defined) of power used in such manufacture.
It shall be understood and agreed that in determining cost there shall be
deducted any discounts, rebates, or refunds accruing in connection with the
concentrated fertilizer business, any miscellaneous receipts from sale of scrap
or residue produced in the operation of the concentrated fertilizer business, and
the market value, if any, as raw materials before any subsequent processing
thereof, of any by-products produced in the course of the manufacture of such
concentrated fertilizer and sold either as such raw materials or after further
processing.
Mr. STAFFORD. Before we enter upon that consideration of sub-
paragraph 2 of title F, I wish just to have you state, generally,
whether I am right in my concept of the arrangement that, in case
of the manufacture of fertilizer by your company, or the lessee, and
it proves to be unprofitable or unbusinesslike, then you intend, in
these various alternatives, three alternatives, to have the Government
remburse you for all the investment you have made in the attempt
to manufacture fertilizer?
Mr. BELL. No ; that is not the theory. The theory of the thing was
this ; that, so far as we were concerned, our only privilege under this
lease is to go ahead and struggle with the situation as best we may;
but if the Government wishes, it has the option either to adjust the
rental upward on the basis of a power situation, as I discussed at the
last hearing, or to recapture the fertilizer portion with power enough
to run it, or to recapture the whole thing. The Government does
not have to reimburse us at all.
Mr. STAFFORD. So, then, if the manufacturing process may not
prove to be a businesslike venture, as far as profit is concerned, so
far as your being able to compete with other private industries in
the manufacture of fertilizer there is no obligation on the part of
the Government
Mr. BELL. No.
 MUSCLE SHOALS 101

Mr. STAFFORD (continuing). To reimburse you for the investment

you have made in the fertilizer business ?
Mr. BELL. None whatever.
Mr. STAFFORD. Then, following up that inquiry, assuming the case
that it will not be profitable, from a businesslike standpoint, to con
tinue the manufacture of fertilizer because there are new processes
developed, or the like, or competition is too keen, what do you pro
pose to do so far as continuing the production of fertilizer is
concerned?
Mr. BELL. Of course we consider that chance very remote, or we
would not* make the investment this will necessitate in the fertilizer
plant. If, however, in the course of 50 years it develops we are
simply beaten to a standstill on the production of fertilizer, on a
commercial scale, why then we have a situation where we will have
somewhere around $35,000,000 to $40,000,000 to try to write off in
the fertilizer plant that can not be used for fertilizer. It will be a
very serious situation. You ask what we might do
Mr. STAFFORD. I am asking whether you would discontinue the
manufacture entirely, or what would be your rights under the lease
as far as the continued production of fertilizer is concerned.
Mr. BELL. As long as we keep the necessary quantity in storage,
we could discontinue the manufacture of fertilizer. What we would
do, as a matter of fact, would be to purchase processes or develop
processes which would enable us to get started again and enable us
to make some use of that investment. That would be our primary
purpose ; because, obviously, that is an enormous sum and we do not
want to lose it.
The CLERK (reading) :
It shall be understood and agreed that the lessee shall have the right to pur
chase, for the manufacture of such concentrated fertilizer, materials, supplies,
and/or equipment not reasonably capable of being produced at either of said
nitrate plants, from American Cyanamid Company, a corporation organized
and existing under and by virtue of the laws of the State of Maine, its sub
sidiary and/or allied companies, at the fair market price thereof, provided
said price shall have been approved, subject to the provisions of Article N
hereof, by resolution of said farmer board.
(b) Fire, liability, and any other insurance.
(c) Taxes (except Federal income and profit taxes).
(d) Any expenses for research ordered by said farmer board (as provided
In subdivision (4) of this article).
(e) All expenses of administration of the concentrated fertilizer business,
including legal expenses properly incidental thereto.
(f) All expenses of maintenance of such part of said nitrate plants, or
either of them, as shall be utilized in the manufacture of such concentrated
fertilizer.
(g) Depreciation and obsolescence at the rate of 10 per centum per annum
of the lessee's total expenditures and expenses for construction and/or instal
lation and/or acquisition of buildings and equipment used in the manufacture
of such concentrated fertilizer and for acquisition, construction, and/or in
stallation of property for the replacement of presently existing property here
after used in such manufacture and for any additions, extensions, and/or
betterments that may be made from time to time to any property used in such
manufacture either existing at the date hereof or which may subsequently
be constructed and/or acquired, all such buildings and equipment becoming
the property of the lessor pursuant to the provisions of subdivision (2) of
Article N hereof on the termination of the lease.
Mr. STAFFORD. Give the reason why you place 10 per cent as the
basis for depreciation and obsolescence?
102 MUSCLE SHOALS

Mr. BELL. "Well that is just a little less than we have found from
our experience in our own business the situation requires.
Mr. bTAFFORD. I am rather surprised at this high rate of depreci
ation ; but, of course, if it is predicated upon your business experience,
that is explanation. Usually it is much less; but maybe in the
chemical industry it is higher.
Mr. BELL. It is high, especially in the ammonia industry.
Mr. STAFFORD. That is because of the constant change going on.
Mr. BELL. Constant advance.
Mr. STAFFORD. Constant change in methods of manufacture?
Mr. BELL. That is it, exactly.
Mr. STAFFORD. Substitution and development of new processes ?
Mr. BELL. Yes.
Mr. COCHRAN. What is your present rate of depreciation and ob
solescence ?
Mr. BELL. Well, taking it over a period of years, I think it has
run around 11 per cent.
Mr. McSwAiN. Mr. Bell, the net result of this is this, that if the
fertilizer feature is a success for 10 years and after the expiration of
the 10 years should fail, there will be no investment on the fertilizer
manufacture to be written off later.
Mr. BELL. I do not think it will work that way, Mr. McSwain.
It is a fact that, on the face of it, it would appear that at the end of
10 years, if the business went on. why then we should not charge any
depreciation, because it would all have been depreciated in our price
of materials to the farmer. Oh the other hand, if the business failed,
why then it would have all been written off. But, as a pratcical
proposition, what I think would usually happen is there will be con
stant investment almost every year, as we go along, in order to take
advantage of the new developments. We have never gone anything
like 10 years, we have never gone a single year without making
further investments in the Niagara plant in order to improve pro
cesses and reduce the cost. If the result of it works the same way at
Muscle Shoals, why we will have a situation where we are never
through depreciating; there will always be new items of equipments
that will have to be written off, and the thing will never come to an
end except at the end of the 50-year period. Do I make that clear?
Mr. McSwAiN. Yes ; I can see that—that, as you write off 10 per
cent a year, you might add an additional 10 per cent in substitution
for that which was written off.
Mr. BELL. Not for the purpose of substitution, but because that is
the nature of the art.
Mr. McSwAiN. But you could certainly save yourself on this, be
cause when 40 years had arrived then for the last 10 years you would
just have to use the old machinery and methods and not put in new
machinery and methods, so that at the end of the 50 years you
would be whole and that would be the natural human way to proceed.
Mr. BELL. Yes; toward the end of the lease, perhaps it would;
although I do not see but what that is all we can do.
Mr. McSwAiN. I would not blame you ; I would do it myself.
Mr. BELL. I do not see but what that is all that we can do.
Mr. STAFFORD. Assuming this lease comes to an end, if it has
worked to the satisfaction of the Government, there would be nego
 MUSCLE SHOALS 103

tiations made during that 10-year period for the continuance of the
lease.
Mr. McSwAiN. Naturally. I have nothing else now.
The CLEKK (reading) :
It shall be understood and agreed that as a part of such total expenditures
and expenses there shall be included Interest at the rate of 6 per centum per
annum during construction upon monthly balances of expenditures for con
struction.
Mr. STAFFORD. Generally speaking, 6 per cent is the usual rate.
In these days when money rates are quite low, do you think that is
the proper rate?
Mr. BELL. I do not believe, Mr. Stafford, on an industrial opera
tion of this kind that we can get our money much less than 6 per cent.
The CLERK (reading) :
It shall be understood and agreed that at no time shall the reserve for ac
crued depreciation and obsolescence over and above the total of expenditures
made therefrom for renewals and replacements of the buildings and equipment
provided at the expense of the lessee exceed the total original cost of all the
properties depreciated, and that no depreciation or obsolescence whatever shall
be charged in respect of the property built and provided at the cost and expense
of the lessor. If any part of the reserve for accrued depreciation and obsoles
cence be withdrawn from the concentrated-fertilizer business, such part so
withdrawn shall cease, from the date of such withdrawal, to be considered
as capital Invested in the concentrated-fertilizer business for the purpose of
computing interest on the capital invested in such concentrated-fertilizer
business.
(h) Interest at the rate of 6 per centum per annum on capital invested in
the concentrated-fertilizer business, except balances of expenditures for con
struction on which interest has hereinbefore been provided for and except
borrowed money.
It shall be understood and agreed that the lessee shall keep departmental
accounts which shall at all times show the proportion of its capital invested
In such concentrated-fertilizer business, and any expense incurred for the joint
benefit of the concentrated-fertilizer business and any other business or busi
nesses of the lessee or of its parent corporation or of its subsidiary or Hilled
corporations shall be equitably apportioned among them.
(i) Interest actually paid (from which shall be deducted interest earned on
bank balances) on money borrowed by the lessee and used or held for the pur
poses of such concentrated fertilizer business, the gross interest on such bor
rowed money not to exceed 6 per centum per annum.
(j) Cost of the farmer board and its members as provided in subdivision
(6) of this article.
(k) Unless otherwise provided for in, or precluded by, specific provisions of
this lease, any expenditure made or obligation incurred, at fair current prices,
for the specific purpose of performing the acts and things required to be per
formed by the lessee in connection with the preparation for manufacture,
manufacture of, storage, distribution, nnd sale of such concentrated fertilizer
under this lease, which the accountants hereinafter provided for shall certify
to have been reasonably necessary, as of the time incurred, in connection with
such performance, shall be considered items of cost.
It shall be understood and agreed, however, that in order to arrive at a
normal cost, preliminary costs of " tuning up " of manufacturing plant, demon
strating through cooperation of agricultural-experiment stations, country-agri
cultural agents, and farmers, the use on various crops of the concentrated
fertilizer produced (as provided in subdivision (1) of this article) on the
leased premises, and other initial and preliminary expenses made and incurred
tluring the period after the commencement of this lease and prior to operation
of the first unit of the plant for manufacture of such concentrated fertilizer
snd properly incident to the concentrated fertilizer business, shall be carried
as deferred charges and distributed equally in the cost of such concentrated
fertilizer over the first ten years of production after the operation of such
first uuit at full capacity has commenced ; and that similar initial and pre
 104 MUSCLE SHOALS

liminary expenses made and incurred in connection with the putting into opera
tion of the second and each subsequent unit of the plant for manufacture of
such concentrated fertilizer shall likewise be carried as deferred charges and
distributed equally in the cost of such concentrated fertilizer over the first ten
years of production after the operation at full capacity of each unit, respec
tively.
In case the lessee and/or any sublessee of the said lessee shall utilize any
part of the nitrate properties for purposes other than the manufacture of such
concentrated fertilizer, the expense of maintenance and operation of such part
of such properties when so utilized shall not be included in the cost of such
concentrated fertilizer, and any profits obtained by the lessee and/or said
sublessee through such utilization shall not be credited to the cost of sucb
concentrated fertilizer.
There shall not be included in the cost of such concentrated fertilizer any
royalties paid or payable on any process utilized in the manufacture of such
concentrated fertilizer, which are now owned or which may hereafter be
acquired by said American Cyanamid Company and/or by any subsidiary
and/or allied corporation of said American Cyanamid Company ; nor shall
there be included in the cost of such concentrated fertilizer any royalties upon
inventions or discoveries by the lessee or any officer, agent, or employee thereof
made through and iu the course of the manufacturing herein contemplated
and the research provided for in subdivision (4) of this article.
Mr. HILL. With reference to these royalties, has your company
the exclusive patent rights for the manufacture of cyanamide in this
country ?
Mr. BELL. We had originally the exclusive rights. Some of these
patents have run out, so that it would be possible for others to manu
facture cyanamide under certain of those basic patents; although,
really, I do not know how they could afford to do it very well be
cause of the improvements we have made, which are the subject of
patents that still hold and which we own.
Mr. HILL. Outside of your company, there is no other company
making cyanamide in this country to-day, is there, or on this conti
nent, really?
Mr. BELL. In North America, no; in fact, in the Western Hemis
phere.
Mr. McSwAiN. Mr. Bell, do not you think it will be right and fair
to agree that there should be no charge for the use of any inventions
or discoveries by the American Cyanamid Co. or any officer, agent, or
employee of that company, or any allied or subsidiary corporation
of the American Cyanamid Co.?
Mr. HILL. Future discovery '(
Mr. McSwAiN. Yes; just like is covered for the lessee itself, the
thousand-dollar corporation. Now, the real he-man in this lease is
the American Cyanamid Co. Now, suppose it acquires something,
there is no covery here that if it hereafter acquires
Mr. HILL. Yes; I think there is. Line 19—which are now owned
or which may hereafter be acquired by said American Cyanamid Co.
Mr. McSwAiN. All right, but suppose the American Cyanamid Co.
makes an invention or discovery, or some agents, officers, or em
ployees do, through their connection with the American Cyanamid
Co.'?
Mr. BELL. Well, if we are able to get the control of that, why then
it seem to me under this language it does come in, does it not ? Maybe
I do not understand your question, but I think it is covered.
Mr. HILL. I think our thought is covered, except this, that yon
would have no power, I take it, unless you had a specific contract
with each and every employee, to bind them.
 MUSCLE SHOALS 105
Mr. BELL. And if we have, so that we acquire it, then automatically
the Government gets it.
Mr. HILL. In other words, the minute the Cyanamid Co. acquired
anv patent rights, right away this section would apply.
Mr. McSwAiN. In lines 22 to 25 you see it does undertake to bind
the lessee, the thousand-dollar corporation, and to bind its officers,
its agents, and its employees. Now, I say why not bind the $60,-
000,000 corporation, its agents, its officers, and its employees?
Mr. BELL. Well, if we are able to get it so that it is owned or
hereafter is acquired, either in that way or any other, why then the
Government is entitled to it, is it not? I think, Mr. McSwain, that
is what we meant to do here ; maybe we did not do it.
Mr. McSwAiN. Yes ; but if some officer, agent, or employee of the
American Cyanamid Co. works out a discovery, that officer can,
through his friendship with the officers of the operating lessee, let the
lessee use it and that officer can put millions of dollars in his pocket
on the side and not be bound by this contract at all.
Mr. BELL. Well, in so far as it is possible for us to control it, why
it is the intention to do it.
Mr. McSwAiN. You do undertake to control the officers, the agents,
and employees of the lessee, the Air Nitrates Corporation, do you not ?
Mr. BELL. Yes.
Mr. McSwAiN. Well, now, of course a thousand-dollar corporation
would not be considered a minute here as a lessee for $100,000,000
worth of property.
Mr. BELL. No. We have provided for that elsewhere, you re
member.
Mr. McSwAiN. Exactly. Now, why not bind the officers, agents,
and employees of the American Cyanamid Co. not to come in here
with a bill for something they have worked out as a result of their
opportunity to experiment at the expense of the farmers of the
country ?
Mr. BELL. Suppose I go over that more carefully. I am not quite
sure I get it.
Mr. McSwAiN. All right.
Mr. CoCHRAN. You notice in line 22 that there is omitted the
language which is used in binding the officers, agents, and employees
of the lessee.
Mr. BELL. Yes. May I study that over ? It is just a little complex
to do it offhand.
The CLERK (reading) :
There shall not be included in the cost of such concentrated fertilizer any
compensation paid to any person holding the office of president, vice president,
secretary, or treasurer or any other corporate office in said American Cyanamid
Co., nor any compensation paid to any person holding like office In any
subsidiary or allied corporation of said company; but this provision shall not
be deemed to exclude from such cost compensation paid to any officer employed
by a corporation engaged exclusively in the manufacture of such concentrated
fertilizer under this lense.
Mr. STAFFORD. Is there any limitation as to compensation being
paid to officers of the Air Nitrates Corporation ?
Mr. BELL. No. We want to be free to pay whatever we think is
necessarv to get the right men, but we ourselves can not profit.
Mr. HILL. I do not see very well how you could limit that in view
of the fact it is for a 50-year period. What might be a good salary
106 MUSCLE SHOALS

to-day, perhaps, might be a very meager salary 25 or 30 years from

now.
Mr. McSwAiN. Or, should things go down, it would be vice versa.
Mr. HILL. Yes, or it may be " vice worsa."
Mr. McSwAiN. What is a poor salary to-day may be a fat goose
50 years from now.
The CLERK (reading) :
In computing the cost of all electric power used in the manufacture of such
concentrated fertilizer—
(a) The term "primary power" shall mean power that is continuously
available, and produced wholly by water or by water supplemented by steam.
All other power produced wholly by water shall be deemed to be " secondary
power."
(6) The cost per horsepower-year of primary power used In the manufacture
of such concentrated fertilizer shall be deemed to be the total average cost per
horsepower-year of all primary power produced by the lessee upon and by
means of the property covered by this lease during the fiscal year.
(o) The cost per kil iwatt-hour of any secondary power used in the manu
facture of such concentrated fertilizer shall be deemed to be the average cost
per kilowatt-hour of all secondary power produced by the lessee upon and by
means of the property covered by this lease during the fiscal year.
In computing the cost of primary power there shall be included—
(a) All expense of administration and all rentals, payments, contributions,
expenses, and expenditures of the lessee paid and/or accrued, whether in the
form of power or of cash, for maintenance and operation of the dams, power
houses, locks, gates and navigation facilities and/or for interest and/or amorti
zation upon the lessor's investment in the dams, power houses, locks, gates, and
navigation facilities, except expenditures for rental by way of interest and
amortization upon the lessor's investment in equipment not used in the produc
tion of primary power.
(6) All interest, amortization, reasonable depreciation, and other proper
fixed charges relating to that part of the power development acquired, con
structed, and/or purchased at the cost and expense of the lessee, and used in
the production of primary power (whether or not exclusively so used).
(c) The cost of production by the lessee of power by steam to supplement the
hydroelectric power development in the production of primary power.
(A) The cost of maintaining auxiliary steam-power plants in stand-by condi
tion and costs of stand-by crews of operators therefor.
(c) The cost of the lessee of any power purchased by it to supplement the
hydroelectric power development in the production of primary power, whether
such purchase be for payment of cash or for power given by the lessee in ex
change for other or different power.
(/) Unless otherwise provided for in, or precluded by, specific provisions of
this lease, any expenditure made or obligation incurred at fair current prices
for the specific purpose of performing the acts and things required to be per
formed by the lessee in connection with the production of such primary power
under this lease, which the accountants hereinafter provided for shall certify
to have been reasonably necessary, as of the time incurred, in connection with
such performance, shall be considered items of cost.
In computing the cost of secondary power there shall be included—
(a) All items properly charged in the accounts of the lessee as the cost of
power and not included in the cost of primary power, including fixed charges
relating to any part of the power development not used as aforesaid in the
production of pimary power.
No purchase of power by the lessee shall cause an increase In the average
cost per unit of power charged against the manufacture of such concentrated
fertilizer and no profit shall accrue to the lessee or to any allied or subsidiary
corporation of the lessee upon any part of the power (or upon items included
in the cost thereof) used in the manufacture of such concentrated fertilizer,
other than the said 8 per centum upon the cost of such concentrated fertilizer,
and the lessee shall use secondary power for the manufacture of such concen
trated fertilizer whenever in the judgment of the lessee secondary power is
available for such purpose and its use will reduce the cost of such concentrated
fertilizer.
 MUSCLE SHOALS 107

The average cost of power charged by the lessee In each year as part of the
expense of manufacture of such concentrated fertilizer shall not exceed the
lowest selling price for that year charged to said American Cyanamid Company
and its subsidiary and/or allied corporations and/or any other consumers by
the lessee for power, of the same class and kind, utilized for purposes other
than the manufacture of such concentrated fertilizer.
There shall be included in the cost of primary power in each fiscal year
such amounts as shall be paid for such fiscal year by the lessee as rental by
way of interest and amortization, in accordance with the terms of article A
hereof, and not any different amounts which may have accrued during such
fiscal year and part of which (as provided in article A hereof) shall have been
deferred to subsequent years ; and such amounts so deferred shall be charged
against the cost of primary power in the years when payments of such deferred
amounts are made in accordance with the terms and provisions of article
A hereof.
It is the intention of the parties to this agreement that in computing cost
there shall be no duplication, and to that end it is agreed that any item in
cluded in cost under any one provision of this subdivision (2) of article F
shall not be included as an item of cost under any provision of this subdivision
(2) of article F.
(3) Each year the fair actual cost of producing and selling such concentrated
fertilizer shall be estimated in the first instance by the lessee for the purpose
of fixing the selling prices at which such concentrated fertilizer shall be
offered for sale, but shall finally be determined annually by a reputable firm
of certified public accountants to be chosen in the following manner : On or
before the 1st day of April of each year the lessee shall nominate to snUl
farmer board three such firms. Said farmer board shall select one of th<«
three so nominated, or, if no one of the three be satisfactory to it, said farnu"1
board shall in turn, on or before the 1st day of May next following, nominate
to the lessee three such firms. On or before the 1st day of June next following
such nomination one of the said three firms shall be selected by the lessee, or.
if no one of said three firms be satisfactory to it, the then President of the
United States shall designate promptly in writing one of said six firms and it
shall act. For the fiscal year ending June 30 next following, such firm of
certified public accountants shall examine the business, books, and accounts
of the lessee and/or any allied or subsidiary corporation relating to the manu
facture and sale of such concentrated fertilizer so far as may be necessary to
determine the cost of such concentrated fertilizer, and shall certify to said
farmer board and to the lessee what was the actual cost of such concentrated
fertilizer, as provided in subdivision (2) of this article, and the prices (being
such cost plus 8 per centum) at which such concentrated fertilizer should have
been sold to farmers and other purchasers during such 'fiscal year, but the
accountants shall not certify or make public in any manner the details of the
cost of such concentrated fertilizer, except that the accountants shall, upon
the request of said farmer board, furnish to said farmer board the details of
sales and general administrative expense. Upon receipt of the certificate of
tbe accountants slating the actual cost and the prices at which such con
centrated fertilizer should have been sold, in case any farmer or other pur
chaser shall have paid to the lessee for such concentrated fertilizer a sum
greater than such price, the amount of such excess payment shall be promptly
refunded to said purchaser by the lessee. Such certificate of the accountants
shall be final and conclusive on all parties hereto, said farmer board and
purchasers of such concentrated fertilizer, subject only to the provisions of
article is" hereof:
Mr. STAFFORD. This paragraph, then, provides for the reimburse
ment to purchasers of the fertilizer in case the accountants find the
price should have been less?
Mr. BELL. Yes.
Mr. STAFFORD. Does not it involve considerable bookkeeping, then,
and a considerable checking as to the amount for repayment?
Mr. BELL. Yes; it will be the same situation we have in the phos
phate rock at the present time. We have a lot of cost-plus customers.
We determine the approximate figure; we are paid on that basis:
108 MUSCLE SHOALS

and if the accountants find the sum should have been less, why, we
mail them checks for the difference.
Mr. STAFFORD. Is it proper to inquire as to the arrangement you
have with those customers, the character of the customers on the
phosphate rock?
Mr. BELL. Cost plus.
Mr. STAFFORD. But who are the customers ; I mean generally, what
is the character of the customers ?
Mr. BELL. Oh, Armour
Mr. STAFFORD. You mean they are large industrial and manufac
turing concerns?
Mr. BELL. Yes.
Mr. McSwAiN. Mr. Bell, as I understand it, you are selling now to
the world from your Warners (N. J.) plant Ammo-Phos at about
$65 a ton?
Mr. BELL. Well, it is somewhat less than that now, Mr. McSwain.
Mr. McSwAiN. About sixty what ?
Mr. BELL. Well, our 20-20 grade is going out at somewhere around
$52 f. o. b. Warners, or f. a. s., as the case may be ; and we are also
selling 13-46 at approximately $60, $61, or $62 ; something like that.
Mr. McSwAiN. It was that that I had in mind, the 13-46.
Mr. BELL. I see.
Mr. McSwAiN. You are selling that at about $60 a ton ?
Mr. BELL. Yes.
Mr. McSwAiN. Now, your engineers have gone over very carefully
and have reported to you ^ what you could probably expect to do in
view of the indirect subsidy through the low rate of interest and
the use of nitrate plant No. 2 at Muscle Shoals, if you were to obtain
this lease, have they not?
Mr. BELL. Yes.
Mr. McSwAiN. Now, upon that report, you think you can succeed
with the manufacture of fertilizer; you will be able to manufacture
it of a kind and sell it at a price tnat will prove attractive to the
farmer ?
Mr. BELL. We do.
Mr. McSwAiN. What is your estimate as to what you will be able
finally to put out and sell to farmers the ammo-phos that contains 13
per cent of nitrogen and 48 per cent of phosphoric acid—is that it?
Mr. BELL. Forty-six to forty-eight per cent; yes.
Mr. McSwAiN. Forty-six to forty-eight per cent of phoshpric acid?
Mr. BELL. I would rather not give that figure, because, obviously,
it is a confidential figure ; but I think I can give you what you have
in mind by saying that there is nothing about these estimates that
indicate we can not do at Muscle Shoals what we are doing at War
ners, N. J. In fact, there is at least one feature of the situation that
is more attractive at Muscle Shoals than at Warners and Niagara. At
present we manufacture cyanamide up at Niagara, Ontario, and then
it has to be shipped down about four hundred-odd miles to Warners,
N. J., on a freight rate of $3.60 or something like that a ton, and there
it is autoclaved and turned into the phosphoric acid. Now, at Muscle
Shoals we have an easier situation, in that we do not have to pay
that freight rate. The ammonia will be autoclaved out of cyanamide
and simply sent through a pipe to the phosphoric-acid plant. So
 MUSCLE SHOALS 109

that in some respects it is rather a more favorable situation. We

know of no reason why we can not equal or better the Warners cost.
Mr. McSwAiN. When the plant reaches a maximum production of
about 48,000 tons of fixed nitrogen, converted into ammo-phos upon
the percentages indicated, what would you estimate would be the
charges you would have to pay the firm of certified public account
ants for going over the business, per year ?
Mr. BELL. Oh, I should think that a simple audit ought not to cost
more than $10,000 a year. That is a very off-hand opinion, but I
should think it ought not to cost more than that.
Mr. McSwAiN. Then if you were to adopt my suggestion that I
have been contending for, to have two firms of certified public ac
countants, one selected by you and the other selected by the farmers
board, it probably would not cost over $20,000 for both firms ?
Mr. BELL. But, as I pointed out to you before, Mr. McSwain, the
moment you set up an arbitration ana the accountants have to ap
pear and contend and dispute about the thing, why, up will go the
cost of accounting.
Mr. McSwAiN. But down might go the cost of fertilizer as a con
sequence of that, might it not ?
Mr. BELL. No ; I do not think so. We have endeavored to draw
this provision regarding costs with such detail that there would be
very little left open that they would have to do ; but if the account
ants are employed with the idea that one of them is our set of ac
countants to advocate our ideas and the other is a set of accountants
to advocate somebody else's ideas, why, we will very soon have
very heavy bills for accountants.
Mr. McSwAiN. Well, Mr. Bell, do not you know that every bank
that goes defunct, 90 days prior to the time it goes bankrupt and
the depositors oftentimes do not get their money, much less the
stockholders, that there is a bank examiner of the Government ex
amines it and issues a statement it is O. K., and three of the directors
certify it and publish that statement to the world every 90 days that
the bank is all right ; and then at the end of the 90 days, after the
bank examiner, an impartial Government auditor, passed on it, the
thing is a wreck ? Do not you know that is a fact in regard to banks ?
Mr BELL. I am afraid I do not know very much about that.
Mr. McSwAiN. Sir?
Mr. BELL. I do not think I have had any experience in bank audits.
Mr. McSwAiN. In failing banks?
Mr. BELL. In audits of failing banks, no.
Mr. McSwAiN. Well, that is a fact. The law of the United States
requires the examiners to examine all national banks every 90 days
and every State law I know of requires the State examiners to ex
amine State banks every 90 days, and here these absolutely impartial
examiners—supposed to be; that do not even get their pay from
the banks, but are paid out of the Public Treasury, and supposed
to be hard-boiled—pass the accounts, and in 90 days, the thing is
gone.
Mr. BELL. I had supposed very often it was the result of the bank
examiner's audit of the bank that the thing was put in bankruptcy.
Mr. McSwAiN. I know that is true ; it is the result of their audit
that the bank is put into bankruptcy; but, 90 days before that, either
the same examiner or some other examiner had said the thing was all
101229—30 8
 110 MUSCLE SHOALS

right. I think if it is only going to cost $10,000 additional, that it cer

tainly would be a mighty good investment; all that anvbody coujd
want would be the truth about it, and it would be a mighty good in
vestment to have what you might call a bipartisan audit. I see things
going through on ex parte statements that if there were a cross-
examination and contrary attitude would never get by. We pass
things out of this committee here with a diversity of minds and we
do not see points, and then we get on the floor over here and some
body throws a question at us that had not occurred to us, and if it
had occurred to us we would have followed the inquiry and, maybe,
never reported the bill. I am a great believer, I must say, in a
bipartisan search of truth. That is why I believe that the court
house, with contrary lawyers, even fighting their selfish points of
view, finally out of their extreme views adduces facts from which
a judge and a jury can arrive at the truth. That is why I am so
wedded to the proposition I have always contended for of a bipar
tisan audit. I do not care to take up the time of the committee; I
just wanted to throw that out so that it might not be understood by
my silence that I have changed my mind at least.
The CLERK (reading) :
(4) The lessee will establish on the leased premises as a part of the group
of plants devoted to the manufacture of such concentrated fertilizer a labora
tory for chemical research in fields of interest to agriculture, such as the
production of nitogen, phosphoric acid, and potash (either separately or in
combination with other materials), in improved concentrated forms, and will
expend upon such research concentrated fertilizer produced and sold during
the preceding fiscal year under the provisions of subdivision (1) of this
article, as shall he determined by said farmer board, the cost and expense ot
such research to be charged to and included in the cost of such concentrated
fertilizer, and the lessee shall employ, so far as reasonably practicable, such
improved processes developed by such research as in its judgment will produce
the cost of such concentrated fertilizer ;
(5) The distribution of such concentrated fertilizer to farmers and other
consumers shall he subject to such reasonable regulations as may be pre
scribed by said farmer board. Such regulations shall be adopted or revised
at annual meetings of said farmer board, to take place on or before June 30
of each year, and the regulations so adopted or revised shall take effect on
the 1st day of January next following. It shall be entirely in the discretion
of said farmer board whether any such regulations shall be adopted or amended
In any one year. Such regulations shall apply solely to distribution and shall
not require the lessee to extend credit to purchasers. It shall be the privilege
and duty of said farmer board, as often as it sees fit, to confer and advise
with the lessee as to the forms, inds, and sorts of such concentrated fertilizer
to be manufactured by the lessee, and also as to the means and methods to be
employed by the lessee in introducing among the farmers of the country the
use of such concentrated fertilizer and also as to the distribution, location,
and shipment of such concentrated fertilizer into different sections of the
country at different seasons of the year to meet the demands and needs of the
users of such concentrated fertilizers, but such advice by the farmer board
shall be merely advisory and shall not be binding or obligatory upon the lessee.
(6) Said farmer board shall consist of not more than nine voting members,
two of whom (who need not be fanners) shall be appointed by the lessee, and
seven of whom shall be appointed through nomination by the President of
the United States from lists submitted by national farm organizations and
confirmation by the Senate. In addition to the voting members the President
shall designate a representative of the Bureau of Markets of the Department
of Agriculture, or its legal successor, to serve upon such board, in an advisory
capacity but without a vote. The voting members appointed by the lessee
shall serve at the pleasure of the lessee, which shall appoint their successors.
The voting members nominated by the President and confirmed by the Senate
shall be chosen in the following manner : On or before the 1st day of Septem
 MUSCLE SHOALS 111

her in the year 1929 and thereafter whenever a vacancy occurs, the American
Farm Bureau Federation, the National Grange, and the Fanners' Educational
and Cooperative Union of America, or their successor or successors, as lead-
lug representative farm organization, national in fact, shall each designate to
the President of the United States, in writing, not less than five nor more
rhan ten candidates for voting membership on said board. The President
shall nominate to the Senate at its then existing or next regular session a
sufficient number of the candidates so designated to fill all the vacancies in
said board, the candidates so nominated to be selected by the President in
such a manner, so far as he rinds practicable, as that representation shall
be given to each of the above-mentioned organizations or their successors and
that not more than one member of the board shall be a resident or any one
State. Such nominations shall be subject to confirmation by the Senate, and
if the Senate shall not confirm a sufficient number to fill all vacancies, the
President shall make additional nominations from among candidates desig
nated as hereinabove provided, until the Senate shall have confirmed a suffi
cient number.
If any controvery shall arise as to the existence or successorship of any
such organization or whether it be national in fact, it shall be determined by
the Secretary of Agriculture ; and if one or more of the above-mentioned farm
organizations or their successors, by reason of expiration of charter or ceas
ing to function or failing to maintain an organization, national in fact, or for
any other reason, shall decline, fail, or neglect to make such designation of
candidates, as above provided, the Secretary of Agriculture shall make such
designations for the organization or organizations so declining, failing, or neg
lecting to make the same; but a failure in any one year to make such desig
nations shall nut deprive any of the said farm organizations or their succes
sors of the right and privilege to make such designations in future years. On
all such questions the decision of the Secretary of Agriculture shall be in
writing and final and conclusive on all persons and organizations. The terms
of office of the members of the said board first appointed shall commence on
the 1st day of January, 1930. Two of the seven members first appointed on
the nomination of the President shall be designated by him to serve for a
period of two years, two for a period of four years, and three for a period of
sis years ; and their successors shall serve for six-year terms. The members
of the said board shall receive a per diem compensation to be fixed by the
Secretary of Agriculture, and shall be reimbursed for their actual and neces
sary expenses in attending to the business ol the board, such compensation
and expenses, and all actual and necessary expenses of the board itself, to be
paid by the lessee and charged to the cost of producing such concentrated
fertilizer. The said board shall appoint and employ a permanent secretary
and such other employees as it shall deem necessary to serve at its pleasure,
and shall fix the compensation of such secretary and employees to be paid
in like manner by the lessee and charged in like manner to the cost of pro
duction of such concentrated fertilizer. Said permanent secretary shall keep
an accurate record of the proceedings of said board, and the same shall be
published annually as a report to Congress.
The said board shall meet at the call of the Secretary of Agriculture and
at least once each year at Washington, in the District of Columbia, or at
Muscle Shoals, in the State of Alabama, or at such other place or places as
the Secretary of Agriculture may designate.
Mr. McSwAiN. I wish the record to show that as to page 50, line
14, and through that page and through page 51, that that is. in sub
stance, the result of an amendment that I offered when the bill was
under consideration before, with reference to enlarging and ex
tending the powers of the farmer board and I think that the lan
guage even here proposed by the lessee is a great improvement, for
this reason : The farmer board is given the right to confer and
advise with the lessee as to the forms, kinds, and sorts of concen
trated fertilizer to be manufactured by the lessee and while, under
the terms of the lease, it is not binding or obligatory upon the
lessee to accept this advice, yet, in my humble judgment, if the
lessee refused to accept the advice and if, in consequence of such
 112 MUSCLE SHOALS

refusal, it continues to put out a product which the farmers will

not buy and use, that that will be a circumstance to be considered by
the court as to whether or not the lessee is in good faith in its effort
to manufacture fertilizer.
The CLERK (reading) :
G. The lessee covenants and agrees that the electric power obtained by it
from said demised premises, to the extent that said power is not required for
such production of said concentrated fertilizer and/or such operation and
lighting of said locks and/or is not used in local industry for the production
of other electrochemicals and/or electrometals, essential or useful to the na
tional defense and/or by the lessee and/or said American Cyanamid Co.
and/or a subsidiary corporation of either of said corporations, will be disposed
of by the lessee for use in local industry and/or for the purpose of distri
bution (subject to the applicable State and Federal laws) for general, domes-
tie, industrial, and commercial use, and the lessee may enter into contracts
for the construction and/or use of transmission lines with persons, corpora
tions, municipalities, districts, counties, and individual States of the United
States to which such electric power may reasonably be transmitted.
Mr. STAFFORD. Under this phraseology, what do you contemplate
might arise as to the distribution of the surplus power to other
corporations and municipalities and to States of the Union?
Mr. BELL. Well, what I suppose will happen will be this, that
in addition to power that goes into the fertilizer operation, we
ourselves will make use of the power in our own other manufac
turing operations which I described the other day; we will furnish
power to the Carbide Co. under our contract with them for some
of their manufacturing operations; and, in addition to all that,
there will be some surplus remaining. That surplus could be dis
tributed, if the public service commission of Alabama gave us per
mission, and other States gave us permission, through new
transmission lines and new distribution systems which we might
build and acquire. As a matter of fact, however, the surplus re
maining will, in my opinion, be so small and, further than that, it
will be subject to recapture for use in fertilizer manufacturing
operations as they grow, that we will have the situation where it
would not warrant the investment of millions of dollars necessary
to erect those transmission lines or purchase the distribution sys
tems existing or construct new ones. Consequently, it seems to me
it will end, probably, in some sort of an arrangement by which the
surplus power, so long as it exists, will have to go out over the lines
of the existing companies. As an economic proposition, I think
we are bottled up as far as the surplus power is concerned.
Mr. STAFFORD. Under the contract with the Union Carbide Co.,
how much power do you plan to lease to them?
Mr. BELL. Well, the nominal amount or the amount named in the
contract is 50,000 horsepower. I would not suppose, Mr. Stafford,
they would want to start off with a block quite so big as that.
Mr. STAFFORD. Where is their plant to be located ?
Mr. BELL. Well that has never been discussed,. I do not know
where it would be, but I suppose they would probably put up a
good-sized furnace somewhere around the vicinity. My impres
sion is—I really do not know this, because we have not discussed it,
but my impression would be, as a manufacturer of carbide, they
would probably begin with furnaces that would use approximately
25,000 horsepower. That is a very economical unit, if you can sell
that much output.
 MUSCLE SHOALS 113
Mr. STAFFORD. Their product is utilized in which of the arts ?
Mr. BELL. Well the carbide when treated with water gives off
acetylene nad acetylene gas is used for a god many different pur
pose's—acetylene lamps, lighting systems. Then acetylene has a
food many derivatives that have become of use now. I am not so
amiliar with those, but I know there are quite a good many.
Mr. STAFFORD. How many plants has the Union Carbide Co.
at present?
Mr. BELL. If you take all their plants which, of course, would
include everything—you do not mean that, though ; what you have
in mind is carbide plants, is it not?
Mr. STAFFORD. Yes, carbide plants.
Mr. BELL. Well they have one at the Soo and they have one at
Niagara, and they have one over in Canada at Welland. I am
almost sure they have another plant or two, but I do not know
where they are.
Mr. STAFFORD. What else do they manufacture besides carbide?
Mr. BELL. Oh, they manufacture a great many things—ferro
alloys; ferro-silican ; ferro-chrome, used as a steel hardener; they
manufacture Ever Keady searchlights ; they manufacture B batteries
for radios ; they manufacture Prestone, "I think it is, this anti
freeze mixture. It is an enormous affair, with a great many man
ufacturing activities.
Mr. STAFFORD. Do you know, off-hand, its capitalization?
Mr. BELL. I am under the impression it has some eight or nine
million shares and that the market value is somewhere around
90—many times larger than we are.
Mr. STAFFORD. They are not competitors of yours, hut they are
in a different line of manufacture?
Mr. BELL. All the carbide we make we put in the cyanamide—
practically all.
Mr. McSwAiN. Mr. Bell, by way of summary, for the fixation of
20,000 tons of nitrogen and its conversion into Ammo-Phos, along
with the production of phosphoric acid, what is the necessary horse
power for the fertilizer operation to that extent?
Mr. BELL. In the manufacture of the cyanamide, there would be
used something a little under 50,000 horsepower. In the manu
facture of the phosphoric acid, by the wet process, there would
be very little power. Eventually, I think we are coming to the
electric furnace process, in which case the amount necessary for
that purpose would be somewhere in the neighborhood of some
thing less than 90,000 horsepower.
Mr. McSwAiN. Ninety thousand horsepower in addition?
Mr. BELL. In addition to the cyanamide.
Mr. McSwAiN. In addition to the 50,000 horsepower for the
cyanamide?
Mr. BELL. Eight; in other words, an aggregate of something less
than 140,000 horsepower.
Mr. McSwAiN. Then why do you think the electric-furnace method
will be cheaper than your wet process, if the wet process does not
take much power ?
Mr. BELL. Well you get rid of the manufacture of sulphuric acid ;
you do not have to buy any sulphur and you treat the phosphate
rock in the electric furnace with a flux which ought to be very cheap.
114 MUSCLE SHOALS

Mr. STAFFORD. Well, in the arts, in steel manufacture, and other

kindred manufactures, they are utilizing the electric furnace more
and more in the place of coal and the like?
Mr. BELL. They are ; that is correct.
Mr. McSwAiN. So for the first 20,000 tons, if you should use the
electric-furnace method for the production of the phosphoric acid,
it would take about 140,000 horsepower ?
Mr. BELL. Not any more than that, Mr. McSwain. I hope it will
prove somewhat less. I do not know it will be substantially less, but
I hope we can get by with a little less current.
Mr. McSwAiN. But you are going to start out with the wet process
for the manufacture of phosphoric acid, are you not ?
Mr. BELL. On the first unit, I would be afraid to start with any
thing else. The wet process we are very familiar with.
Mr. McSwAiN. The world has known that for 75 years already^
has it not?
Mr. BELL. And we have no desire to produce any forfeiture under
our guaranty, so I think we would have to start with the one with
which we are perfectly familiar.
Mr. McSwAiN. Exactly.
Mr. BELL. I think probably in the course of 8 or 10 years, or
even sooner, we might scrap that plant and convert that unit to the
electric furnace; but nobody can tell with certainty about those
things.
Mr. McSwAiN. Then without the promise to let the Union Carbide
Co. have 50,000 horsepower of primary power, you could obligate
yourselves to produce perhaps 40,000 net tons of fixed nitrogen, with
out the building of Dam No. 3 or of Cove Creek, could you not ?
Mr. BELL. No; because we might find ourselves in the position
that we would guarantee to produce this fertilizer and yet we would
find that we were without adequate power to produce it by the
method which may prove to be the cheaper method. Consequently,
our investment would be lost and, therefore, we must make sure, so
far as an adequate supply of power is concerned, that we are certain
to have that power available.
Mr. McSwAiN. But persevering in the determination to let the
Union Carbide Co. have 50,000 horsepower will not increase that
horsepower available for the use of the electric-furnace method
will it?
Mr. BELL. Oh. no ; of course not.
Mr. McSwAiN. Which is the largest corporation financially; which
has the largest amount of assets—the Union Carbide Co., or the
American Cynnamid Co.?
Mr. BELL. Oh, the Carbide Co., many times; ten times, perhaps.
Mr. McSwAiN. Ten times?
Mr. BELL. That is an offhand figure.
Mr. McSwAiN. How much of the assets of the American Cyanamid
Co. does the Union Carbide Co. control?
Mr. BELL. None.
Mr. McSwAiN. None whatever?
Mr. BELL. None whatever.
Mr. McSwAiN. It does not own any stock in it ?
Mr. BELL. Not tha.t T know nf
 MUSCLE SHOALS 115

Mr. McSwAiN. Does the American Cyanamid Co. own any stock
in the Union Carbide Co. ?
Mr. BELL. No.
Mr. McSwAiN. Then, Mr. Bell, what is the motive for letting the
Union Carbide Co. have 50,000 horsepower, primary power, to carve
that our of the 78.000 horsepower to start with, without 1 cent of
profit to the American Cyanamid Co.?
Mr. BELL. Well, when we started to make this offer, it was sup
posed that the Militarv Affairs Committee of the House would appre
ciate the fact that if the Union Carbide Co. were going to take their
ferro-alloys industry to Muscle Shoals, [ferro-alloys having taken a
No. 1 priority certificate in time of war, just as nitrogen took a No. 1
prioritv certificate] and there would be not up at Muscle Shoals
not only a nitrogen industry for use in time of war, but also a ferro
alloy industry, which is just as important, that that would be a very
attractive feature of our offer.
Mr. McSwAiN. Mr. Bell, was not that a very violent assumption;
because, in the first place, there is no agreement by the Union Carbide
Co. to devote that 50,000 horsepower to the manufacture of ferro
alloys of any sort, which would be available for the Government in
the event of war, and there is no agreement it will establish any plant
facility there, and there is no agreement but what, given the power,
if it wanted, it could resell the 50,000 horsepower to the Alabama
Power Co. or anybody else and put $5 or $10 a year profit in its
pocket on every horsepower, without even having done anything in
the wav of the manufacture of metallurgical or chemical products;
it could farm this 50,000 horsepower out and never do a thing for
national defense?
Mr. BELL. Well, I must say the idea did not seem to get across.
Mr. McSwAiN. Yes. Now the only agreement between the Ameri
can Cyanamid Co. and the Union Carbide Co. is that correspondence
which you have shown us ?
Mr. BELL. That is the only agreement which we have ; yes.
Mr. McSwAiN. You, as a lawyer, know that is not a contract ; that
it is certainly in its executory state, do you not?
Mr. BELL. Yes.
Mr. McSwAiN. And you know an executory contract can be can-
caled on notice, before execution?
Mr. BELL. Oh, I think the parties to it are bound by good faith;
there is a clear moral obligation there.
Mr. McSwAiN. But when the parties are dealing with United
States Government property and if some of the representatives of
the United States Government indicate that this is an unfair diver
sion of Government assets, to wit, 50,000 horsepower, without profit,
is an unfair diversion of Government assets, ought not you, seeking
to get the lease to this property, give notice to the Union Carbide
Co. of the present situation, to wit, the desire of the Government to
devote this 50,000 horsepower to the manufacture of fertilizer, and
ask them to release you from the gentleman's agreement ?
Mr. BELL. Well, I think there are two or three ways of looking at
it. First of all, let me say I do not consider that an unfair diversion
of Government assets. I do not know of any reason why it is not a
very excellent thing from the standpoint of the Government to have
 116 MUSCLE SHOALS

that power go into the manufacturing operations the Union Carbide

Co. might be expected to set up at Muscle Shoals. However, to go
on to the answer of the second question that you raised, namely, that
inasmuch as the Government may indicate that they would be glad
to have us abolish that contract, cancel it, or, seek to cancel it, if there
is a clear moral obligation, which I certainly think there is, that we
should go through with our contract I would not feel free to do it.
I might withdraw my own offer, but I do not see that I have any
right to go back on the contracts, even if they are executory, as long
as there is a clear understanding with other people. If they are in
consistent with the feeling representatives of the Government have
about the offer, why, perhaps the thing to do is to withdraw the
offer ; but I can not renig on my obligations.
Mr. McSwAiN. But, Mr. Bell, suppose you explain to the Union
Carbide Co. the view that we take of this, or at least that some of
us take—of course, we are very insignificant, but Congress might
take that view if this thing were called to their attention on the
floor—do you not think the Union Carbide Co. would release you
from a mere gentleman's agreement ?
Mr. BELL. I really do not know ; I would not like to ask anybody
to let me out of an agreement. It is a perfectly sensible agreement:
nothing better could happen for the Tennessee Valley than to have
that great industry established there in addition to our own.
Mr. McSwAiN. But, Mr. Bell, there is no promise on their part
they would establish any industry.
Mr. BELL. No ; but what are they going to do with the power ?
Mr. McSwAiN. Well, they can sell it, can they not, at a profit ?
Mr. BELL. I do not think so.
Mr. MoSwAiN. There is nothing in this lease that they can not
resell it. They can farm it out. I would like to have that 50,000
horsepower; I certainly could use it, and I would not put up any
factories down there either; I would sell it.
Mr. BELL. Now, Mr. McSwain, I appreciate that is probably an
opinion very generally held; but, in my opinion, you can not sell
50,000 horsepower at a profit over and above $17. and, to give vou
some evidence of that, let me tell you it was only year before last
that I bought 70,000 horsepower, prime power, at Niagara Falls, at
a price within a dollar of that and Niagara Falls is one of the most
highly developed industrial sections in the world. In other words,
there is a gross misconception as to the value of power.
Mr. McSwAiN. I do not see how we could ever justify the expendi
ture of $60,000,000 or more to get more power by building Dam No.
3 and Cove Creek when, at the same breath, the first 50,000 horse
power is not worth anything and we ought to give it away to get
rid of it.
Mr. BELL. I did not say it was not worth anything; what I said
was if you had 50,000 horsepower at Muscle Shoals and tried to resell
it, I do not think you could make a profit on it for years to come.
Mr. McSwAiN. Then if we can not sell it at a profit, if we can
not use it profitably, if we just have to give it away without profit
to get rid of it
Mr. BELL. Well, so far as the Carbide Co. is concerned, I think
they can use it at a profit in their own operations; but I do not think
they can resell it at a profit.
 MUSCLE SHOALS 117
Mr. McSwAiN. Well, if it goes on, I am going to move that the
carbide officers be summoned here to testify and maybe they will be
kind enough to you—I see your sensitive point of view and it is very
honorable, but maybe they will be kind enough to you—to get out of
this picture and let you have a free and fair held to it.
Mr. RANSLEY. And fair to the Government.
Mr. McSwAiN. And fair to the Government ; yes.
Mr. STAFFORD. Supplementing the position of Mr. McSwain, I
would like to have some information as to what the Union Carbide
Co. intends to erect there. To me, from the little information fur
nished us in the hearings, it seems the Union Carbide Co. wishes
to erect a private industry of no direct value to the consumers of the
country, and I would like to ask now
Mr. 'McSwAiN. That has been my position all along, along those
lines.
Mr. STAFFORD. I would like to ask now, in view of the fact, espe
cially, we are asked to obligate ourselves to create additional power
in Dam No. 3 and Cove Creek, and we do not know the tremendous
obligation that we may be put to in obtaining the reserve water
supply of Cove Creek, I would like to know something more about
this contract. This is the first time I have learned about it. What
is it ; how did it come about ? I thought this was a fertilizer propo
sition with the American Cyanamid Co.; now I find there is an
arrangement made with the Union Carbide Co. to create an indus
trial concern for the manufacture of ferro processes. There is noth
ing in this lease that refers to the Union Carbide Co. ?
Mr. BELL. No.
Mr. STAFFORD. Then as one member of the committee, and a new
member, I would like to know something about this sort of an
arrangement. I thought it was entirely fertilizer and the develop
ment of your allied industries down there in the manufacture of
chemicals.
Mr. BELL. In addition to that, there is already in the record the
contract, which is the only contract that exists, between ourselves
and the Carbide Co., under the terms of which they are entitled to
50,000 horsepower at not to exceed $17.
Mr. STAFFORD. Why should you single out the Union Carbide Co. ?
There are a great number of other private industries, that manu
facture ferro processes, and why should they be favored ? They are
a stranger to me in this matter. Nothing in this contract gives you
a right to single out one private industry and aid it in the develop
ment of their private processes.
Mr. BELL. Well, is it your idea, Mr. Stafford, that the lease should
provide just exactly to whom and at what prices and so on
Mr. STAFFORD. No. I am very frank to say that I have not brought
myself around to the position that I favor obligating the United
States Government to build the Dam No. 3, just merely to produce
excess power that is to be farmed out to the Union Carbide Co. You
said earlier in your testimony that your original offer was to accept
the power as is. That is what appeals to me. I am not warm to
the proposition of obligating the Government to expend the millions
and millions of dollars to produce additional power and particularlv,
as it now develops, for the benefits of some private interests. I am
not in favor of that kind of subsidy to private industry.
118 MUSCLE SHOALS

Mr. BELL. Of course the additional power goes far beyond the
amount that the Union Carbide Co. would receive.
Mr. STAFFORD. Oh, yes ; but I want to be satisfied, as a representa
tive of the Government here, as to whether the existing power that
is developed at Muscle Shoals, Dam No. 2, with the steam power
plants, is not able to produce fertilizer on an economic scale. I am
hard-boiled; I am from Missouri; I want to be shown that we can
not run that plant under private auspices to the benefit of the farm
ers of the country. I certainly am opposed to granting any subsidy
to the Union Carbide Co. or any other private industry to utilize that
power, for us to sink sixty million or more, maybe one hundred
million before we are through with it. I can not justify any such
policy as that. There is my frank statement.
(The committee thereupon adjourned until to-morrow, Wednes
day, March 5, 1930, at 10 o'clock a. m.)
 MUSCLE SHOALS

WEDNESDAY, MABCH 5, 1930

HOUSE OF REPRESENTATIVES,
CoMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10 o'clock, a. m., Hon. Harry C. Ransley
presiding.
STATEMENT OF W. B. BELL—Resumed
Mr. BELL. There were two questions raised at the last hearing.
The first one was on page 1, line 7, where it was suggested we might
give it greater clarity if we put in something like this; namely,
lowing the words " State of New York," to insert " as the lessee," so
that it will read, beginning in line 5 :
* * * to execute and enter into with Air Nitrates Corporation, a corpora
tion organized and existing under the laws of the State of New York, as the
lessee.
Then, going on to the next page, following the words " and Amer
ican Cyanamid Co., a corporation organized and existing under the
laws of the State of Maine," insert the words " as intervenor."
In that connection, over on page 77 and, in fact, beginning on
page 76, beginning in line 21, it reads :
In this indenture has intervened said American Cynanamid Company, which,
pursuant, to a resolution duly adopted by its board of directors on the day
of , 1930, a copy of which duly certified by its secretary under its corporate
seal, is hereto annexed, hereby for itself and its successors and assigns waives
the royalties hereinbefore described and guarantees the performance by the
lessee of all obligations placed upon said lessee by this lease.
Now the other question which was raised is perhaps not quite so
simple to deal with, although, in practice, what we want to do is
exactly what you gentlemen had in mind, and that was a question
which was suggested in connection with page 42, line 19 :
There shall not be included in the cost of such concentrated fertilizer any
royalties paid or payable on any processes utilized in the manufacture of such
concentrated fertilizer, which are now owned or which may hereafter be
acquired by said American Cyanamid Company and/or by any subsidiary and/or
allied corporation of said American Cyanamid Company ; nor shall there be
included in the cost of such concentrated fertilizer any royalties upon inven
tions or discoveries by the lessee or any officer, agent, or employee, thereof made
through and in the course of the manufacturing herein contemplated and the
research provided for in subdivision (4) of this article.
Now the point was brought out that while the Cyanamid Company
and its subsidiaries and allied corporations agree not to collect any
royalty on any process which they own or may hereafter own, we
had not used the same language which we use later on when we
119
120 MUSCLE SHOALS

specifically say that the inventions, and so on, of those who are
employed at Muscle Shoals, or in the research provided for, or in
connection with this manufacturing operation, shall be available
without royalty.
Now the difficulty, of course, is this : We can easily enough control
and deliver without royalty any processses which the corporations
may own or which they may hereafter acquire, and we have that
situation under control; but if we go ahead and add to that a pro
vision that covers all of the inventions of any officer, agent, or em
ployee of any of said corporations, we face the practical difficulty
that even now we have between 10,000 and 12,000 people scattered
all over the world, in various subsidiaries that we own, and if any
one of them, as it subsequently proves, should have a process, why
we would become liable, under this agreement, regardless of whether
we were able to buy it, or whether we were not. Do I make plain
the difficulty that we face? I do not quite know what to do with it.
In other words, suppose a man in some corporation that we acquire,
who would come under this language if it were made as broad as
this, has some sort of process that, by some conceivable theory, might
be related to this manufacturing operation down at Muscle Shoals,
what are we going to do with him ; how are we going to get it away
from him ?
Mr. SPEAKS. Is there any employee of yours not engaged under
such terms and conditions that, if he should make a discovery of
great value, it goes to the corporation ?
Mr. BELL. Well, there are supposed to be employment contracts
governing the assignment of any process, and so on, which may be
discovered by such man during his term of employment with us.
Now as regards our subsidiaries, I do not know whether they have all
got that or not. What might happen
Air. SPEAKS. Pardon me just a moment. Would not your subsid
iaries probably be governed by the same business policies and regu
lations as the parent organization might devise ?
Mr. BELL. Oh, we certainly intend that they should be. The only
difficulty is that I do not know just whether we might not be headed
for some slip or trouble which would get us into difficulty on this in
dealing with so many thousands of people. I am just a little ner
vous about it. In principle, it is all right and, in practice, we think
that the company, the Cyanamid Co. and/or its subsidiaries
and/or its allied companies, will be able to control that situation
and that is what we have provided. If we do succeed in controlling
it, if the process becomes ours, when then the Muscle Shoals opera
tion shall have the benefit of it without a royalty. That part is all
right ; but I do not quite like to get the company in a position where
something may happen amongst so many men and we may not be
able to control it. It is a practical difficulty, General, that makes
me a little nervous. I do not quite know what to do with it.
Mr. SPEAKS. The thought in my mind is this : It would be just as
fair for the Government to profit by the discovery of some employee
of yours, as it would be for your company
Mr. BELL. Oh, absolutely.
Mr. SPEAKS. As it would be for your company to enjoy the profits.
Mr. BELL. And if we are in a position to profit, why it shall be
turned over to the Government as provided here, without any profit
 MUSCLE SHOALS 12J

to us. That part is all right ; we agree to that. That is already in

here. What I understand is suggested is whether we could not set
it up so that no matter who, under what circumstances, anywhere in
the world, in any part of our organization, may have developed
something or other, regardless of the fact we may be unable to get
control of it ourselves, nevertheless we guarantee to deliver that to
the Government. That is the difficult situation.
Mr. McSwAiN. I think you misunderstood the suggestion I made.
Mr. BELL. I beg your pardon.
Mr. McSwAiN. The language of the bill provides that no expense
should be charged for the use of processes belonging to the American
Cyanamid Co. and the lessee.
Mr. BELL. Yes.
Mr. McSwAiN. Or any agent, employee, or officer of the lessee.
Mr. BELL. Yes.
Mr. McSwAiN. Now, the language did not propose to obligate the
lessee and the American Cyanamid Co. to go out all over the face
of the country and to acquire processes that its employees, officers,
or agents might originate and invent and patent, but that if they
should be usea down there, then there should be no charge for such
use as an element of cost in the fertilizer. It would not obligate you
to go out and acquire it and you would not have to use it unless you
wanted to; but, if you used it, it was net to be charged as an item
of cost.
Mr. BELL. That is all right, provided, if we are not able to get
control, that hereafter we do not become liable, supposing the Gov
ernment, or some other lessee, should make use of that process with
out the consent of the man from whom we had been unable to get it.
Would it be your understanding that the Cyanamid Co. would
be liable in the event he sued and recovered rovalty, or something
like that? Because that is the situation I am afraid of, if we have
oontrol of it, you shall have it; but suppose a new tenant of the
Government starts to perform there and makes use of a process in
vented by John Jones, who, it appears, is connected with the Cyana
mid company in some way or other, in its group, but from whom we
have been unable to obtain the rights to that process for use at
Muscle Shoals, or anywhere, he would just refuse to deal, and then
he enters suit against the Government and it is determined they are
infringing his patent rights and he is entitled to a royalty. Now, do
we thereupon become liable ?
Mr. McSwAiN. Mr. Bell, the Air Nitrates Corporation is the lessee,
is it not?
Mr. BELL. Yes.
.1 «Mr.
i McSwAiN.
• A little $1,000 corporation
* claims it is coins to do
this business;
Mr. BELL. Yes.
Mr. McSwAiN. Now you say that you will never charge, the lessee
will never charge, as any item of cost, any royalties upon any
inventions or discoveries by the lessee ?
Mr. BELL. Yes.
Mr. McSwAiN. Or officers, agents, or employees thereof?
Mr. BELL. Yes.
122 MUSOLE SHOALS

Mr. McSwAiN. Now, why would not the same argument have pre
vailed when you were drawing the bill against obligating you not
to charge for these inventions and discoveries of the officers, agents,
and employees of the lessee which you now bring up as a good argu
ment against the use of processes and Inventions of the officers, agents,
and employees of the American Cyanamid Co.?
Mr. BELL. Why just this, that so far as that operation down there
at Muscle Shoals is concerned, that remains to be set up, all the men
that we employ there we can force to sign a contract covering this
very situation and either they do not work for us or else we have
control of that situation so that we can perform under that clause.
But now let us suppose that we introduce similar language as
regards all the men who may come into the cyanamid organization,
or any of its subsidiaries, or allied corporations, and it turns out that
some one of them, at some stage of his career, has invented something
which, we will suppose, is used by the Government in its operation
of Muscle Shoals, if the Government ever comes to operate it under
the terms of this provision. Now that gentleman may refuse to
assign his rights to us. Do I make plain the difference in the
situation?
Mr. McSwAiN. Yes; I see your point.
Mr. BELL. Now if there is some feasible and practical way in
which it can be set up, so that we won't get in a jam of that
kind, I will gladly set it up; but I think it presents some practical
difficulty.
Mr. McSwAiN. Can not you make the same contract with the
employees of the American Cyanamid Co. that you say you can com
pel employees at Muscle Shoals to make?
Mr. BELL. Suppose he is a man already in the employee of some
subsidiary which we buy, then he would come in under the language
which you mention.
Mr. McSwAiN. He has not a life-time job anyway, has he?
Mr. BELL. Oh, if we discharge him, I do not think we would
have freed ourselves of the liability that language would impose on
us. Suppose we find John Jones had just this kind of process and
we could not deal with him and we fire him. Nevertheless, he would
have been an employee of one of the subsidiaries and we become
liable as against some future date.
Mr. McSwAiN. Mr. Bell, you would not become liable unless you
acquired from him the right to use the process.
Mr. BELL. Oh, if that is what you mean, that is perfectly satis
factory; but is not that already covered by the language in which
we say, " which are now owned or which may hereafter be acquired."
We agree to that; if we are able to acquire it, you shall have it for
nothing. What I am trying to deal with and do not know quite how
to do it, is that he is in our group and therefore, under the language
suggested for the first part of this, we have to deliver the process,
but we would not be able to acquire it.
Mr. HILL. But if you ever once acquire it
Mr. BELL. It is yours; so far as the Government is concerned, it
can use at Muscle Shoals, without any royalty whatever, anything
we have.
Mr. STAFFORD. Should not you also have a saving clause here that
any rights that you may obtain from employees, any rights the
 MUSCLE SHOALS 123

American Cyanamid Co. may obtain from its employees, should be

accorded to the Government on the same terms? This merely ex
tends to granting the Government the privilege or protection in case
of the acquirement of the patents by the American Cyanamid Co. or
any subsidiary. Why should not the Government also be protected
in the cost of fertilizer as to the same basis of royalties that you pay
to any of your help ?
Mr. BELL. Well, that is perfectly all right. As a matter of fact, I
think that is included under " cost."
Mr. STAFFORD. Where?
Mr. BELL. That is included—that we can not make any profit on
that, is it not?
Mr. STAFFORD. This last clause which you are now objecting to—
and I see considerable merit in your position—only applies to the
lessee, the Air Nitrates Corporation, and does not extend to the
American Cyanamid Co. or any of its other subsidiaries.
Mr. HILL. This provision only applies where the Government takes
over the plant under the recapture clause; in other words, this does
not apply to the cost of fertilizer where it is manufactured by the
lessee; it only applies where the Government takes over the plant
under the recapture clause. Is not that true, Mr. Bell?
Mr. BELL. Y es ; that is right.
Mr. McSwAiK. No; the cost of fertilizer itself, manufactured by
them.
Mr. BELL. What I mean is that I think Mr. Stafford's point is
covered in the items of " cost " ; but suppose I look it up. But the
principle you state is absolutely right ; that is the way it ought to be.
The CLERK. Page 55, line 1 :
H. Upon the termination of this lease, for any cause whatsoever, except the
adoption of the "total recapture alternative" as provided in subsection (c) of
subdivision (1) of Article F hereof—
(1) The lessor shall take any steam-power plants or any additions or ex
tensions thereto, transmission lines, or other electric or hydroelectric iustalla-
tions or extensions erected or installed on the leased premises by the lessee at
its expense during the period of the lease and pay to the lessee therefor such
fair value as, subject to the provisions of Article N hereof, shall be fixed by
agreement between the Secretary of War and the lessee, which fair value shall
in no case exceed actual cost less reasonable depreciation ;
(2) All buildings, machinery, equipment, fixtures, facilities, appurtenances,
and improvements not embraced in subdivision (1) of this article, which shall
have been installed at said United States nitrate plant numbered 1 and/ or
said United State nitrate plant numbered 2 and/or elsewhere as herein provided
by the lessee, at its own cost and expense, and used In the manufacture of such
concentrated fertilizer, shall be and become the property of the lessor without
any payment therefor to the lessee ; and
(3) All manufacturing plants, machinery, equipment, facilities, appurte
nances, and improvements, and structures placed or erected on the leased
premises by the lessee or its subtenants, not embraced in subdivisions (1) and
(2) of this article, shall not become the property of the lessor, but may be
removed from the leased premises by the lessee or its subtenants at the termi
nation of this lease or any renewal or extension thereof, or within a reasonable
time thereafter.
Mr. STAFFORD. In a short, concise statement, will you put in the
record just what are the respective privileges of the Government
and the lessee upon the termination of this lease as provided in
these three subsections?
 124 MUSCLE SHOALS

Mr. BELL. The United States will take over power installations
made by the company, at the company's expense, and will pay to
the company the fair value of these installations, not exceeding
their actual cost to the company, less reasonable depreciation. The
United States will take over
Mr. STAFFORD. There won't be any question, in determining the
cost at which the Government takes over the plant—there will be
no consideration as to amortization; only depreciation?
Mr. BELL. Yes. The United States w'ill take over, without pay
ment, all those manufacturing plants erected by the company on the
leased premises, which are used in the production of concentrated
fertilizer, under the company's fertilizer guaranty. All other plants
or improvements remain the property 01 the company and may be
removed from the premises.
The CLERK (reading) :
I. The lessor covenants and agrees that it owns, by good and marketable
title, free from all material defects and encumbrances, the aforesaid demised
properties and has full right and power to make this lease thereof, except
that it does not now own the properties described In paragraph (2) of the
granting clauses hereof. The lessor further covenants and agrees that the
properties demised and described in paragraphs (1), (3), and (4) of the
granting clauses hereof constitute all such lands, rights, easements, and servi
tudes as may be necessary or the construction, operation, and maintenance of
t-aid dams and power houses. The lessor also covenants and agrees that in
case the title to the said lands, rights, easements, and servitudes shall be
found defective or encumbered, or said lands, rights, easements, and servitudes
be found Insufficient within the meaning of the covenants herein contained,
the lessor, at its own cost and expense, shall and will remedy and remove such
defects or encumbrances and make good any such insufficiency. The lessor
covenants and agrees to acquire the properties described in paragraph (2)
of the granting clauses hereof by good and marketable title, free from all
material defects and encumbrances, including all such lands, rights, easements,
and servitudes as may be necessary for the construction, operation, and
maintenance of said Dam No. 3 and its power house when the same Is
constructed, operated, and maintained In accordance with the terms and
provisions of this lease; and, upon the completion of said Dam No. 3, the
said properties so purchased and acquired, except the locks and navigation
facilities, shall ipso facto, and without any further conveyance or assignment,
become and be a part of the properties demised by this lease and, as such,
subject to all the applicable terms and provisions of this lease for and durin.z
the balance of the unexpired said term of fifty years hereinahove mentioned
and described, as fully and completely as though specifically leased and demised
by this lease.
It is mutually agreed that in the event of any litigation attacking the title
or possession of the property, rights, privileges, and franchises demised, the
lessor shall defend such litigation at its own cost and expense. but the lessee
may, at its own cost and expense, be represented by Its counsel in any such
litigation; and in the event of any litigation involving the title or possession
of the property, rights, privileges, and franchises herein demised and which are
reasonably essential to the performance of the obligations assumed by the
lessee by the terms of this lease, the lessee shall be relieved from said obliga
tions pending the termination of such litigation : Provided, That if the lessee
shall, during the pendency of such litigation, continue to have possession of
such property, rights, privileges, and franchises, and shall utilize and/or sell
electric power obtained by it from the demised premises or any part thereof,
the lessee shall not be relieved, during the period of such utilization and/or
sale, from the payment of rent by way of amortization, Interest, payments for
repairs and for maintenance, or electric power, as provided in articles A and T
hereof with respect to that part of the demised premises from which the elec
tric power so utilized and/or sold shall be derived.
The lessor also covenants and agrees that It will at any time upon the request
of the lessee and at the lessor's cost and expense execute and deliver to the
 MUSCLE SHOALS 125

lessee any and all such other or further instruments and assurances In the
law for the better granting, demising, and securing to the lessee the said
franchises, rights, privileges, easements, real estate, and property by this lease
granted and demised, or intended so to be, or to describe accurately the said
properties or any of them intended to be embraced in this lease, the description
theieof hereinbefore given being wholly general and to be thus supplemented,
which the lessee or its counsel learned in the law shall reasonably advise and
require. The lessor covenants and agrees to keep and perform all the terms
and conditions hereof on its part to be kept and performed in manner and form
as the same are herein set forth.
The lessor covenants and agrees to deliver Dam Numbered 2 and its power
plant to the lessee in good operating order and condition and promptly to
icplace any of its structures and/or equipment which, within thirty days from
the date hereof, may prove to have been defective in design, material, or work
manship for the purpose or operation for which the same was intended. In case
the lessor fails or refuses to replace promptly any such defective structures
and/or equipment, the lessee may, upon giving notice to the lessor, replace the
same at the cost and expense of the lessor, and in such event the lessee may
deduct and retain out of the payments to be made by it by way of rental here-
under all such sums as it shall pay or incur on account of such replacements :
Provided, however, That nothing contained herein shall render the lessor liable
tor damages or delays to the lessee on account of any such defective structures
and/or equipment.
Mr. STAFFORD. I assume that is a clerical error, the " or " in line
19 should be " for."
Mr. BELL. Yes ; I should think so.
Mr. STAFFORD. As I understand from your prior testimony, Dam
No. 2 to-day is in an upkeep and acceptable condition ?
Mr. BELL. We so understand it.
Mr. STAFFORD. And this is virtually nugatory, except it is protected
in case it is not?
Mr. BELL. I think so.
Mr. HILL. It is in very excellent shape, I should say.
Mr. BELL. Yes.
Mr. STAFFORD. May I inquire when the terms of this lease were
first promulgated as now presented to us for consideration?
Mr. BELL. Well, in greater part it was presented to the joint com
mittee of three Senators and three Representatives in 1926 ; but there
have been, oh, literally hundreds of changes, large and small, since
then.
Mr. STAFFORD. Is there any difference in the terms of this lease
from that which was considered in the last Congress?
Mr. BELL. No; I think this is the very same draft as I remember
it.
Mr. STAFFORD. I was proceeding under that assumption.
Mr. BELL. Yes.
Mr. STAFFORD. That it was virtually the bill introduced by Mr.
Madden, although I wanted to have it confirmed.
Mr. BELL. No; it is not the one introduced by Mr. Madden, because
that was changed in a number of points.
Mr. STAFFORD. I am trying to get back, so as to relieve me of my
study of this question, because I am reading the hearings of the
joint committee. I would like to know, for my benefit, just what
was your original proposition and how many changes have been
made since then in the terms of the lease ; whether any substantial
Changes have been made.
101229—30 9
126 MUSCLE SHOALS

Mr. BELL. Answering the first question first, my understanding

of it is that this is the very same bill that was reported out in the
last session of the Congress toward its close, in every respect ; that is
my understanding.
Mr. HILL. And at that time, Mr. Bell, it was the Madden bill.
Mr. BELL. Yes ; but it had certainly been materially modified.
Mr. HILL. Oh, yes; it had been changed.
Mr. BELL. It had been materially modified in this committee from
the date when Mr. Madden introduced it. Does that answer your
question ?
Mr. STAFFORD. How much different is this bill from what was
first submitted to the joint committee in 1926?
Mr. BELL. Oh, it is different in many respects. For example, my
recollection is that it was in this committee that the nitrogen guar
anty was raised from 40,000 tons per annum to 50,000 ; the recapture
clauses are new, and there were a multitude of small changes in word
ing and one thing and another, and I suspect, Mr. Stafford, there
were certain other substantial changes that do not occur to me at
the moment.
Mr. STAFFORD. In the original proposal you made I understand
it did not intend to have the Government complete Dam No. 3 or
the Cove Creek Reservoir for power.
Mr. BELL. Well, the original proposal that was discussed orally
with the joint committee 01 six, the one that we had proposed woulii
meet the situation, did not include Dam No. 3 nor Cove Creek, nor
did it cover more than 20,000 tons of fixed nitrogen; but it was at
the suggestion of the committee of six, conveyed, I think, orally to
me in a meeting of the committee, that they wanted at least 40,000
tons of nitrogen, and they wanted Cove Creek and Dam No. 3 in
cluded. And I think that was said to me before we had actually
submitted the proposal, so that when the proposal appeared in print
for the consideration of the committee it did contain, I believe, those
two extra dams and 40,000 tons of nitrogen. That is my best recollec
tion. It is four years ago, and I may not have the chronology right,
but I think I have.
Mr. DOUGLAS. May I ask two questions on that line ?
Mr. BELL. Certainly.
Mr. DOUGLAS. Is the completion of Dam No. 3 necessary to the
production of 50,000 tons, 40,000 tons of fixed nitrogen and the other
10,000 in the form of some other plant food ?
Mr. BELL. Yes. I think, Mr. Douglas, that I might say it is
necessary for this reason, that, as I have mentioned here, our own
experiments—and we have spent about $600,000 on it now ; perhaps
more—indicate that in the end nobody can stay in the phosphoric
acid manufacturing game unless he produces by the electric fur
nace ; therefore, it woulii be folly for us to get ourselves into a posi
tion where we did not have the power necessary to operate that fur
nace. So that if we are to retain the guaranties as to nitrogen con
tent and mixed fertilizer that now have to go with it, I think we
would have to be assured of enough power and I do not know where
else to get it.
Mr. STAFFORD. But if you would proceed by the wet process, the
additional power that would be developed at Dam No. 3 would not
be essential ?
 MUSCLE SHOALS 127

Mr. BELL. That is correct. The difficulty is our own researches

show we would probably have to change over and in the end we will
have to write off the wet process and to go to the electric furnace,
even in the first unit.
Mr. DOUGLAS. Now, if Cove Creek were built, would Dam No. 3>
still be necessary?
Mr. BELL. Oh, no. Perhaps I did not answer you quite as fully
as I should. Dam No. 3, even with Cove Creek, won't produce more
than about 70,000 horsepower. Dam No. 3 is primarily a naviga
tion structure.
Mr. DOUGLAS. Nobody would undertake it for the development of
power as a primary purpose?
Mr. BELL. No. Even if Dam No. 3 is built, it will represent an
investment of about $400 per horsepower year which, you know, is
terrible.
Mr. DOUGLAS. Surely.
Mr. BELL. However, I want to point this out, Mr. Douglas, that
unless Dam No. 3 is built, you will not have navigation all the wav
up and down the Tennessee. You appreciate that?
Mr. DOUGLAS. Yes ; I understand that. Now, let me ask this ques
tion again, so that' the answer is clear in the record : Were the Cove
Creek Dam to be constructed, the power to be developed at Dam
No. 3, when Dam No. 3 is completed, would not be essential to your
operation ?
Mr. BELL. No.
Mr. DOUGLAS. It would not ?
Mr. BELL. No.
Mr. DOUGLAS. So that there is, therefore, assuming Cove Creek to
be constructed and in operation, no necessity for Dam No. 3?
Mr. BELL. No ; that is correct. I think we could get by without it.
Mr. DOUGLAS. That is, for your purposes ?
Mr. BELL. I think we could get by without that block of power.
Mr. STAFFOKD. Will you just read those last few questions and
answers ?
(The questions and answers referred to were read, as follows:)
Mr. DOUGLAS. * * * Now. let me ask tMs question again, so that the
answer is clear in the record : Were the Cove Creek Dam to be constructed, the
power to be developed at Dam No. 3, when Dam No. 3 is completed, would not
be essential to your operation?
Mr. BELL, No.
Mr. DOUGLAS. It would not?
Mr. BELL. No.
Mr. DOUGLAS. So that there is, therefore, assuming Cove Creek to be con
structed and In operation, no necessity for Dam No. 3?
Mr. 'BELL. No ; that is correct. I think we could get by without it.
Mr. DOUGLAS. That is, for your purposes?
Mr. BELL. I think we could get by without that block of power.
Mr. BELL. I think that is in interest of having a complete state
ment of everything that this is probably true, too—it does not change
my answer but I am trying to give you the complete picture, as I
see it—I think this is true, that we will probably barge phosphate
rock from Tennessee over the slack pool which would be created by
Dam No. 3. I think that is where we would probably get it.
Mr. STAFFORD. I do not understand that, please.
128 MUSCLK SHOALS

Mr. BELL. There are certain phosphate deposits over in Tennessee,

really very close to the Alabama State line, and I think that \vc will
probably barge, for the ammo-phos operation, phosphate rock from
those deposits to Muscle Shoals, and the barge would traverse the
waters of the slack pool created by Dam No. 3. That is not essen
tial; I do not want to mislead you about it, but it is part of the
picture, so that I could not truthfully say that Dam No. 3 would
have no influence or interest in our manufacturing operation.
Mr. HILL. But to have navigation on the river you absolutely have
to have Dam No. 3, do you not (
Mr. BELL. Yes; it is a necessary adjunct, of course. Of course,
the slack pool at Dam No. 3 is 87 miles or something like that; it is
a very long pool and covers the last break in the navigation up to
Chattanooga.
Mr. DOUGLAS. In other words, assuming Cove Creek Dam to be
built and placed in operation, the only advantage incident to the
construction of Dam No. 3 would be the advantage incidental to
navigation?
Mr. BELL. Well, that would be the primary purpose of that dam.
Mr. DOUGLAS. Surely, and that would be your only interest in it (
Mr. BELL. Yes ; we can get along without that power.
Mr. DOUGLAS. So that if Dam No. 3 were not built and, of course,
always assuming Cove Creek to be constructed, the only effect on
your operation, were Dam No. 3 not to be completed, would be
slightly to increase the cost of production as reflected by an increase
in the freight rate on phosphate rock?
Mr. BELL. That is correct; yes.
Mr. DOUGLAS. While I am pursuing that line of thought I have
been considering the matter of the Federal construction of the Cove
Creek Dam and, quite frankly, I have mental reservations about an
authorization for the construction of Cove Creek by the Federal
Government. I would like to see Muscle Shoals disposed of so that
the maximum advantage from existing plants may be made available
to the whole country and particularly to that section of the United
States. I have been wondering whether your company, instead of
calling for the construction of Cove Creek at the expense of the
Federal Treasury, would be willing to undertake the construction of
the Cove Creek Dam at its own expense.
Mr. BELL. Well, as a matter of fact, at one stage of the proceed
ings our offer did read that way, subject to our own engineers mak
ing the necessary drill holes to assure fhat the cost would not prove
excessive ; but the committee did not want it that way.
Mr. DOUGLAS. The committee did not then want it that way?
Mr. BELL. No.
Mr. STAFFORD. That is the joint committee?
Mr. BELL. No; this committee. I think I am quit justified in that
statement, am I not ?
Mr. HILL. I think so, yes; absolutely.
Mr. BELL. Now, as I understand it, your question is whether we
would be willing to finance that situation by ourselves. Well, I do
not know why we should not go back to the proposal that we did make
at one time. You see, first of all, we came in here—I should not say
here, but to the joint committee—we came in with this 20,000 tons,
as I have mentioned. After some discussion and before we presented
 MUSCLE SHOALS 129

(lie thing in printed form, that was revised upward to 40,000 and
ihese other two dams were included; but they were included at that
time on the basis of our doing the financing of Cove Creek, not Dam
No. 3; because that was so obviously a navigation project that it
would not have been reasonable to put that on us; and, of course,
subject to survey, and so on, and subject, perhaps—I do not suppose
there is any question about it; but, nevertheless, the question has been
mentioned—of our right to go ahead under a Federal law. I think
we dealt with that in this way. when the thing was reading in that
form, that the statute gave us a priority permit from the Federal
Power Commission. In other words, Congress settled the right for
us to go in there and make necessary surveys, and so on, and get
the license first, if we wanted to go ahead. Now, on a full consider
ation of this thing, I think that is all right, although there have been
some questions raised by the State of Tennessee. I do not think they
are material. At any rate. I see no reason to answer your question,
if the committee desires us to do so, why we should not go back to that
original set-up.
Mr. DOUGLAS. Now. to bring this whole series of questions into a
head. I understand that your company, if it be the wish of this
committee, would undertake the construction of Cove Creek Dam at
its own expense ?
Mr. BELL. Yes; subject to the surveys.
Mr. DOUGLAS. Yes; subject to the surveys; that is to say, you do
not want to undertake an expenditure which is out of proportion to
the advantages to be derived?
Mr. BELL. Exactly, and particularly we do not want to guarantee
the dam unless we know what there is there to build it on.
Mr. DOUGLAS. Surely; that is, the engineering data.
Mr. BELL. Yes.
Mr. HILr,. Mr. Bell, how long would it take to make those surveys?
Mr. BELL. I should say, judging from experience in other cases,
it would probably take about two years to be satisfied everything
was all right and we could safely go ahead. I think, however, Mr.
Hill, that would be pretty well covered by the ordinary procedure
in the case of water-power permits ; in other words, we would do
what is ordinarily done in such cases.
Mr. DOUGLAS. So that if it were the wish of this committee that
you build, at your own expense. Cove Creek, there would then be no
necessity for the construction of Cove Creek or any other structure
in the vicinity at the expense of the Federal Treasury?
Mr. BELL. No.
Mr. DOUGLAS. Nor, for the purposes of the lease, would there be
any urgent necessity for the construction of Dam No. 3 at Federal
expense ?
Mr. BELL. No.
Mr. DOUGLAS. That is all.
Mr. STAFFORD. Should the committee decide that it was not fea
sible to provide for 40.000 tons of nitrogen, would your company be
willing to go back to its original offer and submit a proposal for
20,000 tons to utilize the power at Dam No. 2 as is?
Mr. BELL. Yes.
Mr. STAFFORD. Along the lines set forth in the original proposal?
130 MUSCLE SHOALS

Mr. BELL. Yes. I see no reason why we should not do that. I do

not believe, of course, we will be able to get our costs quite so low as
we would if we had a greater tonnage, but it will be a low cost, and I
do not know why we should not go ahead on that basis if that is
the wish of the committe.
Mr. HILL. Of course, Mr. Bell, if you were to build Cove Creek
Dam yourself, there would be no reason for the Government or this
lease contract to limit you at all to 20,000 tons ; if you were to build
Cove Creek Dam yourself, you could go ahead with a maximum of
50,000 tons?
Mr. BELL. Oh, yes; it is simply a question of having the power
necessary.
Mr. STAFFORD. My question is predicated upon the idea you would
only use the facilities as is.
Mr. BELL. Yes; that is the way I understood it.
Mr. STAFFORD. Following the observation here of Mr. Douglas, for
you to build Cove Creek at your own expense, necessarily that would
involve provisions to provide for 40.000 tons.
Mr. BELL. As long as we have enough power to do it, that is all
right.
Mr. McSwAiN. Mr. Bell, on that Cove Creek proposition, it is my
recollection—I might be confused as to that—that under your origi
nal proposition, which contemplated your doing the work, advancing
the monev necessary to build Cove Creek Dam, you were also to have
an exclusive option, for a limited period of time, to build four dams
down the river between Cove Creek and Muscle Shoals.
Mr. BELL. We not only did it there, but it is in this form as well—
Senator, Clinton and Melton Hill. I think there were three, Mr.
McSwain, as I recall it—three dams on the Clinch, within a com
paratively short distance of Cove Creek itself.
Mr. McSwAiN. Yes; but that would leave still, as I recollect,
about seven other dam sites that would be open to private develop
ment, or public development, as might appear desirable.
Mr. BELL. That agrees with my recollection. I can not name the
seven, but I think the figure is correct.
Mr. McSwAiN. Now, then, assuming for the purposes of this par
ticular statement, that you should yourself build Cove Creek under
the terms of your original proposition and that you should con
struct, for your own purposes, dams at the three or four mentioned
places—it is my recollection there were four.
Mr. BELL. You may be right.
Mr. HILL. There were three ; I have them here on page 75—Sena
tor Dam, Melton Hill Dam, and Clinton Dam—three of them.
Mr. McSwAiN. All right—that you should build the three men
tioned dams, now would there be any contribution by the persons,
firms, or corporations that might construct the other six or seven
dams on the river below the Cove Creek development, by those
builders to you, for whatever benefits they might receive from the
continuous increased flow of water?
Mr. BELL. Why, I should think there would be. In other words,
would not we be building Cove Creek under the usual procedure
that prevails wherever the Federal Power Commission gives one a
license ?
 MUSCLE SHOALS 131

Mr. McSwAiN. That is your understanding, that you would be

entitled to the benefits of such contribution ?
Mr. BELL. I should think so.
Mr. McSwAiN. Of course, under the bill as now set up, contem
plating the Government's building Cove Creek dam, there is no
contribution contemplated.
Mr. BELL. I would not say that; there is no contribution that
comes to us, but I suppose the Government would exact such con
tribution.
Mr. DOUGLAS. Under the Federal water power act the Govern
ment is entitled to a royalty.
Mr. McSwAiN. I understand; but if we enacted this law, that
would be the last expression of the legislative will and the Federal
water power act would have to yield.
Mr. BELL. Yes.
Mr. McSwAiN. And it was certainly contemplated at one time by
some proposal here that there should be no contribution; that if
the Government builds this dam at Cove Creek, then the Tennessee
Basin was to get the great benefit as a sort of subsidy to encourage
the building of those dams and hasten the development of that river
power, without contribution to the Government. I do not say that
is your proposition, but it was in some proposal here.
Mr. BELL. You may be right, Mr. McSwain; but my impression
was that if the Government built Cove Creek, then as regards these
six or seven other dams that might be undertaken by other parties
altogether, that the Government would exact such contribution. In
fact, I think there were some estimates made as to what that con
tribution might run. I hesitate to say, but the figures that come to
my mind are between eight and twelve million dollars, which the
Government would receive in the reduction of its cost in the con
struction of Cove Creek dam. I do not just see why the Govern
ment should not have it.
Mr. McSwAiN. Well, under the set-up contemplated by this bill
here, where you are to have the option to build the three dams con
templated, is there any provision in this 'bill for the making of
contributions ?
Mr. BELL. No. On the contrary, this bill does not provide that.
Mr. McSwAiN. Then, you would get the benefit of the three dams
without contribution?
Mr. BELL. As regards those three that have been read, why, we
would get that without contribution.
Mr. McSwAiN. I see ; that is all.
Mr. DOUGLAS. It must be implicitly contemplated that any lessees
below Cove Creek, were Cove Creek to be constructed by the Fed
eral Government, would pay a royalty to the United States on
account of the benefits accruing to the construction lower down on
the river by reason of the fact that the bill contemplates amortiza
tion over a period of 100 years of a sum not exceeding $20,000,000 on
account of the dam and reservoir, $5,000,000 for any locks and navi
gation facilities; whereas the estimated cost, including power, barge
lift, reservoir, right of way, easements, and so forth, is $37,540,000.
So that there is a difference of approximately $12,000,000 which,
over the long period of time, would be made up through royalties
paid into the Treasury of the United States.
132 MUSCLE SHOALS

Mr. BELL. Mr. Douglas, has the War Department or the Federal
Power Commission got the estimate up to—what did you say?
Mr. DOUGLAS. $37.540,000.
Mr. BELL. On Cove Creek?
Mr. DOUGLAS. That cost includes the main dam, the spillway, the
power house, the barge lift, the reservoir, general overhead costs;
contingencies, including taxes, insurance, and interest. Therefore,
there would have to be deducted on account of navigation costs
approximatelv $7,887.000.
Mr. HILL. That would be chargeable to navigation?
Mr. DOUGLAS. Yes ; that is the charge incident to the improvement
of navigation.
Mr. HILL. How about taxes and insurance?
Mr. DOUGLAS. That is an item the War Department has in this.
Mr. HILL. I do not see where that would figure in it with the
Government.
Mr. DOUGLAS. I do not, either.
Mr. HILL. How much is that ?
Mr. DOUGLAS. $3,708.785.
Mr. HILL. Tuxes and insurance?
Mr. DOUGLAS. Yes. Now, to go back to Mr. McSwain's question,
let us assume no royalty were charged ; let us assume that the Federal
Government constructs Cove Creek and that no royalty were charged
against any lessees below Cove Creek for benefits derived by stabili
zation of the flow accruing through the construction of Cove Creek.
and that the whole cost of Cove Creek must be repaid to the Federal
Government through the sale of fertilizer: Based upon that assump
tion, the effect is simply this, is it not, that those who use fertilizer
will pay for the amortization of Cove Creek, while those who use
power to be developed at a project below Cove Creek would derive a
corresponding benefit in the power rate?
Mr. HILL. At the cost of fertilizer.
Mr. DOUGLAS. At the cost of fertilizer. You see what I mean. Is
not that the effect of absolving any subsequent lessees?
Mr. HILL. From the* payment of a royalty.
Mr. McSwAiN. Well from what you say, yes ; but there will cer
tainly be an absolving of the lessee here from any benefits it may
receive from the building of Cove Creek—for instance, the three
dams for which it is taking a permit.
Mr. DOUGLAS. I have not read the bill carefully bearing that in
mind, but I think the gentleman is right; I think' you are right.
Mr. McSwAiN. That is Mr. Bell's own contention, too, and the
bill that passed Congress, that received a pocket veto from the
President, contemplated that there should be no contribution (I am
quite distinct in my recollection on that) from any of the licensees
of anv of the intermediate dams, and it was one of the strongest
arguments we made to the people of Tennessee why they should
not oppose that bill and should permit the construction of Cove
Creek by the Government. You remember, it was fought by all
the Representatives of Tennessee with the exception of McReynolds,
and it was fought in the Senate, and I argued very energetically,
of course futilely, that Tennessee was refusing the pYoffered golden
apple that we were extending to her in the development of her
 MUSCLE SHOALS 133

resources; that we were making double in value the power sites

down the river there without the expectation of a single cent of
contribution, that we were building Cove Creek in the interest of
navigation and to double our power resources at our existing plant
at Muscle Shoals, and that we were doing that for their benefit and
expecting to get our only reward for building Cove Creek Dam out
of that, and to give Tennessee the 9 or 11 dam sites (I have for
gotten just now which it is) between Cove Creek and Muscle Shoals
gratuitously, absolutely free from any expectation of royalty from
the licensees and as to this project here.
Mr. DOUGLAS. Of course, if Mr. Bell constructed Cove Creek
himself, that is, if Mr. Bell's company constructed Cove Creek at
its own expense, then any royalty that might be paid, under the
provisions of the act before us, if any of those three dams be con
structed, would simply be paid from one pocket to the other.
Mr. McSwAiN. Correct.
The CLERK. Page 59, line 21 :
The lessor further covenants and agrees that it will not itself, or by permit
or license authorize or empower any third party to construct, operate, or main
tain any dam or dams on the Tennessee River and/or its tributaries, in such
form or manner as will materially impair or detract from the full use and
enjoyment by the lessee of the properties, or any of them, demised to the
lessee by this lease.
J. The lessor covenants and agrees that the lessee, during the term of this
lease, upon keeping and performing the terms and conditions hereof on its
part to be kept and performed, shall have quiet and peaceable possession and
enjoyment of the properties herein demised, without let, hindrance, molesta
tion, or disturbance from anyone whatsoever. If the lessor shall fail duly
to keep and perform this covenant, or if the lessor, or the Congress of the
United States, or the Secretary of War, or other officer acting on behalf of
the lessor in relation thereto, shall refuse to keep or perform any of the
promises provided in this lease to be performed by the lessor, upon the ground
that said promise is invalid or without authority, or in any respect ultra vires,
or If the lessor shall fail to perform any of saW promises upon such ground,
the lessee shall lie entitled to terminate this lease upon not less than 90 days'
previous notice to the lessor to that effect, and upon and after such termination
the lessee shall be relieved of all obligations hereunder.
K. The lessee covenants and agrees that it will, during the term of this
lease, do, or cause to be done, the things necessary or proper to keep in full
force and effect its corporate existence, rights, and franchises. And the lessee
covenants and agrees that, should it or any of its subsidiary corporations or
said American Cyanamid Company or any subsidiary corporation of said Ameri
can Cyanamid Company engaged in the manufacture of such concentrated fer
tilizer on the leased premises cease to be nn American-controlled corporation.
that fact shall bo deemed to constitute a default in the terms of this lease.
And the lessee covenants and agrees that if the lessee or American Cyanamid
Company shall be adjudicated a bankrupt so that its obligations herein con
tained be not financially enforceable then such adjudication shall be deemed to
constitute a default in the terms of this lease.
The lessee also covenants and agrees that it shall and will indemnify, protect,
and save harmless the lessor against any and all claims, demands, ' expenses.
'lamnges, losses, liabilities, judgments, and costs in the prosecution and defense of
any action or legal proceeding for or on account of or in connection with dam-
nee to property or injury to person (including death) due solely to the action
or alleged negligence or misconduct of the lessee or any of its sublessees or the
agents, employees, or contractors of such lessee or any of such sublessees, which
may arise during the term of this lease in or about the construction, installa-
non' maintenance, use, management, possession, or operation by the lessee of any
or the properties which the lessee in and by this lease agrees to maintain and
operate or any of the facilities which under the provisions of this lease it is
"Wlgated to construct, Install, operate, or maintain : and the lessee shall assume
 134 MUSCLE SHOALS

the defense, compromise, or other disposition of any claim, demand, suit, action,
or legal proceeding that may be made or brought agaiust the lessor for or on
account of or In connection with any such damage or injury and shall pay any
final judgment that may be rendered against the lessor and/or the lessee In any
such action or legal proceeding.
The lessee does hereby further covenant and agree that it will not assign this
lease without the consent of the lessor, such consent to be evidenced by an act
of the Congress, and that at the expiration of the term of this lease, or other
sooner termination, it will and shall peaceably surrender, transfer, return, and
deliver np to the lessor the aforesaid demised premises.
L. Neither party to this lease shall be held responsible for any loss, damage,
injury, delay, or failure of jierformance. occasioned by the act or omission of
the other party, its officers, agents, or employees, or by force majeure, or any
cause or causes reasonably beyond the control of the party exercising ordinary
care and not attributable to its fault or neglect, including ice, earthquake,
movement of earth or rock, flood, drought, or other action of the elements,
famine, pestilence, strikes and suspensions of labor, war, riot, civil commotion,
order of any court, and unavoidable casualty. Except as otherwise provided in
this lease, the lessee shall not be required to repair or restore, for or on account
of any such loss, damage, injury, or delay, and shall be entitled to an appor
tionment or suspension of the terms and conditions of this lease to an amount
and extent reasonably commensurate with the curtailment or prevention thereby
of its use and enjoyment of this lease and said demised probities.
M. Subject to the provisions of articles E and F hereof, the lessee shall,
during the continuance of this lease, have the full and exclusive use, posses
sion, control, enjoyment, and operation of the demised premises, together
with the electric power generated thereon, and shall be entitled to enjoy
the benefits and advantages thereof, including (1) the right to use the said
demised premises for all lawful purposes and to construct, operate, and main
tain thereon any structure, equipment, OP apparatus which the lessee may
deem desirable or convenient, the same, subject to the provisions of article H
hereof, to remain the property of the lessee and to be removable by it within
a reasonable time after the termination of this lease; (2) the right to alter,
enlarge, rebuild, and reconstruct any of the structures, equipment, or apparatus
now or hereafter belonging to the lessor and on the demised premises, save
as in this lease otherwise expressly provided; and (3) the right to remove
limestone from said Waco quarry, provided, always, that the amount of
limestone in said quarry reasonably mineable and suitable for the manu
facture of ammonium nitrate be not reduced below fifteen million long tons,
the estimated amount of such limestone required to operate said United States
nitrate plant numbered 2 for a period of 50 years at its present capacity as
respects the manufacture of ammonium nitrate.
N. In case a dispute arise as to this lease or any of its terms, or any act
done or omitted to be done under or with respect to it, or any of the prop
erties now or hereafter embraced in it, or as to whether a default has occurred
or its removal been made or bona fide begun, or in case the parties hereto fail
to reach an agreement or determination in any respect in which they should
or must agree in order to the proper carrying out of this lease or any part
thereof, as contemplated by its terms, any party hereto injuriously affected
thereby may, upon written notice to the other parties hereto of its intention
so to do, apply by petition to the District Court of the United States for the
Northern District of Alabama, or its successor as then constituted (which
is hereby given original jurisdiction to hear and determine the matter under
such rules and procedure as it may adopt for the purpose, which rules and
procedure shall conform, as far as practicable, to the rules and procedure
then governing proceedings in equitable causes) for a judicial ascertainment
and determination of the controversy as well as to fix and determine the just
and reasonable compensation to the lessee for the lessor's possession and/or
use of the surrendered premises during an emergency as provided by the pro
visions of subdivision (3) of article E hereof, subject to the right of either
party to apply, upon a proper showing of Interest, relationship, or bias of
the judge or Judges of said district, or inability to obtain a fair and Impartial
Jury, for a transfer of any such controversy or proceeding to the United States
district court for any district adjacent to said northern district of Alabama
(or its successor as then constituted), and, in the event such application be
granted original jurisdiction for the purposes above stated is hereby con
ferred upon the United States district court for the district to which such con
 MUSCLE SHOALS 135

troversy or proceeding is transferred (or its successor as then constituted),

and in any such proceeding the farmer board shall have the right to inter
vene as a party. The court shall grant such relief as, after ascertaining the
tacts and hearing the parties, it may consider proper. The decision of said
court shall be in writing, and from it any party thereto may appeal to the
Circuit Court of Appeals for the Fifth Judicial Circuit (or its successor as
then constituted) or in the event the controversy or proceeding he transferred
to the district court for a district within the sixth Judicial circuit, then to
the Circuit Court of Appeals for the Sixth Judicial Circuit (or its successors as
then constituted) under the statutes and rules then governing appeals between
said courts in equitable causes. Any order or judgment rendered by either
of said courts shall allow a reasonable time from the entry thereof for com
pliance therewith.
O. The lessee covenants and agrees that it will within sixty days after the
date hereof duly increase its authorized capital to at least $50.000,000, to be
paid in in cash as required to carry out the provisions of this lease. At least
$10.000.000 in cash shall be provided by the lessee as required but before the
expiration of the third year of the lease term and shall be available to carry
out the provisions of this lease with respect to the production, storage, and
sale of concentrated fertilizer: Provided, hoirever, That after such sum shall
have been paid in in cash it may be invested by the lessee in short-term securi
ties or placed on call or invested in such other manner as. upon written request
of the lessee, the Secretary of War may assent to in writing, until jt shall be
required to carry out such provisions. And the lessee will so arrange and
provide that such other cash funds as may be necessary for its performance
of this lease will be available to it as and when required for that purpose
P. It is further mutually agreed that in case the lessee shall at any time or
times hereafter during the term of this lease full or omit to keep and perform
the covenants and agreements heroin contained on it« part to be ktpt and
performed, or any of them, and shall continue in default in respect to the
performance of such covenant or agreement, for the period of ninety days, or
in case a default shall occur in respect to American control or bankruptcy, as
provided in Article K hereof, and the lessee shall permit such default to con
tinue for the period of ninety days, then and in either and every such case the
lessor may give notice to the lessee, specifying such default and requiring its
removal: and thereupon, if the lessee does not with reasonable promptness
after the giving of such notice commence and complete the removal of said
default, it shall be lawful for the lessor, at its option, to proceed in accordance
with the provisions of Article N hereof for an order declaring this lease ter
minated to the same extent as if the term thereof had expired, and the Dis
trict Court of the United States for the Northern District of Alabama or. under
the conditions stated In Article N hereof, the district court of the T'nlted
States for any district adjacent to said northern district of Alabama, subject
to the right of appeal in the manner described in said Article N, is hereby
given original jurisdiction to hear and determine the same and to give such
other and further relief as the case may require.
Q. This lease and all the covenants, conditions, stipulations, promises, and
agreements herein contained shall extend to and be binding upon and inure to
the benefit and run in favor of the parties and their respective successors and
assigns.
R. Any notice to or demand upon the lessor shall be deemed to have been
sufficiently given or served on the lessor, for all the purposes hereof. if mailed,
postage prepaid, to the then Secretary of War, Washington, District of Colum
bia. Any notice to or demand upon the lessee shall be deemed to have been
sufficiently given or served on the lessee, for all the purposes hereof, if mailed,
Postage prepaid, to the lessee at Jts office in the borough of Manhattan, city,
county, and State of New York, or to such other address as shall be furnished
by the lessee by written notice to the lessor. Any notice to or demand upon
said American Cyanamld Company shall he deemed to have been sufficiently
given or served on said American Cyanamid Company for all the purposes
hereof, if mailed, postage prepaid, to the said American Cyanamid Company
at its office. 535 Fifth Avenue, city, county, and State of New York, or such
other address as shall be furnished by said American Cyanamid Company by
'vritten notice to the lessor.
S. It is mutually understood and agreed that the lessee may, for the more
convenient performance and execution of any of the terms and provisions of
this lease required to be performed and executed by the lessee, organize or
136 MDSCLE SHOALS

cause to be organized one or more corporations (herein referred to as a "sub

sidiary corporation"), under and by virtue of the laws of one of the United
States: Provided, That all of the authorized voting stock (other than any
directors' qualifying shares) of any such corporation shall be owiied by the
lessee : And prmided further, That the lessee and said American Cyanamid
Oompany shall, notwithstanding such formation and use of any such subsid
iary corporation, continue fully responsible for the performance or carrying out
of all of the terms or provisions of this lease. Any notice or demand properly
given to or served on the lessee shall be deemed to include notice to or demand
upon any such subsidiary corporation.
T. The lessor, for the purposes of navigation improvement, national defense,
incidental flood control, and to secure the maximum production of fertilizers
at Muscle Shoals in time of peace, covenants and tigress to acquire nnd con
struct with reasonable promptness, Cove Creek Dam. to be constructed upon
the Cove Creek site on the Clinch Kiver located approximately eight miles in
a direct line north of Clinton, in the State of Tennessee.
The term " dam " as used in this article, is hereby defined to mean and be
deemed to include, except as otherwise expressly stated, all lands, water rights,
dams, flumes, spillways, sluices, reservoirs, power houses, fixtures, structures,
facilities, generators, machinery, hydroelectric and operating appliances, ap
paratus, appurtenances, accessories and facilities, trackage, transmission lines,
telephone and telegraph lines, plants, buildings, erections, housings, poles,
wires, easements, rights of way, riparian rights, locks and navigation facili
ties, appurtenant thereto and/or owned, controlled, or acquired for or in
connection therewith.
Said Cove Creek Dam shall have a height of approximately two hundred and
twenty-five feet, a power house and hydroelectric installations and equipment
for the generation of at least two hundred thousand horsepower, and be of
such dimensions and specifications, as determined by said Secretary of War,
as will take full reasonable advantage of the flow and fall of the Clinch River
for the utilization of the water power of said river to the best advantage
thereof in view of the other water power developments that may be located
on said river nnd on the Tennessee River; and the said dam shall not be
constructed in such a way as will materially impair or detract from the use anil
enjoyment by the lessee of the other properties, or any of them, demised to it
by this lease.
The said Cove Creek Dam, except its locks and navigation facilities (if any),
shall ipso facto, upon its completion, and without any further conveyance or
assignment, become and he a part of the properties demised by this lease and,
as such, subject to all the applicable terms and provisions of this lease for
and during the balance of the unexpired said term of fifty years herein above
mentioned and described, as fully and completely as though specifically leased
and demised by this lease; but nevertheless the lessor shall, from time to time,
execute and deliver to the lessee any and all such other or further instruments
and assurances in the law for the better granting, demising, and securing to
the lessee the said dam which the lessee or its counsel learned in the law shall
reasonably advise and require.
The lessee, in addition to the payments to be made by it under Article A
hereof, will pay to the lessor as rental for the said Cove Creek Dam, from the
time said dam shall be completed and' made available by the lessor to the lessee
hereunder—
(a) A sum equal to interest at the rate of 4 per centum per annum upon
the total of all sums expended by the lessor upon the acquisition and con
struction of said dam, less such amount of such expenditure as shall be deter
mined by agreement between said Secretary of War and the lessee, and In case
they can' not agree, by proceedings in accordance with the provisions of article
N iiereof, to be properly applicable to the cost of any navigation facilities
appurtenant thereto, as distinguished from power purposes of said dam;
(b) Annual amounts sufficient, if continued for 100 years, to amortize on
a basis of 4 per cent interest, compounded annually, the entire amount so
expended by the lessor upon the acquisition and construction of said dam:
Provided. That the total of the sums expended by the lessor upon the acquisition
and construction thereof shall, for the purpose of calculating the payments to
be made by the lessee by way of rent ill of sjud dam. be deemed to be the sum
actually so extended, but not exceeding $20,000,000 (exclusive of its lock
and navigation facilities) and $5,000,000 for any locks and navigation facilities
appurtenant thereto, unless such amounfs be increased by mutual agreement
between said Secretary of War and the lessee; and
 MUSCLE SHOALS 137

(c) An amount annually in installments quarterly, equal to the actual cost

during the preceding fiscal year paid by the lessor for repairs and maintenance
of said dam and for operation of its locks (if any) : Provided, however. That
said sum so to be paid by the lessee shall in no case exceed $50,000 in any one
fiscal year.
From the time said Cove Creek Dam shall be completed and made available
by the lessor to the lessee hereunder, the lessee will, during the unexpired
portion of the terms of this lease, supply to the lessor, free of all charge, electric
power necessary for the operation and lighting of its locks ; the same to be
delivered at any point on its lock grounds designated by said Secretary of
War.
The lessor covenants and agrees to acquire, by good and marketable title,
free from all material defects and encumbrances, all such lands, rights, ease
ments, and servitudes as may be necessary for the construction, operation,
and maintenance of said dam and to complete the construction thereof in good
faith and with reasonable diligence In accordance with said plans and speci
fications and all such lands, rights, easements, and servitudes shall, ipso facto,
upon completion of said Cove Creek Dam, and without any further conveyarue
or assignment, become and be a part of the properties demised by this lease.
Mr. McSwAiN. Mr. Bell, I want to throw out there the suggestion
it might be well to advise with your firm (I do not know who your
present counsel is) with regard to the constitutionality of that par
ticular provision. The United States Government has the power to
exercise eminent domain only for public purposes and, of course, for
its own purposes. Here it undertakes to covenant to transfer that
right or at least to exercise that right for the benefit of a private
corporation, and it might be well for you to look into that, to see
whether or not that would have to be built up in some other way.
Mr. BELL. I see.
The CLERK, (reading) :
Anything in this lease to the contrary notwithstanding, the lessee shall not
be required to provide and place in operation a third or subsequent units for
the production of such concentrated fertilizer in accordance with the provisions
of subdivision (1) of article F hereof until the lessor shall have completed the
construction of said Cove Creek Dam and the same shall have become a part
of the demised premises, pursuant to the provisions of this article.
Anything in this lease to the contrary notwithstanding, if said Cove "reck
Dam shall not be completed by the lessor and made available to the lessee
pursunant to the provisions of this article within ten years after the date
hereof, then and from such ten years after the date hereof until such time as
"aid Cove Creek Dam shall be completed by the lessor and made available to
the lessee the lessee shall pay to the lessor in respect of said Dam Numbered
3 a sum equal to interest at the rate of 2 per cent per annum upon the principal
amount to be computed as in subdivision (2) of article A hereof, provided, in
lieu of the payment at the rnte of 4 per cent per annum in said subdivision
(2) of article A provided; but, upon said Cove Creek Dam being completed by
the lessor and made available to the lessee, said lessee shall resume payment
»f said sum equal to interest at the rate of 4 per cent per annum as in said
subdivision (2) or article A provided.
U. The lessee will, within ninety days after the date hereof, cause to be
organized under the laws of one of the United States as a subsidiary corpora
tion, empowered to engage in the business of developing, generating, trans
mitting, and distributing electric power, and will cause said subsidiary corpo
ration to file, within ninety days after its organization, with the Federal
Power Commission an application for a preliminary permit to enable said sub
sidiary corporation to secure the data and perform the acts required by section
0 of the Federal water power act, with a view to acquiring and obtaining a
license to construct, operate, and maintain, in accordance with the terms and
provisions of said act, except as herein otherwise provided, the following dams,
to wit: (1) Senator Dam, to be constructed upon the Senator site on the Clinch
River, above the mouth of the Emory River; (2) Melton Hill Dam, to be con
structed upon the Melton Hill site on the Clinch River, in Anderson and Knox
Counties; (3) Clinton Dam. to be constructed upon the Clinton site on the
Clinch River, near Clinton, all of said sites being located in the State of Ten
138 MUSCLE SHOALS

nessee; and thereupon the said commission shall Issue such a preliminary
permit forthwith.
Mr. STAFFORD. Do you contemplate under the subsidiary corpora
tion which is herein authorized to have that merely control the power
of these three dams ?
Mr. BELL. You see, Mr. Stafford, the dilemma we face is this :
These dams are located just below Cove Creek Dam, on the Clinch
Kiver. It is our program for the operation of Cove Creek Dam,
if this lease comes through, to operate that dam from the standpoint
of increasing the power at Dam No. 2 by regulating the flow in
such a way that when the river is low we turn on Cove Creek; when
the river is high, we close it up, or nearly so. Now we were in
this dilemma, that if we did that then these three dams would vir
tually Jbe a part of the power system at Cove Creek and we would
face a protest from somebody or other that we were interfering with
the development of those dam sites. If anybody, for instance,
secured permits for Senator, Clinton, and Melton Hill and started
to build, he would complain what we were doing was putting him
out of business; because the Clinch would practically be turned off
in the wet seasons and turned on in the dry seasons, and we would
be interfering, therefore, with the developments of certain power
site possibilities in Tennessee. Now the other way to deal with it
was for us to take it over just as we would take over all the power
to be developed at Cove Creek ; then if we regulated the Clinch Kiver
in that way nobody would be harmed but ourselves and that program
would not*be open to that objection ; so that, in addition to getting a
certain amount of secondary power in the dry period we were meet
ing a situation which otherwise I do not know how anybody could
handle. I would not want to take those dam sites unless I had
charge of Cove Creek.
Mr. STAFFORD. Do I understand there are also in existence some
other dam sites between Florence and Cove Creek ?
Mr. BELL. Yes ; but those are all right, you see ; because they bene
fit by this program we have in mind for Cove Creek. In other words,
everybody from the junction of the Clinch with the Tennessee,
everybody who has a power station from there on down, will also
have his power doubled just like it will be doubled at Dam No. 2.
Mr. STAFFORD. Does the Government intend to make any charge
for those existing dams for that additional power?
Mr. BELL. Oh, I think it should ; yes. In other words, as we were
discussion a while ago, there should be, I think, a contribution from
those people who have yet to build.
Mr. STAFFORD. I mean existing dams; from those who have exist
ing power sites.
Mr. BELL. I can not tell you whether the one station I know of
that has been built, the Hales Bar station—I can not tell you whether,
legally, they would have to make contribution or not. There is one
site.
Mr. HILL. They were built under a special act of Congress before
the general power act was passed.
Mr. BELL. Exactly, and what the legal situation is with them, I
can not say.
Mr. STAFFORD. Is that the only power site between Florence and
Cove Creek now in existence?
 MUSCLE SHOALS 139

Mr. BELL. Except, of course, Dam No. 2, which does not enter into
this discussion. That is the only developed site.
Mr. STAFFOKD. Have you made any thorough estimate as to the
cost of the construction of Cove Creek and of these other three re
spective dams?
Mr. BELL. Well, we have not made a thorough estimate. I cer
tainly was under the impression it would not cost any such sum as
has been mentioned by Mr. Douglas as being the present estimate.
Was that the present estimate of the War Department engineers,'
or not?
Mr. DOUGLAS. Yes.
Mr. BELL. It appears from that estimate they think it will cost
some $37,000,000. At a very much earlier stage of the game, not on
a thorough examination, but, nevertheless, on some examination, one
of the Government engineers estimated it at $20,000,000, and that
included a 20 per cent overrun, as I recollect it, so that the figure
has risen from $20,000,000 to $37.000,000, and I am at a loss to
understand it.
Mr. STAFFORD. Your company itself has not made any investiga
tion as to the cost ?
Mr. BELL. We have made no such investigation as would warrant
us in going ahead or even in giving a figure that we would regard
as dependable, but we have no such idea as that. Our idea is about
$25,000,000.
Mr. DOUGLAS. In order to clear up the discussion of the estimated
cost, the estimate as prepared by the W"ar Department, I think it
should be stated that of the $37,540,643 figure, which represents the
total cost, $4,903,457 is for a power plant and power house ; $2,983,850
is for the barge lift. The total of those two figures is $7,887,307.
Mr. BELL. Now, of course, as far as the barge lift is concerned,
we are not interested in that; but the Government is, naturally; but
my impression is that the original figure of $20,000,000 by Major
Fiske included a barge lift; I think it did.
Mr. STAFFORD. There is no estimate there for the construction of
these three dams?
Mr. BELL. Oh, no.
Mr. DOUGLAS. No; not for the three dams—Senator, Melton Hill,
and Clinton.
Mr. BELL. Mr. Douglas, may I inquire whether there is a trans
mission line included in the $37,000,000?
Mr. DOUGLAS. There apparently is no transmission line.
Mr. BELL. Because wet do not want a transmission line.
Mr. DOUGLAS. The main dam is estimated to cost $6,842,836; the
spillway, $1,810,839; the power house, $4,903,457; barge lift, $2,983,-
850; reservoir, $11,318.745.
Mr. BELL. Is that split up so that we can tell how much for land,
how much for railway removals, and how much for highway
removals ?
Mr. DOUGLAS. It is not split up in this estimate.
Mr. BELL. I think that is where the increased cost comes in.
Mr. DOUGLAS. Then the general overhead costs is $5,972,131.
Mr. BELL. I wonder what that means.
Mr. DOUGLAS. That looks to me as though it were a very high
figure. The total is $33,831,858. Then, in addition, there is the
140 MUSCLE SHOALS

following item, " Contingencies, including taxes, insurance, and in

terest, $3,708,785." The grand total is $37,540,643. .
Mr. BELL. Ordinarily the Government includes neither interst
nor insurance on its projects.
Mr. DOUGLAS. Yes.
Mr. BELL. Still, I hesitate to say anything about it, because, after
all, these figures do get away from one; but I think I am right in
saying the original estimate was $'20,000.000 or less.
Mr. WAINWRIGHT. As of what date are these figures, Mr. Douglas;
how recently have they been checked up?
Mr. DOUGLAS. This letter is dated February 10, 1930.
Mr. BELL. Have you any of the basic quantity costs, like cubic
yards of concrete ?
Mr. DOUGLAS. I have no detailed report. I have been advised that
the report in detail has not been printed, but I can see it if I will
call at a certain place in the Munitions Building, which I intend
to do.
Mr. HILL. I think there is no doubt, Mr. Bell, but what vour
figure of $20,000,000 is predicated upon the original estimates of the
Army engineers. I think they originally estimated about $20,000,000
for the construction of that dam; perhaps eighteen or nineteen
million; not over twenty million.
Mr. BELL. Of course, if the footings had proved disappointing,
that would account for a very large increase.
Mr. HILL. Oh, yes.
Mr. BELL. But that does not appear to be true, because the dam
you said, I think, is estimated at between six and seven million.
Mr. DOUGLAS. Yes.
Mr. BELL. After all, it is a thing that can only be determined after
very careful study.
Mr. STAFFORD. You have no estimate as to the cost of construc
tion of these other three dams ?
Mr. BELL. In a rough way, Mr. Stafford, my recollection is we
figured they would run probablv $30,000,000; something like that.
Mr. HILL. That is, $10,000.000"each: $30,000,000 in the aggregate.
Mr. BELL. In the aggregate; I do not know whether they were
equally divided, or not.
Mr. HILL. I mean the aggregate will be about $30,000,000.
Mr. BELL. That is my recollection, yes.
Mr. STAFFORD. In addition to the expenditure for Cove Creek?
Mr. BELL. Yes.
Mr. WAINWRIGHT. Are these subsidiary dams to be constructed by
you or by the Government?
Mr. BELL. By us.
Mr. WAINWRIGHT. The entire expense of Cove Creek is to be
borne by the Government?
Mr. BELL. That is the program and we pay 4 per cent on $20.000--
000 of it and we amortize on the basis of 100 years $25.000,000 of it,
that is, up to the actual cost, whatever the figures would be and,
apparently, it would be an over-run.
Mr. WAINWRIGHT. So that tl\e Government would expend
$37,000,000 to construct Cove Creek and vou would pay rental on
a basis of cost of $20,000,000?
Mr. BELL. Yes.
 MUSCLE SHOALS 141

Mr. WAINWRIGHT. With additional amortization?

Mr. BELL. Yes.
Mr. WAINWRIGHT. Additional rental so as finally to amortize the
whole thing?
Mr. BELL. No.
Mr. WAINWRIGHT. To amortize $25,000,000 in 100 years?
Mr. BELL. Yes.
Mr. WAINWRIGHT. So the net result would be the Government
would not be receiving the rent on $17,500,000 of expenditure and
would not receive an ultimate reimbursement for $12,500,000?
Mr. BELL. That would appear to be the fact from this statement
of costs, or this estimate oi costs, except for the fact, Colonel, that
a substantial part of that the Government, under this program,
would get back through contributions levied on these six or seven
dams down the stream. Now those contributions have been esti
mated, roughly, at somewhere between $8,000,000 and $12,000,000.
Mr. DOUGLAS. Colonel, I do not think you were here when, after
a series of questions, Mr. Bell stated that' if it were the wish of the
committee, his company, at its expense, would undertake the con
struction of Cove Creek.
Mr. WAINWRIGHT, And stand the entire cost?
Mr. DOUGLAS. At its own expense.
Mr. HILL. Another thing, Mr. Wainwright, part of that $37,000.000
is chargeable to navigation. For instance, that barge lift estimated
there is over $7,000,000; is not that true? How much is the bargp
lift?
Mr. DOUGLAS. No; the barge lift is, roughly, $3,000,000.
Mr. HILL. Then there are some other amounts.
Mr. DOUGLAS. The power house is $5,000,000; insurance, taxes, and
interest at almost $4.000,000.
Mr. WAINWRIGHT. The question sort of arises in your mind, if
they are willing to stand the entire cost of it, why they are not will
ing, in avoidance of that expenditure, to pay rental on the entire cost
at a low rate of interest with a very liberal amortization feature.
Of course, that is just a query that occurs to your mind.
Mr. DOUGLAS. I think that can be answered this way, that the
construction of Cove Creek will approximately double the potential
horsepower at the various sites on the Tennessee River below the
junction of the Clinch with the Tennessee and under the terms of
the Federal water power act, regardless of who may build Cove
Creek, whether it be the Federal Government or whether it be the
American Cyanamid Co., or a subsidiary of the American Cyanamid
Co., a proper royalty can be charged against those subsequent lessees
on account of the great benefit which they will derive from stabiliza
tion of the flow of the river accruing from the construction of Cove
Creek. Now, then, the reason in this bill there is an apparent dif
ference between the amount which is to be amortized by the Ameri
can Cyanamid Co. and the apparent estimated cost of the project,
is due to the fact that it is unquestionably contemplated that the
Federal Government will make up that deficit, or that difference,
through imposing reasonable royalities on subsequent licensees on
the Tennessee. Does that make it clear?
101229—30 10
 142 MUSCLE SHOALS

Mr. WAINWRIGHT. Yes. I did not mean by the query to precipi

tate any discussion ; I assume, of course, that is a question that can
not be determined by a discussion here, but it is a question that has
to be answered at some time, and answered satisfactorily.
Mr. DOUGLAS. I think that is the answer to it.
Mr. WAINWRIGHT. Maybe it is. Are there any further questions,
Mr. Douglas?
Mi*. DOUGLAS. No.
The CLERK (reading) :
The said subsidiary corporation shall have a period of three years from
the date of such prelimiuary permit within which to make examinations and
surveys, prepare maps, plans, specifications, and estimates for the acquisition,
construction, operation, and maintenance of any one or more of said dams;
and during such period said subsidiary corporation shall have and enjoy
IMriority in applying for a license under the terms of said act to acquire, con
struct, operate, and maintain any one or more of said dams. If within said
period of three years the said subsidiary corporation shall elect to acquire and
construct any one or more of the said dams, it shall promptly apply for such
a license under the terms of said act to construct, operate, and maintain such
dam or dams subject to the applicable .State and Federal laws. Thereupon,
in accordance with plans and specifications approved by the Secretary of
War and which shall be well adapted to develop, conserve, and utilize in the
public interest the navigation and the waterpower development of such region,
the said commission shall issue to the said subsidiary corporation a license to
acquire, construct, operate, and maintain the dam or dams specified in said
application, which shall center upon said subsidiary corporation all the rights
and privileges of said act : Provided, hoircrer. That said subsidiary corpora
tion shall not be required to pay, under and pursuant to the terms and provi
sions of subsection (f) of section 10 of said act, to the lessor any annual
charges for interest, maintenance, and depreciation on said Cove Creek Dam
on account of the said subsidiary corporation's use and operation, as licensee
under Paid act, of any dam or dams mentioned and described in this article.
Mr. WAINWRIGHT. Mr. Bell, that provision is practically a manda
tory provision upon the Federal Power Commission directing them
to grant these licenses to those three dams?
Mr. BELL. Yes; it gives us priority.
Mr. WAINWRIGHT. It gives you more than that; it gives you
pretty near the absolute right here, does it not ?
Mr. BELL. Oh, yes ; if our survey shows it is all right, we go ahead.
The CLERK (reading) :
V. In this indenture has intervened said American Cyanamid Company,
which, pursuant to a resolution duly adopted by its board of directors on the
day of 192 , a copy of which duly certified by its secretary under its
corporate seal, is hereto annexed, hereby for itself and its successors and assigns
waives the royalties hereinbefore described and guarantees the performance
by the lessee of all obligations placed upon snid lessee by this lease.
In witness whereof the parties hereto and said American Cyanamid Com
pany have caused their respective corporate names to be hereunder subscribed
and their respective corporate seals to be hereto affixed and attested by
ofllcers duly authorized so to do.
[SEAL.I UNITED STATES OF AMERICA,
By , Secretary of War.
Attest :
[SEAL.I AlR NITRATES CORPORATION,
By , Its President.
Attest :
, It* Secretary.
[SEAL I AMERICAN CYANAUID COMPANY,
By , Its President.
Attest :
Its Secretary.
 MUSCLE SHOALS 143

SEC. 2. That all officers, agents, and agencies of the United States of America
mentioned or referred to in said lease and all other proper officers, agents,
and agencies of the United States of America, are hereby authorized and
directed, for and on behalf of the United States of America, to do all such
acts as are provided in said lease to be done by them or by the United States
of America, and all other acts which may be necessary or appropriate to carry
out the terms and provisions of said lease in the manner and form therein
set forth : Provided, hoicever. That before the Secretary of War shall execute
said lease on behalf of the United States of America, he shall be furnished,
within ninety days from the time this act shall become a law, with the follow
ing documents: (1) A verified certificate that at lawfully convened meetings
of the holders of stock entitled to vote and the board of directors of said Air
Nitrates Corporation proper resolutions were duly passed authorizing and
directing its president and its secretary to execute said lease on its behalf;
and (2) a verified certificate that at lawfully convened meetings of the holders
of stock entitled to vote and the board of directors of said American Cyanamid
Company proper resolutions were duly passed reciting that (a) said lease
is for the use and advantage of said American Cyanamid Company and that
(b) said American Cyanamid Company is an American controlled corpora
tion and owns and controls all the capital stock (other than directors' quali
fying shares) of said Air Nitrates Corporation, and authorizing and directing
the president and secretary of said American Cyanamid Company to inter
vene in and execute said lease on its behalf thereby waiving the royalties
therein described and guaranteeing the performance by said Air Nitrates Cor
poration of all obligations placed upon said Air Nitrates Corporation by said
lease. All of said documents shall be preserved by the Secretary of War
and copies thereof shall be inserted in his next annual report.
SEC. 3. That original jurisdiction to hear and determine any controversy
arising under this act or under or with respect to said lease, and to fix and
determine the just and reasonable compensation for the possession and/or use
of the demised properties during the period of an emergency and to desig
nate arbitrators and certified public accountants as provided therein, is hereby
conferred upon the United States District Court for the Northern District of
Alabama (or its successor as then constituted), subject to the right of either
party to apply, upon a proper showing of interest, relationship, or bias of the
judge or judges of said district court, or inability to obtain a fair and impar
tial jury, for a transfer of any such controversy or proceeding to the United
States district court for any district adjacent to said northern district of
Alabama (or its successor as then constituted), and, in the event such appli
cation be granted, original jurisdiction for the purposes above stated is hereby
conferred upon the United States district court for the district to which such
controversy or proceeding is transferred (or its successor as then constituted),
and that appellate jurisdiction of any such controversy or determination as
provided in said lease is hereby conferred upon the United States Circuit
Court of Appeals for the Fifth Judicial Circuit, or in the event the controversy
or proceeding be transferred to the district court for a district within the
Sixth Judicial Circuit then upon the United States Circuit Court of Appeals
for the Sixth Judicial Circuit (or its successor as then constituted), subject
to review by the Supreme Court of the United States according to law.
SEC. 4. That, after the Secretary of War has been furnished with the
documents mentioned in section 2 hereof, said Secretary of War shall give
Air Nitrates Corporation and American Cyanamid Company ten days' written
notice fixing a time (which shall not be later than thirty days from receipt
by said Secretary of War of said documents) at which the proper officers of
Air Nitrates Corporation and American Cyanamid Company shall appear in
the office of the Secretary of War to sign the proposed lease at the same time
lie signs the same. If, for causes which in the opinion of the Secretary of
War are beyond the reasonable control of such officers, they fall to appear
and sign at the time fixed In such notice the Secretary of War may fix a
later date for them to appear and sign.
SBC. 5. The Secretary of the Treasury is hereby authorized and directed
to establish special sinking funds in the Treasury to return to the Government
the entire cost of Muscle Shoals Dams Numbered 2 and 3 and the Cove Creek
Dam, together with their power plants, navigation facilities, and other appur
tenances, and to that end is authorized and directed from and after the first
144 MUSCLE SHOALS

year of the lease period to invest the sums herein provided for that purpose,
together with the Interest thereon, in 5 per centum Federal farm-loan bonds,
or such Federal securities as in his judgment are most suitable for the pur
pose of returning to the Treasury the Government's entire investment in the
Muscle Shoals and Cove Creek Dams within the shortest practicable time
not to exceed the amortization period designated in the lease.
SEC. 6. The United States grants to the State of Tennessee the right at the
end of the period of the above lease to purchase said Cove Creek Dam, hydro
electric power plant and appurtenances at actual cost, less an amount charge
able to navigation, flood control, or national defense to be agreed upon by
the President and the Governor of Tennessee, subject to approval of Congress.
The proceeds of the Cove Creek sinking fund herein provided for shall be
applied as a credit against said purchase price.
SEC. 7. That all appropriations necessary to carry out the provisions of said
lease are hereby authorized.
SEC. 8. That all acts or parts of acts in conflict herewith are hereby repealed.
SEC. 9. That this act may be cited as the " Muscle Shoals act of 1930."
SEC. 10. That this act shall take effect immediately.
Mr. STAFFORD. I wish to inquire, should the committee decide on
a policy to lease the power only of Dam No. 2, whether that would
permit you or whether you would feel bounden, under that character
of lease, to grant to the Union Carbide Co. the rights that they
have under the understanding you have with them.
Mr. BELL. If the committee should decide—this is cutting out Cove
Creek and Dam No. 3 ?
Mr. STAFFORD. Yes. Some memberse, I know, as expressed in
their prior reports, merely wish to lease the property as is, so as
to permit you to manufacture at least 20,000 tons of nitrogen—at
least that. Now, if that would be the policy of the committee, would
you then be in a position to carry out the contract I understand you
have with the Union Carbide Co. to grant them 50,000 horsepower?
Mr. BELL. Well, I would like to think about that a little. In a
general way, I can say, of course, the 50,000 contract was based
on an offer which included Cove Creek and Dam No. 3. I think,
Mr. Stafford, we would be under the same moral obligation there
to try to adjust that in some way.
Mr. STAFFORD. What are the conditions that make it morally
obligatory upon you to adhere to the understanding with the Union
Carbide Co. ?
Mr. BELL. What happened was this, that we acquired from them
under that contract the right to use their Urea process patents in the
United States, which is a right in the future, probably, of very sub
stantial value, and I should want to treat them fairly about this
thing.
Mr. STAFFORD. As I understand, there would not be sufficient
power, would there?
Mr. BELL. I think there would have to be a modification of the
agreement; yes.
Mr. STAFFORD. Well, whatever you wish to incorporate along that
line, I wish you would insert in the record.
Mr. BELL. I think it might be of some interest if I turned over to
the committee this statement which Mr. Madden had worked out by
some of the experts as to what these payments would be. You re
member that has been referred to and I have guessed at some of these
figures and I think it would be very much better if I would turn
over the calculations as we have them.
 MUSCLE SHOALS 145

Mr. RANSLEY (presiding). I think that is already in the hearings,

but it would be well to incorporate it right here.
Mr. BELL. I think that is probably so, but I am not able to put my
finger on the page.
Mr. HILL. That gives a picture, as I recall, of the financial end of
the lease?
Mr. BELL. Yes, apparently worked out in the greatest detail.
Mr. RANSLEY (presiding). Is there anything further, Mr. Bell?
Mr. BELL. I think not ; thank you very much.
 Estimate
to
receipts
of
each
Government
the
50-year
during
year
Muscle
lease
Willis-Madden
under
Shoals
bill—Receipts
§
(excluding
Government's
earned
interest
by
sinking
accumulations)
fund

1
Amount
Amorti Enºs
-
*::::
Item
1
(cumula-
Interest
Account
Royalty
zation
Total
Assumptions
y
tive)
payments
Dam.
$200,000
Dam----|
First------------
Wilson
$47,000,000
Dam----
$35,000----------
!----------
Estimated
$235,000
beginning
at
investment
lease
of
year
First--
period.
de
ferring
amortization
and
interest
payments
Dam.
Wilson
on
do----------
Second----------|----- -
47,000,000-----
200,000
-----
35,000--------------------
235,000
Third-----------|---
47,000,000-----
200,000-----
do----------
$3,000
35,000----------
unit
First
000
No.
plant
nitrate
of
b
2 e
gins
fertilizer
of
production
con
taining
nitrogen
of
tons
10,000
per
year.
Fourth----------|--
54,000,000-----
200,000-----
4p35,000-------------
cent
er
charges
other
and
interest
0----------
Cove
800,000,
20,000,000
Creek
160----------|------
$16,
50,000,
begin
invest
Dam
Creek
Cove
on
Dam.
Dam.
ment,
that
assumed
being
it
Cove
ann.
Creek
completed
be
will
Dam
at -

Total.-----|--------
74,000,000---------
1,000,000----------
3,000
85,000
beginning
1,104,160
160
16,
(Assume
year.
fourth
of
locks
no
Storage
Creek
Cove
in -----
--

Dam.)
additional
$7,000,000
ma
º now
Dam
Wilson
at
in
s
- Dam----|
Fifth------------
Wilson
54,000,000
200.000.
Dam----
Dam----
Wilson
35.000----------|---
year
First
interest
deferring
of
and
|------------
Cove
20,000,000
Creek
Creek
800,000
Creek
Cove
amortization
50,000
on
payments
160,----------
16,
Dam
!------------
Dam.
|D
3,am.
No.
becom
to
assumed
is
which
Dam
160,000
Dam
32,500,000
3.------
3.------
No.
pleted
20,000
year.
fifth
of
beginning
at
---------------------
----------

Total.-----------------------
opo106,500,000------------------
160,000.------------------
1.
3,000,
160
1,284,
105,
160
16,
Sixth------------
No.
Dam
Wilson
106,500,000
3.------
200,000.
Dam----
Dam----
Wilson
Final
35,000.----------|---
interest
deferring
of
year
and
----------
------------
800,000,
Cove
Creek
Cove
Creek
amortization
Wilson
on
payments
160|----------
16,
50,000
Dam.
airl.
3.------
No.
Dam
100,000
20,
000
----------------------------------

16,100 -—
Total-----------------------------------------------------
3,160,000.------------------
1,
160
1,284,
º105,000
106,500,000.
1,500,000.
Dam----|
Seventh---------
Dam.---
Wilson
No.
Dam
3.------
year
Final
interest
deferring
of
35,000
and
Cove
800,000.
Creek
Creek
Cove
amortization
,000
on
payments
Dam
am.
No.
pDam.
4
at
interest
Full
3.er
|Dcent
No.
DamDam
160,000.
3.------
No.
3.------
20,000----------|----
now
is
Wilson
on
year
each
payable
Dam
of
investment
power
$37,
-,
2,460,000-----------
Total.--------------
105,000
6,000
500,000,
2,630,792
59,792
is
fullamortization
and
now
payable
Wilson
entire
on
year
each
am
$54,000,000.
of
investment
Second
plant
nitrate
of
unit
2
No.
begins
fertilizer
annual
production;
output
tons
20,000
contains
now
of
nitrogen.
 interest
Full
4per
at
now
is
cent
pay
30,000 Dam----|
wilson
1,500,000.
Pº:
Wilsº
each
able
No.
Dam
on
year
woºl
10%
ºr
"gº ower
3pNo. -
§
º Dam
§
Eighth----------
$26,500,000,
investment
of3.------
and
full
1,000,000
3.-----|__*.
No.
Dam
3.------
No.
Dam
amortization
payable
now
is
each
year
entire
on
No.
Dam
nvest
3i105,000
3,360,000-------
--|
Total.-----|---------
$32,500,000.
of
ment
No -
-----------
further
deferring
amortiza
or
interest
of
tion.
and
Ninth
No.
Dam
tenth
106,500,000
3.------|
Dam----
3,000,000
Dam----
Wilson
70,000
Dam
Covecreek
1,600,000
Dam
Creek
Cove
100,000
3.------|
120,000
2,
3.------
No.
Dam
40,000
Total.-----|------------------|------------|------------------
6,720,000------------------
172,104
210,000
114,
7,
12,000
104
-
106,500,000
Eleventh
Dam----|
No.
Dam
to
6,000,000
3.------
Dam----
Wilson
unit
Third
plant
nitrate
of
2
No.
fourteenth,
in-
Dam
Covecreek
200,000
3,
Dam
Covecreek
production
begins
11th
in
year;
clusive.
No.
Dam
240,000
4,
3.------
No.
Dam
fertilizer
annual
now
output
con
tains
30,000
nitrogen.
tons
Total.-----------------------------------------------------
13,440,000------------------
Fifteenth
No.
Dam
to
106,500,000
3.------
Dam----|
Wilson
6,000,000
Dam----
Wilson
unit
Fourth
plant
nitrate
of
2
No.
3: eighteenth,
in-
200,000
3,
Dam
Covecreek
}...".
15th
in
begins
year;
clusive.
3.------
No.
Dam
r:
240,000
4,
3.------
No.
Dam
annual
fertilizer
now
output
con-
4.tains
40,000
nitrogen.
tons
---

Total----------
13,440,000-----
344,208
420,000
252,208
14,
48,000.
---------------
t
tr;
Nineteenth
No.
Dam
to
106,500,000
3.------
Dam----|
24,000,000
Dam----
Wilson
unit
Fifth
plant
nitrate
of
2
No.
thirty-fourth,
Dam
CoveCreek
12,800,000
Creek
Cove
production
begins
19th
in
year;
ra
inclusive.
960,000
16,
3.------
No.
Dam
fertilizer
now
output
con-
Iannual
50,000
tains
nitrogen.
tons
C --

Total.-----------------------------------------------------
53,760,000------------------
1,376,832
1,680,000.
>
t-
-

35,000
Thirty-fifth---
106,500,000
Dam----|
1,500,000
No.
Dam
Dam----
Wilson
3.------
now
Payments
43,632
interest
against
begin
an
CoveCreek
800,000
Dam
Covecreek
50,000
amortization
and
deferred
first
in
3.------
No.
Dam
1,060,000
3.------
No.
Dam
20,000
years
seven
of
inter-
644,000.
amor-----------
Deferred
est.
tization.
-
on
Interest
de-
875,840
de-----------
on
Interest
interest.
ſerred
amorti
ferred
zation.
+sw80------------------
Total-----------------------
136,967
105,000.
5,136,807
15,000
------------------
Thirty-sixth----|
No.
Dam
Current---------
------------------
3,360,000
105,000
86,052
inter-
Deferred
644,000.
amor-----------
Deferred
21,573
|test.
ization.
on
Interest
de-
890,880
de-----------
on
Interest
29,995'----------|------------
interest.
ferred
amor
|tization.
Total.-----
----------------
4,894,880
105,000
620
137.
152,
5,
15,000
500
|--------------
K
1United
States
5locks,
dams,
in
hydroelectric
and
(includes
plants
of
cost
war
excess
2a
No.
Dam
investment
nd
navigation
in
improvement).

|
|
 ;
receipts
WEstimate
under
Shoals
Muscle
of
lease
50-year
during
year
Gbeach
the
to
iolve—iRsre-ncMmeaidepntesn

*
Enºs
TAAccount
|
Royalty
zation
(Interest
1scumula-
otal
umptions
Item

Gcouvm elartino ms)e—Cno ti'nused

by
earned
interest
a(excluding
fund
sinking

tive)
payinents
y
1
Amount
Amorti
-

|Deferred
amor-
Deferred
644,000.
574- -- -- - - - - 901,
21,
inter- |Interest
de-
on
Interest
600
2-04 -- -- - -- --ferred
de-
on
30, ferred
inter-
amor |Deferred
armor-
Deferred
644,000.
-21,
574- -- -|-- - -- 905,920
inter- |Interest
de-
on
Interest
30,-653|- - - -| - - -ferred
de-
on -inter- |Deferred
amor-
Deferred
644,000.
-21,
- - - - 920,960
573
inter- -31,065-! -- -|- --ferred
|Interest
de-
on
Interest
de-
on amor
-inter-
ferred ----------
amor-
Deferred
644,000.
inter-
Deferred
574- - - - - - - - Intérest
21, * amor
ferred
30-9. --- -|- -- --inter-
|31,
de-
on
Interest
360
927,
de-
on ferred
amor

tization.
est. tization.
est. tization.
est. tization.
est. tization.
est. tization.
est. est.
tization. tization.
est.

T3,
TCurrent
3.------
No.
Darn
1h105,000
360i,r60t,y-5n0-i-n,t-h0- 0- .-|
86,052

Tu6,0hr6i502r-,etn0-5yt-0s-e,v-e0n-t-0h.- -
83Dam
C1105,000
3.------
No. T105,000
3.------
No.
Dam
C183hu6,0ir562,]t0-eyn5-t0e-ig|-,h0-th-0- .- F105,000
Co6,ur05t2,ri-0etn-h- -| - - - -
500,000.
83106,
3.-----.
No.
Dam

Total.4,905,
163,430
5,
15,000
137,830
105,000.
6-0- - - - - - - - Tota105,000
138,279
l.4,
---- --- ----
920
909, 650
183,
5,
15,000
Tot105,000
9al.6-0- - - - - - - -
4,924,
138,690 Tot105,000.
295
190.
5,
15,000
4al,.-931-,36-0, - - - - - -
138,935
 £

Umypdnited
h1
and
locks,
dams,
aStates
2
No.
Dam
of
cost
war
excess
(includes
iplants
navigation
in
investment
rond
velmecntr)i.c

187
5,275,

15,000 15,000

86,052
3, 60, 0 - - - - - -
105,000 20 - - - - - - 86,052
4,951,
556
139,
105,000. 13, 605,000
- 0, 0 - - - - - - .
105,000
-139,
120
4,957,
81
--------
3, 60, 0 .- - - - - -
86,052
105,000 140,416 574.
21, ---
33,655 141,281
105,000. 86,052

sº,052
-

| 1–

574
21,
| - - - - - 947,
armor-
Deferred
644,000. |31,930
de-
on
Interest
200
- - - - - amor
ferred ----------
amor-
Deferred
644,000.
574 120
21, - - - - - ferred
|953,
de-
on
Interest
191
32, amor o 978,880
|D21,
amor-
573 e- - - - -amorti
d32,791
on
Interest
-eferred
----
644, f-erred
| 1,004,ferred
-------
de-
on
Interest
640 amorti -21,
amor-
Deferred
644,000.
573
---- 40
e-'- - - - - amorti
d34,122
on
Interest
1,009, ferred

tization. tization. tization. tization. tization. tization.

|, tization.
zation. |
zation. zation.

gºod. . 105,
- ....
solº. .141,
....
105,000
747

06,Deferred
inter de ferred
on
Interest inter Pºted de ferred
inter Interest
on inter Pºſteddeferred
inter Interest
on interest. inter Interest ferred
de
on interest. inter
Deferred Interest ferred
de
on interest.

Cur1.
500,000
ent- - - - - Cur ent- - - - -
500,000
106, C1u0r6e,n5t-0-,-0- 0- CurrentI)eferred
500,000
106, Cur ent- - - -
500,000
106, -

est. est. est. est. est. est.

es

3.------
No.
Dam 3.------
No.
Dam 3.------
No.
Dam

Forty-third
year.

Total.- - - Forty-second- - Total.- - - ----- Forty-fourth- -

Total
Forty-first- - -
 Qut
K-1 c

receipts
WEstimate
under
Shoals
Muscle
of
lease
50-year
during
year
Gbeach
the
to
iolve—iRsre-ncMmeaidepntesn year
this
in
made
is
payment
Final
F6u,o0r562-,t0e-ynt-n-in-t-h-.-against
C3Dam
500,000.
810%,
105,000
3.------
No. a2Deferred
and
interest
(inter-
amor- 73r-t-i-z-a|t- i-o-ndeferred
Dm1-,644,
-o5eferred of
years
seven
first
in
-tization.
est.

Enºse
*TInterest
|
Royalty
zation
(scumula-
1
Item
AAccount
otal
umptions

lease.
|6,243-' - - --| - -- -
de-
on
Interest
1,081,920
de-
on
3Interest

Gcoumvleatrionsm)—eContin'uesd
by
earned
interest
a(excluding
fund
sinking

tive)
payments
y 143,003
105,000
1601- - - - - -
5,000, --------- 143,968
1
Amount
Amorti
-

(21,
amor-
Deferred
5inter-
7644, 4,e51-8 - - -|- - - -ferred
-4 -- - -|--- - - 31,030,400
dInterest
on
Interest
de-
on amorti
ferred
interest. |2inter-
amor-
Deferred
644,000.
1-,573--- -|- - --- 160
|1,056,
de-
on
Interest
de-
on
3Interest
35, interest.
7-8! - -- -| --- --ferred
amorti 6,0571- - - -| - - - -ferred
| - - - - - Interest
amor-
Deſerred
644,000.
inter-
Deferred
574
21, 31,071,680
----------
de-
on
de-
on
Interest amorti
ferred
interest. interest.
ferred
amorti

tization.
est. tization.
est. tization.
est.
zation. zation. Zation. zation.

-i.
5,085,920

*:::::::
105,000
8CDam
1F6,ou0r52t-6ye-,ns5-ti-x0|th- -,-0- 0-|
3.------|
No. --------- 1F6,uo0r526,-t0e,yn-5ts-0e|-v-e,n-0t-h-0 -
3.------
No.
83CDam
105,000 3CDam
86,052
105,000
1,u60r,60e,-n5t-0- -,0- -0-
3.------
No.

5,296,544
15,000
142,144
105,000
5T,ot0al.3-4,|-0 - - - - |- - - 5,339,363
15,000
143,683
105,000
5Tot,al0.-75,-680- - - - - - - 3,89,788
15,000
105,000
Total.- - -
- - ---
-------
 5.
$16,50 ,0 0 or
Deducting
investment
total
net
the
3,
No.
Dam
$6,000,000
plus
Dam,
Wilson
of
cost
in
navigation
and
costs
war
excess
to
charged ma3i,n6t0e5n,a9n5c1e,
for
to
lessee
payments
$Excluding
at
estimate
this
by
shown
are
Government
the
of
receipts
annual
average
annum
cent
per
4.29

$cG8n3ho4v,ae7r0sgt6en0m,ae03bn5lt01e.
of
return
annual
average
iThe
power
said
the
on
annum
cent
per
4.41
to
equal
is

Umynpdnited
h*
and
locks,
dams,
investment
aStates
2
No.
Dam
of
cost
war
excess
(includes
iplants
navigation
in vreond
svetlmeicntern)it.c

ahdajiorumane.d),
thereupon
committee
c(The
of
call
the
to
subject

COMPUTATIONS
OF
BASIS

3.------
No.
Dam
amor-lFi- fDeferred
Deferred |t-ie-th|- - |- - - - -
inter- de-lInterest
on
Interest
- - - -| - - |- - -
de-
amor
ferred
interest.

tization.
est. tization.

Dam
Wilson
at
machinery
generating
additional
of
cost
Estimated
7,000,000
1928- $-4-7-,0- - 0- ,- 0- - 0
1,
Feb.
of
as
locks,
including
Dam,
Wilson
in
investment
Present
requid)000,000
locks
(number
Dam
Creek
Cove
of
cost
Estimated
---------
Cur ent:- - - -
500,000.
106,

locks-500,000
including
3,
No.
Dam
of
cost
Estimated
---------

investment.
power
said
the
on

l- - - - |- - - | - - -
annual
Veſake
- Gov-
to
receipt

Total86,052
3,566,052
15,000
.-105,000
-------- Total.500,000
----------
º
*:::::::
Grand
5,020,000.A
600,000
4,621,564 ernment.
152 MUSCLE SHOALS

Captain POYET. Gentlemen, the Ordnance Department feel thai

ihe nitrate plants are in first-class condition right now.
Mr. STAFFORD. Well, there are two nitrate plants.
Captain POYET. Two nitrate plants; nitrate plant No. 1 and
nitrate plant No. 2 : and nitrate plant No. 2 is in such condition thai
we feel we could put it in operation within 60 days at an esti
mated cost of $100,000.
Mr. SPEAKS. In operation—you mean to manufacture fertilizer
for instance?
Captain POYET. To be ready to manufacture ammonium nitrate,
Mr. SPEAKS. Do you speak as a man qualified to express an au
thoritative opinion on the manufacture oi fertilizer?
Captain POYET. No. sir; I am not qualified to speak upon the
manufacture of fertilizer.
Mr. SPEAKS. You are not a chemist?
Captain POYET. No, sir: I am not a chemist.
Mr. SPEAKS. Could you start the plant and manufacture fertilizer?
Captain POYET. We could start the plant.
Mr. SPEAKS. Could you do it. I mean ?
Captain POYET. Yes, sir.
Mr. STAFFORD. Are you qualified to supervise the manufacture of
ammonium nitrate?
Captain POYET. I would have to hire a chemist; I am not a
chemist.
 MUSCLE SHOALS

TUESDAY, MARCH 18, 1930

HOUSE OF REPRESENTATIVES,
CoMMITTEE ON MILITARY AFFAIRS,
Washington* D. C.
The committee met at 10.30 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. Major Poyet, will you kindly take the stand and
state to the committee the conditions* of the plant at Muscle Shoals?
STATEMENTS OF MAJ. ANTHONY POYET, WARRANT OFFICER,
UNITED STATES ARMY, IN CHARGE OF NITRATE PLANTS AT
MUSCLE SHOALS; MAJ. F. H. MILES, JR., IN CHARGE OF NITRATE
SECTION, ORDNANCE DEPARTMENT, UNITED STATES ARMY;
AND CAPT. H. D. W. RILEY, MILITARY ASSISTANT TO DIS
TRICT ENGINEER AT CHATTANOOGA, COMMANDING OFFICER OF
WILSON DAM (DAM NO. 2) AND THE RIVER AND HARBOR WORKS
AT MUSCLE SHOALS
Mr. RANSLEY. And the witness is to be questioned so that we can
{ret information relative to the plant.
Mr. SPEAKS. Well, he states that he is ready to operate the plant
within 60 days. He is in charge of the plant and is speaking, sup
posedly, with technical information which warrants him in making
that statement. There is the plant as provided by law. after the
Government .spent one hundred and sixty million or more dollars,
and it can be operated. What I want to know is why it is not in
operation as intended?
Mr. RANSLEY. Mr. Quin. do you desire to ask any questions?
Mr. QUIN. Major, the buildings are all in first-class shape?
Major POYET. Yes, sir.
Mr. QUIN. Maintained and kept up ?
Major POYET. Yes, sir; first class.
Mr. QUIN. Practically as good as new. right now?
Major POYET. The condition of the machinery is better now than
rt was when it was installed.
Mr. QUIN. The plant was built by the Air Nitrates Corporation?
Major POYET. Yes. sir.
Mr. QUIN. Which is the bidder in this case through the Cyanamid
Co.?
Major POYET. Yes, sir.
Mr. QUIN. Now, that was constructed for permanent use, was it
not!
Major POYET. Yes, sir.
153
154 MUSCLE SHOALS

Mr. QUIN. The machinery that was in place—there are two differ
ent plants, as I understand : The machinery that is in place in No. 2
is the identical machinery, with the patents, and so on, of the Amer
ican Cyanamid Co.?
Major POYET. Yes, sir.
Mr. QUIN. Now that is the plant that you say is ready to begin
operation with perhaps an expenditure of $100,000?
Major POYET. Yes, sir.
Mr. QUIN. What you mean by operation is to make explosive
nitrogen ?
Maior POYET. To make ammonium nitrate.
Major POYET. For explosive purposes.
Major POYET. For explosive purposes?
Mr. QUIN. Now, Major, in order to make the nitrogen in the form
of fertilizer to go on the ground, to produce plant food, what would
be necessary and required in your judgment?
Major POYET. Of course they could use cyanamide. There is a
step where we make cyanamide and that can be used as fertilizer, but
it is not very good, you know, without being mixed. They generally
step where we make cyananmide and that can be used as fertilizer, but
maKe urea from cyanamide, but if you want to broadcast it over the
land, you could use cyanamide. Some nations are using cyanamide
as a fertilizer, but it has to be broadcast over the ground for a period
of about 40 days before the plowing takes place.
Mr. QUIN. Well, they are ready now to make that cyanamide?
Major POYET. Yes, sir.
Mr. QUIN. You would not have to do anything only to spend
$100,000?
Major POYET. Yes, sir. That $100,000 would be spent to install the
belting.
Mr. QUIN. To install what?
Major POYET. The belting—the belt to run the conveyors.
Mr. QUIN. That goes over the pulleys?
Major POYET. Yes; and to change the lubricants and grease and
overhaul the motors, blow out the dust and dry the motors.
Mr. QUIN. But the machinery they have is all right, just as good
as the day it was put there ?
Major POYET. Yes. All we have to do is to replace the belting, to
replace the lubricants and dry out the motors.
Mr. QUIN. If suddenly a war were to come, that place is ready to
go to producing nitrogen right now?
Major POYET. Is ready to go to producing nitrogen right now to
supply an army of about a million and a half men with explosives.
Mr. QUIN. That was tried out and demonstrated before the plant
was shut down, as I understand it?
Major POYET. Yes, sir. It was operated for about 90 days; that
is, all the machinery was tested and we know that the plant can be
operated.
Mr. QUIN. Now, I was down there after the war closed and, of
course, I do not know anything about this type of machinery, but it
was in first-class shape then.
Major POYET. Yes, sir.
Mr. QUIN. You gentlemen have maintained it in that same fix—is
it kept oiled up ?
 MUSCLE SHOALS 155

Major POYET. Yes, sir ; the Ordnance Department have maintained

the nitrate plants in about the same shape as the Navy maintains a
battleship in reserve. That is our policy to maintain those plants. -
Mr. QUIN. Do you know anything about plant No. 1, constructed
by this same concern, to manufacture the same ingredient through a
different process?
Major POYET. At nitrate plate No. 1 the process part would have
to be revamped, would have to be remodeled.
Mr. QUIN. Do you know about what it would cost to do that ?
Major POYET. It is estimated about $355,000.
Mr. QUIN. And with the expenditure of a little over a quarter of a
million dollars, even plant No. 1 could go to turning out nitrogen in
a form to make explosives for gunpowder, and so on ?
Major POYET. Yes, sir.
Mr. QUIN. How about making some fertilizer through that plant?
Major POYET. Well, of course, you do not make cyanamide in that
nitrate plant No. 1. If you desire, I can explain to you the difference
between nitrate plant No. 1 and plant No. 2.
Mr. QUIN. I wish you would put that explanation very concise,
in good form, so that every man on the floor can understand what you
mean. I do not believe a lot of damned lies told about this thing, and
we want the truth now.
Major POYET. At plant No. 2 the raw material is limestone and ,
coke—that is, the cyanamide process, limestone and coke. The lime- /
stone is burned, calcinized, and the coke is crushed; then the 2 are
combined, 2 parts of limestone and 1 part of coke, and fused together
in an electric furnace to make calcium carbide. That is where we
use most of our current—in the furnace room we need 60,000 kilo
watts to make that calcium carbide.
Mr. DOUGLAS. Sixty thousand kilowatts?
Major POYET. Yes, sir.
Mr. DOUGLAS. For what tonnage?
Major POYET. To make calcium carbide.
Mr. DOUGLAS. But for what tonnage ?
Major POYET. I would have to look that up; I do not remember /
right now. Now we are ready to make nitrogen, for which purposes j/
we extract the nitrogen from the air and liquefy it, separate it from
the oxygen; then the nitrogen is fused with the calcium carbide to
make cyanamide. or lime nitrogen. Now we are ready to make am
monia gas from that.
Mr. DOUGLAS. As I understand it, you said the nitrogen was taken
from the air for the fixation process ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Then it is liquefied ?
Major POYET. Yes. sir.
Mr. DOUGLAS. And subsequently fused with calcium carbide?
Major POYET. Yes; separated from the oxygen.
Mr. DOUGLAS. Yes ; separated from the oxygen and fused with cal
cium carbide to make what?
Major POYET. Cyanamide, or lime nitrogen. Then by mixing that
cyanamide, with soda ash and passing steam, we have ammonia gas. ./
Then we take half of the ammonia gas, pass it over a catalyst, over a '
platinum catalyst. That gas is converted into nitric oxide and we
156 MUSCLE SHOALS

mix that gas with oxygen and pass it through towers containing
water to make nitric acid.
Mr. DOUGLAS. It is passed over your catalyst, which is platinum?
Major POYET. Yes.
Mr. DOUGLAS. To make nitric acid; is that right?
Major POYET. Yes.
Mr. DOUGLAS. Which is N2O3 ?
Major POYET. Yes. Then we pass that gas through water, sepa
rate it through towers to make nitric acid. Then we use one-half of
the ammonia gas and we save the second half to neutralize the nitric
acid and ammonium nitrate, which comes out in liquid form. Then it
is crystalized. Now ammonium nitrate is mixed with 20 per cent
T. N. T. to make amatol, a high explosive, and the plant has a capac
ity of 110,000 tons of ammonium nitrate per annum, and it is esti
mated it would be sufficient for an army of about a million and a
half men, firing at the rate fired during the World War.
Mr. QUIN. Do you mean plant No. 1 has that capacity?
Major POYET. No ; plant No. 2.
Mr. QuiN. I mean plant No. 1.
Major POYET. We are talking about plant No. 2, now.
Mr. QUIN. The first one I asked you about was plant No. 2.
Major POYET. Yes.
Mr. QUIN. And the next one was plant No. 1.
Major POYET. I will tell you about plant No. 1. That is. very
briefly, as plant No. 2. If you desire, I can furnish you with a copy
of this pamphlet.
Mr. DOUGLAS. This is an official document, is it ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Of the plant and of the processes?
Major POYET. Yes. sir.
Mr. DOUGLAS. Ana it is official ?
Major POYET. It is official.
Mr. QUIN. From what source, now?
Major POYET. The Ordnance Department, sir.
Mr. QUIN. Of the United States Government ?
Major POYET. Yes, sir.
Mr. QUIN. Of the War Department?
Major POYET. Yes, sir.
Mr. DOUGLAS. Then I ask unanimous consent, Mr. Chairman, that
this pamphlet be incorporated in the hearings.
Mr. RANSLEY (presiding). It will be so ordered.
(The pamphlet above referred to will be found a< the conclusion
of to-day's hearing, page 177.)
Mr. QUIN. Now you have described plant No. 2 ?
Major POYET. Yes, sir.
Mr. QuiN. Now, can you describe plant No. 1?
Major POYET. Yes, sir.
Mr. WAINWRKJHT. Before you go ahead, Major, how many tons per
annum?
Captain POYET. One hundred and ten thousand.
Mr. WAINWRIGHT. One hundred and ten thousand tons—that
would be the annual output?
Major POYET. Of ammonium nitrate.
Mr. WAINWRIGHT. Ammonium nitrate for explosives?
 MUSCLE SHOALS 157

Major POYET. Yes, sir.

Mr. QUIN. Now, let me ask for a description of that, so far as the
buildings are concerned. As I understand and observed while there,
they are of splendid brick construction ?
Major POYCT. Yes, sir.
Mr. QUIN. And reinforced concrete at places?
Major POYET. Yes, sir; permanent construction.
M. QUIN. That building at this time is in fine condition, is it not?
Major POYET. Yes, sir.
Mr. QUIN. That building was put there for the purpose of standing
as long as any such construction could fairly be maintained in the
United States?
Major POYET. Yes, sir.
Mr. QUIN. Of a similar plant ?
Major POYET. Yes, sir.
Mr. QuiN. It is as good now to work in as the day it was finished ?
Major POYET. Yes, sir.
Mr. QUIN. How about the machinery in that plant, Major ?
Major POYET. It is in just as good condition to-day as it was the
day it was installed.
Mr. QUIN. The machinery has been kept oiled, lubricated, the rust
kept off of it, and everything?
Major POYET. Yes, sir.
Mr. QUIN. How about the obsolescence of it ; is it the same type of
machinery with the same type of patents it was operated on at the
time, at the present time?
Major POYET. Practically.
Mr. QUIN. You stated that $355,000 would be necessary to put that
iu a shape to commence work right now?
Major POYET. That is at plant No. 1, sir, and $100,000 at plant
Xo. 2 to put it in operation.
Mr. QUIN. It is plant No. 1 I am asking you about.
Major POYET. You are talking of plant No. 1.
Mr. QUIN. Yes: we have your description of plant No. 2 and at
plant No. 1—that is a different process.
Major POYET. I thought you were asking about plant No. 2.
Mr. QUIN. No; No. 1.
Major POYET. Some of the machinery at plant No. 1 would have
to be redesigned. Suppose I start on plant No. 1, now.
Mr. QUIN. Yes; that is what I am after, to get that description,
have it in the record now for plant No. 2, which is a different
process.
Major POYET. It is a different process.
Mr. QUIN. Now, Major, the buildings there are just as good
Major POYET. Yes; the buildings are there.
Mr. QUIN. Now, the machinery in that plant is in what fix {
Major POYET. The machinery as installed is in good condition, but
part of the machinery would have to be redesigned.
Mr. QUIN. On account of obsolescence?
Major POYET. No; on account that it was an experimental plant in
the first place. When the General Chemical Co. installed that plant
it was the first plant installed in the United States and they had some
German patent, but I do not suppose they got it all. You see, part
of the plant was a failure and that is the part which would have to
101229—30 11
158 MUSCLE SHOALS

be redesigned. Some of the machinerv could be utilized and other

machinery would have to be purchased, and the estimate to replace
that machinery is $355,000.
Mr. QUIN. Now, what is you judgment as to the time required to
put that in order, to turn out this product that we turn into
explosives ?
Major POYET. About a year, I should say.
Mr. QUIN. The other plant could turn it out right now?
Major POYET. Yes, sir.
Mr. QUIN. And you would be a year getting this in a fix to make
explosives ?
Major POYET. Yes, sir.
Mr. QUIN. What would be the capacity of this plant No. 1 ?
Major POYET. Twenty thousand tons per annum, sir.
Mr. QUIN. And the other is 110,000?
Major POYET. One hundred and ten thousand tons.
Mr. DOUGLAS. Twenty thousand tons of what?
Major POYET. Ammonium nitrate, sir.
Mr. QUIN. How much fertilizer in the ordinary forms used
throughout this country would that make?
Major POYET. You are talking about plant No. 1. You see, I have
no figures on plant No. 1, but it is practically one-fifth of the capacity
of plant No. 2. In view of the fact we could not operate plant No. 1
in the present condition, there would be no figures.
Mr. QUIN. It is one-fifth practically of the other ?
Major POYET. Of plant No. 2.
Mr. QUIN. What number of tons of fertilizer, ready to put on the
soil, would this plant No. 2 make?
Major POYET. Plant No. 2 would give us 2,500,000 tons of ferti
lizer—mixed fertilizer.
Mr. QUIN. As it stands there to-day ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Plant No. 2?
Major POYET. The capacity of plant No. 2 is the equivalent of
333,000 tons of Chilean nitrate, and that would provide 2,500,000 tons
of mixed fertilizer ready for use.
Mr. GAERETT. What per cent of nitrogen now? That is on a
certain per cent of nitrogen base, is it not?
Major POYET. Yes, sir : according to the amount that is contained
now in commercial fertilizers.
Mr. GARRETT. You know there are different forms; there are
8^-2 and 12-4-2.
Major POYET. I am not familiar enough to talk about fertilizer,
sir.
Mr. GARRETT. You mean the 2 per cent base ; you have to get your
base percentage there. You mean that will turn out the finished
product upon a fixed basis of nitrogen and the other ingredients,
making a complete fertilizer, have got to come in from other
sources ?
Major POYET. I could not tell you anything about fertilizer, sir;
I could not go into it.
Mr. QUIN. You are an expert, as I understand it, on the explo
sive proposition?
 MUSCLE SHOALS 159

Major POYET. Well, I am not an expert; I know something

about it.
Mr. QCIN. You are modest.
Mr. WAINWRIGHT. How many years have you been down there,
Major?
Major POYET. Sir.
Mr. WAINWRIGHT. How many years have you been in charge of
that plant?
Major POYET. I am in my ninth year, sir.
Mr. QUIN. You have been there practical!y ever since
Major POYET. Since 1921, sir.
Mr. QUIN. You were there before the dam was completed ?
Major POYET. Yes. sir.
Mr. QUIN. When was that dam completed, Major?
Mayor POYET. In 1926, finally.
Mr. QTJIN. How much of that power is being used now ?
Major POYET. I am not very familiar with that, sir. Captain
Riley. who has charge of the dam is here and is more familiar with
the dam than I am.
Mr. QUIN. The steam plant there is in first-class condition?
Major POYET. Yes, sir.
Mr. QDIN. The buildings are of permanent construction?
Major POYET. Yes; the steam plant is under lease to the Alabama
Power Co. and has been since 1921.
Mr. QUIN. They have some of the water lease, too—some of the
water?
Mayor POYET. Well, they had the Gorgas plant, but we sold out
the Gorgas plant.
Mr. QUIN. I mean they have some of the water at this dam?
Major POYET. Yes. sir. That is under the Engineer Department,
but the steam plant is under the Ordnance Department.
Mr. QUIN. So far as the outward appearances are concerned, both
of these plants are in first-class condition ?
Major POYET. Yes. sir.
Mr. QUIN. And if the Government wanted to, it could begin opera
tions under the terms—I mean so far as time is concerned—stated
by vou.
Major POYET. To make ammonium nitrate; yes, sir.
Mr. HILL. Major, I have no questions. I just want to say this,
that Mr. James and I were at Muscle Shoals the latter part of
October and the first of November, and were very much impressed
with the very fine condition in which we found the nitrate plant
under Major Poyet's supervision. The machinery, the equipment,
the housing, the grounds—everything connected with the Govern
ment's property down there seemed to be in the very pink of con
dition. In fact, we found it in such splendid condition that we
wrote the Chief of Ordnance and the Secretary of War a letter from
Muscle Shoals commending the fine way in which Major Poyet had
kept the Government's property at Muscle Shoals.
Major POYET. Thank you, sir.
Mr. COCHRAN. Major, have you heretofore, for the purposes of the
record, identified yourself—your connection with the plant?
Major POYET. Yes, sir.
160 MUSCLE SHOALS

Mr. STAFFORD. In the proposed manufacture of fertilizer, would

the nitrate plant No. 2, in its processes, have to be changed so that
it would not now be utilizable for the manufacture of powder in
case of need ?
Major POYET. Not that part, sir. What they would use, most
likely, at plant No. 2 would be the ammonium sulphate. They would
have to erect additional equipment.
Mr. STAFFORD. The interrogation point in my mind is as to what
change in manufacture would be required, or in the machinery op
erations, in case we went ahead with the manufacture of cyanamide
or any other necessary ingredient to make fertilizer, in case the
Government desired the plant for its own operation in case of emer
gency for the manufacture of powder. Do I understand there would
be no change in machinery at all in case the Government wished to
requisition the plant for the manufacture of powder; that it could
just go ahead with the manufacture of ammonium nitrate ?
Major POYET. We are not manufacturing powder there; we are
manufacturing explosives.
Mr. STAFFORD. Well, for the manufacture of explosives. Now you
are manufacturing ammonium nitrate?
Major POYET. Yes, sir.
Mr. STAFFORD. What further is necessary, then ; what is that used
for in the art of war, in the science of war ?
Major POYET. To explode the projectile or bomb.
Mr. STAFFORD. And it is not purposed to manufacture powder there
at all?
Major POYET. No, sir.
Mr. STAFFORD. Then, when you manufacture the ammonium ni
trate, it is a finished product so far as explosives are concerned?
Major POYET. Yes, sir.
Mr. STAFFORD. Now, assuming that condition, and that the Gov
ernment goes ahead and provides for the manufacture of cyanamide
or some other necessary ingredient to utilize ammonium nitrate for
the manufacture of fertilizer, is the plant given over for the manu
facture of ammonium nitrate in any way changed in the manufac
ture of fertilizer?
Major POYET. No, sir.
Mr. STAFFORD. So that they could immediately break off
Major POYET. Yes, sir.
Mr. STAFFORD (continuing). The manufacture of fertilizer and
utilize the Nitrate Plant No. 2 for the manufacture of ammonium
nitrate for explosive purposes?
Major POYET. Yes, sir.
Mr. STAFFORD. On what do you base your estimate of $3r>5.000 to
recondition nitrate plant No. 1?
Major POYET. Well, last August we had a training camp for re
serve officers at Muscle Shoals and these reserve officers were chem
ists, one of them especially who has been building that type of plant
in Europe. That is Colonel Brown of New York. And he made an
estimate of how much it would cost to modify plant No. 1.
Mr. STAFFORD. For the manufacture of what; under what process?
Major POYET. The Haber-Bosch process.
 MUSCLE SHOALS 101
Mr. STAFFORD. And are you acquainted with the Haber process, as
to whether it is an accepted process in the manufacture of am
monium nitrate or whatever it is?
Major POYET. Well, it is the more economical process; it is the
cheaper process.
Mr. STAFFORD. On what do you base that statement ?
Major POYET. The first thing is you do not need as much current;
you need very little power to use the Haber process.
Mr. DOUGLAS. But does not the capital investment for equipment
run higher for the Haber process?
Major POYET. It is less.
Mr. DOUGLAS. The capital investment?
Major POYET. Is less than the cyanamide plant.
Mr. DOUGLAS. I did not understand that to be the case.
Mr. STAFFORD. Where is the Haber process in successful operation
at the present time, if you know?
Major POYF/T. In Germany.
Mr. STAFFORD. How extensively is it used in Germany ?
Major POYET. Very extensively, I understand, sir.
Mr. STAFFORD. Is it under patents that they themselves control
exclusively and by a secret process, or are those processes available
to our engineers?
Major POYET. They are available to us, they are available now.
Mr. STAFFORD. Why do you say they are available? In your
Erefactory statement, you said when nitrate plant No. 1 was estab-
shed, you were not certain that the constructors knew all about
the German processes.
Major POYET. Well, but they experimented when they constructed
plant No. 1 and they found out what the trouble was.
Mr. STAFFORD. Who experimented?
Major POYET. The General Chemical Co.
Mr. STAFFORD. Do you know, authoritatively, whether the Gen
eral Chemical Co. now are of the opinion that they can manufacture
successfully according to the Haber process?
Major POYET. Well, I could not say for sure, but they are doing it.
Mr. STAFFORD. Where are they doing it?
Major POYET. I understand in Syracuse, N. Y., and Hopewell, Va.
Mr. STAFFORD. And what is the ultimate result in the manufacture
by the Haber process—ammonium nitrate?
Major POYET. I could not say what they are manufacturing, sir;
I have not been through their plant.
Mr. STAFFORD. Now, what is the product of the manufacture?
Major POYET. Ammonia gas; I suppose they make ammonia gas.
Mr. STAFFORD. Ammonia gas?
Major POYET. Yes, sir.
Mr. STAFFORD. You are not sufficiently acquainted to testify as to
the process of manufacture of ammonia gas by the Haber process?
Major POYET. No, sir.
Mr. STAFFORD. Or how ammonia gas is utilized afterwards for tho
manufacture of explosives or for fertilizer?
Major POYET. No, sir; I am not.
Mr. STAFFORD. The gentleman you referred to was a member of
the R. O. T. C.?
Major POYET. Colonel Brown.
162 MUSCLE SHOALS

Mr. STAFFORD. A chemical engineer?

Major POYET. Yes, sir.
Mr. STAFFORD. Whom you said you believe is qualified to testify
on that subject ?
Major POYET. Yes, sir.
Mr. STAFFORD. That is his special work?
Major POYET. Yes, sir.
Mr. STAFFORD. Do you know his name?
Major POYET. Yes, sir; Colonel Brown.
Mr. STAFFORD. What are his initials?
Major MILES. C. O.
Mr. STAFFORD. With what concern is Colonel Brown identified ?
Major POYET. They have a nitrogen engineering corporation.
Mr. STAFFORD. Where is that located?
Major POYET. New York, sir.
Mr. STAFFORD. Where is their place of manufacture located?
Major POYET. Well, they are not manufacturing; they are con
structing.
Mr. STAFFORD. They are construction engineers?
Major POYET. Yes, sir.
Mr. STAFFORD. And have they constructed any of these engineer
ing plants for the manufacture of ammonia gas by the Haber process
in America ?
Major POYET. Not in America, I understand; all in Europe.
Mr. STAFFORD. It is your opinion from what you have gleaned
from those representative experts that the manufacture of ammonia
gas by the Haber process is considerably cheaper than by the process
at Nitrate Plant No. 2?
Major POYET. Yes, sir.
Mr. STAFFORD. Have you any other persons that you would suggest
that are authoritatively informed on the process, who were members
of that committee who studied the systems down there last August
for a period of about two weeks?
Major POYET. I believe Colonel Brown can tell you more about it
than any others.
Mr. STAFFORD. I thought perhaps there were some other outstand
ing figures that impressed you as being very well versed in the art
of manufacture.
Major POYET. I was well impressed with Colonel Brown as being
the most capable to give us any information.
Mr. STAFFORD. You are not sufficiently versed in the conditions of
the water supply at Dam No. 2?
Major POYET. No, sir.
Mr. STAFFORD. What is the condition of the limestone quarry at
Waco ?
Major POYET. It is in good condition, sir, ready to operate. The
quarry has never been operated, but everything is there to operate.
Mr. STAFFORD. During those 90 days when nitrate plant No. 2 was
in operation, from whence did you get the limestone?
Major POYET. They purchased the limestone from a private quarry.
Mr. STAFFORD. Is there any railroad or other connection between
the Waco quarry and nitrate plant No. 2?
Major POYET. Yes, sir.
 MUSCLE SHOALS 163

Mr. STAFFORD. Steam operated, or electrically controlled?

Major POYET. Steam, sir.
Mr. STAFFORD. Have they locomotives and cars and everything?
Major POYET. Yes, sir.
Mr. STAFFORD. Is there any character of construction at Waco
quarry at all, or is it just merely a quarry ?
Major POYET. Well, there is the quarry, and we have a crusher
where we crush the rocks, and a storage bin and screen, and some
dwellings for some of the employees.
Mr. STAFFORD. You understand the quality of the limestone is of
a high grade at Waco 1
Major POYET. Yes, sir; it is.
Mr. STAFFORD. How near is any other quarry of limestone to the
nitrate plant, as compared with Waco?
Major POYET. About the same distance as the quarry; there is a
private quarry three miles from the Waco quarry.
Mr. STAFFORD. So that Waco is about as near a quarry as could be
obtained for limestone for the manufacture of amonium nitrate at
nitrate plant No. 2 ?
Major POYET. Yes, sir.
Mr. STAFFORD. How large a force is employed under your direction
in maintaining in status quo the nitrate plant No. 2 and nitrate plant
Xo. 1?
Major POYET. Well; it would average about 40 men the year
around.
Mr. STAFFORD. And have you any estimate as to the cost for the
maintenance ?
Major POYET. It costs $67,000 to maintain plant No. 2 and $16,000
to maintain plant No. 1.
Mr. STAFFORD. Most of that expense is occasioned by salaries and
wages?
Major POYET. Salaries, wages, and material, such as paint.
Mr. STAFFORD. Can you furnish a statement for the record of the
salaries paid to the respective officers for keeping up, in an upkeep
condition, those plants ?
Major POYET. Not right now.
Mr. STAFFORD. I mean for the record.
Major POYET. Yes, sir.
Mr. STAFFORD. I will ask that that be incorporated.
Mr. RANSLEY (presiding). It is so ordered.
Mr. STAFFORD. Have you any expense in connection with the
maintenance of the quarry ?
Major POYET. We have one caretaker, one man stationed there
permanently.
Mr. STAFFORD. At a small salary?
Major POYET. $1.500 per annum.
Mr. STAFFORD. This expense that you have just stated; of $67,000
and $16,000, respectively, for nitrate plant No. 2 and n1trate plant
No. 1, is independent entirely of any expense that the Engineer
Department pays for the maintenance of Dam No. 2?
Major POYET. Yes, sir; it is independent; entirely separate.
Mr. STAFFORD. Have you any acquaintance, from your connection
with plant No. 2. as to whether that process is being utilized by any
other plant, private or otherwise, in the manufacture of fertilizer?
164 MUSCLE SHOALS

Major POYET. Well, I understand the Cyanamid Co. is operating a

plant at Niagara Falls.
Mr. STAFFORD. Other than the Cyanamid Co.—and I may say that
we had before us for several days Mr. Bell, its president, to testify
as to its work—you know of no other company ?
Major POYET. Not here; not in the United States.
Mr. STAFFORD. Do you know of any company in any other country?
Major POYET. I heard that a cyanamide plant is established in
France and England, and some of those European countries.
Mr. STAFFORD. Do you know by what companies ?
Major POYET. No, sir; I do not.
Mr. STAFFORD. Do you know anything as to the extent of manu
facture in those countries by that process ?
Major POYET. I could not say.
Mr. DOUGLAS. I was not here when you gave your commission
or rank.
Major POYET. I am a warrant officer.
Mr. DOUGLAS. You are a warrant officer?
- Major POYET. Yes. sir; a warrant officer, United States Army.
Mr. DOUGLAS. And you are in charge of the plant at Muscle
Shoals?
Major POYET. Yes, sir.
Mr. DOUGLAS. You testified that it would require an expenditure
of $100,000 and a period of 60 days to place plant No. 2 in operation?
Major POYET. Yes, sir.
Mr. DOUGLAS. For the production of ammonia ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Is that right ?
Major POYET. Yes, sir.
Mr. DOUGLAS. How much in addition to the $100,000 would be re
quired as an expenditure to place plant No. 2, or to equip plant No. 2,
for the production of fertilizer in the form of cyanamide?
Major POYET. I am not qualified to testify on that, sir. It would
just be guesswork on my part.
Mr. DOUGLAS. But it would require, would it not, the installation
of electric arcs to fuse the nitrogen?
Major POYET. We have that, sir.
Mr. DOUGLAS. You have those electric arcs already installed?
Major POYET. Yes. sir.
Mr. DOUGLAS. So that the requirements in the way of machinery
would then be limited to the equipment necessary for the mixing of
the cyanamide with sodium carbonate, passing the steam, and for
the purpose of passing the ammonia, as a result of that product, over
the catalyts and nitric-acid plant?
Major POYET. Yes. sir.
Mr. DOUGLAS. And it is true, is it not, that the expenditure neces
sary to install the equipment to carry out those operations would be
a considerable one?
Major POYET. I do not quite get you—additional equipment?
Mr. DOUGLAS. You have not that equipment now ?
Major POYET. To make fertilizer?
Mr. DOUGLAS. No; you have not the equipment necessary for the
purpose of mixing cyanamide with sodium carbonate, passing the
steam over it and making ammonia.
 MUSCLE SHOALS 165

Major POYET. Yes, sir; we have.

Mr. DOUGLAS. You have that?
Major POYET. Yes, sir.
Mr. DOUGLAS. Have you the equipment for the manufacture of
nitric oxide?
Major POYET. Yes, sir. Pardon me; we have the equipment. It
takes platinum, but the platinum is stored in New York.
Mr. DOUGLAS. I understand—the catalyst.
Major POYET. Yes, sir.
Mr. DOUGLAS. And you have the nitric-acid plant?
Major POYET. Yes, sir. ,
Mr. DOUGLAS. So that you are thoroughly equipped for the man
ufacture of ammonium nitrate?
Major POYET. Yes, sir ; at plant No. 2.
Mr. DOUGLAS. At plant No. 2; yes.
Major POYET. Yes, sir.
Mr. DOUGLAS. I must have misunderstood your original statement.
I understood you to say it would require an investment of $100,000
and a period of 60 days to place plant No. 2 in a position in which
it could produce ammonia, but that is not true. It is ammonium
nitrate ?
Major POYET. Ammonium nitrate; or, you see, you have to make
your ammonia gas before nitrate.
Mr. DOUGLAS. Surely. Now, there is a good deal of difference
Major POYET. Of course, there is a good deal of difference.
Mr. DOUGLAS. Between ammonia and ammonium nitrate ?
Major POYET. But you have to make ammonia gas before you make
ammonium nitrate.
Mr. DOUGLAS. Yes ; but you also have to make nitric acid ?
Major POYET. Yes, sir.
Mr. DOUGLAS. And you have the nitric acid plant ?
Major POYET. Yes, sir.
Mr. DOUGLAS. So that the additional investment would be that
confined solely to the installation of equipment necessary to convert
the ammonium nitrate into whatever form of nitrogen fertilizer one
chose to use?
Major POYET. That is correct.
Mr. DOUGLAS. Is that correct?
Major POYET. Yes, sir.
Mr. DOUGLAS. And you have no idea what additional investment
would be necessary?
Major POYET. No, sir; I could not say for certain. It would be
just merely guesswork on my part.
Mr. DOUGLAS. And the $100.000 figure which you gave is the esti
mated cost as made by Colonel Brown ?
Major POYET. No ; that is my estimate.
Mr. DOUGLAS. That is your estimate?
Major POYET. Yes, sir.
Mr. DOUGLAS. You have already itemized those costs roughly for
the committee?
Major POYET. I furnished Mr. James a copy.
Mr. DOUGLAS. I think for the purposes oi this hearing the state
ment with respect to the items of cost is sufficient. It is mostly
belting.
166 MUSCLE SHOALS

Major POYET. Belting, oil, and cleaning up the motors.

Mr. DOUGLAS. It might be high, and it might be low ?
Major POYET. It might be high or it might be low.
Mr. DOUGLAS. But within reasonable limits, that is the estimate?
Major POYET. Yes, sir.
Mr. DOUGLAS. Now with respect to plant No. 1, you estimate, or
Colonel Brown estimates
Major POYET. Colonel Brown.
Mr. DOUGLAS. That an investment of $355,000 will be required to
equip it?
Major POYET. To redesign it. The process part has to be rede
signed. You see, the gas plant is all right ; we make blue water gas
from coke; then that blue water gas, which is carbon monoxide,
mixed with air, passed over a catalyst, is carbon dioxide. Then in
the process you have to scrub it, to eliminate the carbon and retain
only hydrogen and nitrogen, and the plant was designed for a
pressure of 100 atmosphere, and Colonel Brown said, if it was
redesigned, to change some of the machinery and make it up to 300
atmosphere, and that is the part of the plant that did not work,
to scrub out the carbon. Some claim the piping was too small and
could not stand the pressure. They would scrub that gas and have
an explosion, but this acid plant is in good condition; it could be
utilized. They did purchase some ammonia gas and made ammonium
nitrate.
Mr. DOUGLAS. They purchased ammonia gas and made ammonium
nitrate ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Now assuming plant No. 2 and plant No. 1 were
designed and equipped for the production of cyanamid, is there suffi
cient firm power susceptible of being developed at the generating
plant, including the steam standby plant, to produce forty to fifty
thousand tons of fixed nitrogen per year ?
Major POYET. There is.
Mr. DOUGLAS. There is sufficient firm power?
Major POYET. Sir?
Mr. DOUGLAS. Sufficient firm power?
Major POYET. That is hydro and steam combined ?
Mr. DOUGLAS. Including all of the generating plants you have ?
Major POYET. Yes, sir.
Mr. DOUGLAS. To produce 50.000 tons of fixed nitrogen?
Major POYET. Yes, sir.
Mr. DOUGLAS. Now fixed nitrogen?
Major POYET. Yes, sir; per year.
Mr. DOUGLAS. I am not talking about ammonia ; I am not talking
about ammonia nitrate.
Major POYET. I know.
Mr. DOUGLAS. I am not talking about cyanamide; I am talking
about fixed nitrogen.
Major POYET. Yes. sir. That is the full capacity of the plant—
50.000 tons of fixed nitrogen.
Mr. DOUGLAS. And you say there is sufficient firm power to pro
duce 50.000 tons of fixed nitrogen by the cyanamid process?
Major POYET. Yes, sir, that is, using hydro and steam power. At
low water, you may have to use steam.
 MUSCLE SHOALS 167

Mr. DOUGLAS. What is the maximum power developed, what is

the firm horsepower which can be developed both by the steam plant
and the hydro generating plants?
Major POYET. Well, there have been several opinions about it. I
-would prefer that you ask Captain Riley, who is in charge of Wilson
Dam. Captain Riley will tell you all about it and what he tells
you is the actual fact.
Mr. DOUGLAS. Between the two plants, No. 1 and No. 2, there is
a total productive capacity of 130.000 tons of ammonia per annum;
is that right ?
Major POYET. Ammonium nitrate.
Mr. DOUGLAS. Ammonium nitrate, yes,—or 110.000 tons at plant
No. 2?
Major POYET. Yes. sir.
Mr. DOUGLAS. And 20.000 tons at plant No. 1 ?
Major POYET. Yes. sir.
Mr. DOUGLAS. Is that correct ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Plant No. 1, however, being the plant in which
ammonium nitrate will be produced by the method other than the
cyanamid method?
Major POYET. Yes, sir.
Mr. DOUGLAS. Is that right ?
Major POYET. Yes, sir.
Mr. DOUGLAS. Would you translate, for my information, 130,000
tons of ammonium nitrate into tonnage of fixed nitrogen?
Major POYET. It is 50,000 tons of fixed nitrogen.
Mr. DOUGLAS. Fifty thousand tons of fixed nitrogen?
Major POYET. Yes, sir, and 5,000 tons at plant No. 1. Plant No. 1
is about one-fifth of the capacity of plant No. 2.
Mr. DOUGLAS. But between the two, 130.000 tons of ammonium
nitrate i
Major POYET. Yes, sir.
Mr. DOUGLAS. Corresponds roughly to 50.000 tons of fixed nitrogen?
Major POYET. That would be 55,000 with the two.
Mr. DOUGLAS. Fifty-five?
Major POYET. With the two.
Mr. DOUGLAS. And that is the maximum production ?
Major POYET. Yes, sir.
Mr. DOUGLAS. When it is pushed as hard as it can be pushed ?
Major POYET. Yes, sir.
Mr. DOUGLAS. So that to allow for a margin of safety, 50,000 tons
would be about correct; is that right?
Major POYET. Yes, sir.
Mr. DOUGLAS. Of fixed nitrogen?
Major POYET.' Yes, sir.
Mr. DOUGLAS. For my information, would you tell me about the
various methods of producing nitrogen for the purpose of manu
facturing either high explosives or fertilizer?
Major POYET. There is cyanamid and the Haber process, and I
believe they have an Italian process that is different. I am not
familiar with that.
Mr. DOUGLAS. Is that the arc process?
Major POYET. There is an arc process and the Casale process.
168 MUSCLE SHOALS

Mr. WAIKWRIGHT. Is there a Swedish process that uses urea that

is different entirely from the others?
Major POYET. I beg your pardon.
Mr. WAINWKIGHT. You mentioned urea. Is there a Swedish
process ?
Major POYET. To make urea they use the cyanamide process. They
use cyanamide to make urea, I understand.
Mr. DOUGLAS. Now, would you explain the difference between the
cyanamide process and the Haber process? The arc process, as I
understand it, is more or less obsolete.
Major POYET. Yes, sir.
Mr. DOUGLAS. So that it will not be considered, but as between
those two that have been enumerated, the cyanamide process and the
Haber process, would you explain the difference?
Major POYET. Well, I explained the cyanamide process a while ago.
Mr. DOUGLAS. Yes.
Major POYET. In the Haber process, the raw material is coke.
You burn the coke and pass steam through the coke to make blue-
water gas, or carbon monoxide, and you mix that carbon monoxide
with air and pass it through a catalyst, and you have carbon dioxide.
Then you scrub the carbon out and retain only the hydrogen from
the steam used to make your gas and the nitrogen fronl the air,
and by passing these two gases over a catalyst you have ammonia
gas.
Mr. DOUGLAS. You pass carbon monoxide over a catalyst?
Major POYET. Yes, sir.
Mr. DOUGLAS. And you produce carbon dioxide?
Major POYET. Yes.
Mr. DOUGLAS. Then you scrub carbon dioxide plus steam?
Major POYET. That is right.
Mr. DOUGLAS. And in association with a catalyst ?
Major POYET. Yes, sir.
Mr. DOUGLAS. And what is that catalyst ?
Major POYET. It is an iron catalyst, the first one.
Mr. DOUGLAS. An iron catalyst?"
Major POYET. Yes. sir.
Mr. DOUGLAS. And you get what—ammonia?
Major POYET. You mean the last catalyst?
Mr. DOUGLAS. Yes.
Major POYET. After you scrub out the carbon ?
Mr. DOUGLAS. Yes.
Major POYET. At plant No. 1, they use a kind of chemical cata
lyst, but I understand now that Doctor Cottrell uses iron.
Mr. DOUGLAS. I am not quite certain in my mind what the product
is after having passed carbon dioxide plus steam over a catalyst;
after having scrubbed out the carbon in connection with the cata
lyst, what is the product (
Major POYET. After you pass it over the catalyst?
Mr. DOUGLAS. Yes.
Major POYET. Ammonia gas.
Mr. DOUGLAS. From where do you get the nitrogen ?
Major POYET. You get it from the air, as you pass it over the
heat interchangers before it goes to the catalyst.
 MUSCLE SHOALS 169

Mr. DOUGLAS. What is the process of obtaining nitrogen from the

air?
Major POYET. You just draw it from the air direct.
Mr. DOUGLAS. In other words, it is a normal chemical reaction?
Major POYET. You just blow it through.
Mr. DOUGLAS. It is a normal chemical reaction between nitrogen
and the hydrogen of the air ; is that it ?
Alajor POYET. Yes, sir.
Mr. DOUGLAS. And that, in essence, is the difference between the
cyanamide process and the Haber process?
Major POYET. Yes, sir; after you get ammonia gas, that process
is the same as the cyanamide process.
Mr. DOUGLAS. Surely.
Major POYET. You pass the gas over a catalyst, and so on.
Mr. DOUGLAS. And from there on the processes are very much alike ?
Major POYET. Yes, sir.
Mr. DOUGLAS. The only difference between the processes is that
r.f the production of ammonia or ammonium dioxide?
Major POYET. I am not sure on that. I am not a chemist. I just
run across this down there ; I am not a chemist. If Doctor Cottrell
was to see that, maybe he would criticize me.
Mr. DOUGLAS. About this Haber process, do you know of any
installations in the United States, or has that question been asked?
Major POYET. It was asked.
Mr. DOUGLAS. There was one in Virginia
Major POYET. And in Syracuse. N. Y.
Mr. DOUGLAS. Do you know whether that is operating at a profit
to-day-?
Major POYET. I could not say, sir.
Mr. DOUGLAS. But that is the only one you know of in the United
States?
Major MILES. Most of these processes which are used in this coun
try for the manufacture of synthetic ammonia are a modified Haber-
Bosch process and they take the name of Claude, Casale, or the
names of the different means of modification of the original Haber
process made in Germany for a combination of hydrogen and nitro
gen manufactured into ammonia by passing it over a catalyst.
Mr. DOUGLAS. Now I will revamp my question slightly : Are there
any plants in the United States using the Haber process for the
commercial manufacture of fertilizer?
Major MILES. Yes; the plant at Hopewell, Va., of the Allied
Chemical & Dye Co.. to which Major Poyet referred, is now making
-sodium nitrate, which we feel ultimately will reach the fertilizer
market and is probably at this time reaching the fertilizer market.
Mr. WAINWRIGHT. We have heard so much about the plant at
Hopewell. Va.. starting three years ago, and that the plant to be
'leveloped by the Allied Chemical Co. was really going to put the
cyanamide process off of the map. Now do you know, Major, what
the condition of the operation of that Hopewell plant is—whether
the plans and the promises they made at that time have been realized,
M> that to-day they are either actually in process of turning out
nitrates, or are actually on the eve of turning them out?
Major MILES. Yes. I think it can be said they are turning out
successfully nitrates there by using the Haber-Bosch process; but it
170 MUSCLE SHOALS

can hardly be said to be displacing cyanamide, because cyanamide

does not really occupy a very important place in the general picture
of the production of fertilizer in this country.
Mr. WAINWRIGHT. It is nearly all Haber?
Major MILES. Well the fertilizers in this country—when you speak
of fertilizer, you speak of combinations of nitrogen and potash and
various other things known as plant foods, and the nitrogen content
itself is a very small part.
Mr. WAINWRIGHT. Is the Hopewell plant yet supplying the com
mercial market with fertilizer?
Major MILES. No, sir; it probably can not, but it does enter the
picture.
Mr. DOUGLAS. May I ask you a question now : You stated that the
American Cyanamid is a negligible factor in the production of com
mercial fertilizer—is not that approximately what you stated ?
Major MILES. Yes.
Mr. DOUGLAS. Is that due to the fact we import a great deal of
sodium nitrate from South America ?
Major MILES. That is a very determining influence.
Mr. DOUGLAS. Let me put the question in this way : To what extent
is the American Cyanamid Co. a factor in the production of synthetic
ammonia for the manufacture of fertilizer? What I want to do is
to find out how great a factor the American Cyanamid Co. is in the
field of manufactured ammonia for the purpose of making fertilizer.
I want to exclude the imported raw material mined in Chile anJ
shipped into this country. Do you see what I mean?
Major MILES. Yes. Well, figured on that basis, they probably
have a considerable percentage of the total fixed nitrogen used in
fertilizer.
Mr. DOUGLAS. In other words, the committee is considering
Muscle Shoals as a plant in which ammonia shall be manufactured
for the purpose of producing fertilizer and, since the American
Cyanamid Co. is in this picture with respect to Muscle Shoals and
since the Haber process is the process which is now, at the present
moment, being compared with that of the American Cyanamid
Co., it is only fair; is it not, to determine the extent to which the
American Cyanamul Co. is a factor in the particular field which
we are now discussing?
Major MILES. They should be considered; there is no question
about it.
Mr. DOUGLAS. And they are, within that field, quite a large factor?
Major MILES. Yes, because a good part of your nitrogen for in
corporation in fertilizer comes from the Chilean sodium nitrate.
Mr. DOUGLAS. Exactly.
Major MILES. The part that is actually manufactured in this
country that goes into fertilizer, the cyanamid part, would be a
considerable percentage.
Mr. DOUGLAS. Now have you any information with respect to the
relative merits of the Cyanamid Co., the process of the American
Cyanamid Co., and the Haber process? I know there are differences
and I know there are disadvantages to both and advantages to
both.
Major MILES. You have to reduce things of that character to »
dollars and cents basis, and on a dollars and cents basis there is no
 MUSCLE SHOALS 171

question but what synthetic ammonia can be manufactured more

cheaply than can ammonia by the cyanamid process.
Mr. DOUGLAS. On what do you base that ?
Major MILES. It is a well known fact in the nitrogen industry
that synthetic ammonia is produced at less cost than ammonia from
cyanamid.
Mr. DOUGLAS. Let us just analyze that for a moment; where there
is your cheap power, and power is, of course, essential to the Ameri
can Cyanamid process, does your conclusion still hold?
Major MILES. Yes, sir, it still holds.
Mr. DOUGLAS. What are the differences in cost, do you know—
the estimated differences in cost at Muscle Shoals ?
Major MILES. The work we did last summer indicated that am
monia from cyanamid could be produced at about 51/2 cents a pound.
Mr. DOUGLAS. By what process?
Major MILES. By the cyanamid process; whereas, we feel that
the No. 1 plant, if revamped in accordance with the way Major
Poyet has indicated, we could produce ammonia for from probably
4V2 to 5 cents a pound.
Mr. DOUGLAS. But does that take into account the differences in
depreciation? Your depreciation item on your Haber process is
much higher than your depreciation item on your cyanamide process,
is it not ?
Major MILES. I do not think so.
Mr. DOUGLAS. You do not think so ?
Major MILES. No? not materially; theirs is so much greater, the
capital investment is so much greater in the cyanamide process.
Mr. DOUGLAS. The cost of the power ?
Major MILES. Not entirely the cost of the power, but the cost of
the actual equipment installed. If there is any advantage in the
operation of the cyanamid equipment, you have so much more per
pound produced that the actual money necessary to take care of
obsolescence would probably be in favor of the. Haber-Bosch process.
Mr. DOUGLAS. Is it true, Major, that the cyanamide process is
replacing a good many of the Haber plants in Germany?
Major MILES. No, I do not think it is true. I think the cyanamide
plants are only remaining where the capital investment has already
been taken care of, so that in the cost of operation, as between turn
ing out cyanamide products on the one hand with existing equipment,
or putting new Haber-Bosch equipment which would have to be sub
sidized, you arrive at a point where you are willing to continue the
equipment which has the higher capitalization, which costs more to
operate than you are to put in new synthetic plants.
Mr. DOUGLAS. Are you a chemist (
Major MILES. No, sir, I am not. I studied chemistry, but I am
not what you would call a chemist.
Mr. DOUGLAS. Are you familiar with the fertilizer business?
Major MILES. Only as I rub noses with it in my work.
Mr. DOUGLAS. You have never actually been engaged in it?
Major MILES. I am an Army officer, consequently I am rather
restricted.
Mr. DOUGLAS. Major, could you answer my question with respect to
firm power ?
172 MUSCLE SHOALS

Major MILES. I can answer in this way. that the firm power
required to operate No. "2 plant is 90,000 kilowatts. The present
installation is 00,000 kilowatts. Therefore the river would only have
to be called upon for 30.000 kilowatts of firm power. Now, so far as
1 know, the river has never gone below that point; so that I can
answer in the affirmative, that there is firm power enough there to
operate No. 2 plant.
Mr. WAINWRIGHT. You mean 60.000 from the steam plant?
Major MILES. Yes; and in ordinary years there is enough power
from the hydro installation alone to operate No. 2 plant.
Mr. DOUGLAS. With respect to plant No. 1, is there sufficient firm
power ?
Major MILES. Yes.
Mr. DOUGLAS. Generated at the hydro stations and the standby
steam plant, assuming both plants, both plant No. 1 and plant No. 2
be equipped for the production of ammonium nitrate by the cyana-
mide process?
Major MILES. Yes.
Mr. DOUGLAS. To produce 50,000 tons per annum of fixed nitrogen ?
Major MILES. Absolutely ; no question.
Mr. DOUGLAS. There is enough firm power?
Major MILES. Yes; as a matter of fact, No. 1 has its own power
plant.
Mr. DOUGLAS. Yes.
Major MILES. It is capable of taking care of its own needs and No.
2 has 60,000 kilowatts out of the total of ninety to one hundred thou
sand needed, so that it is capable of taking care of itself except for
the thirty or forty thousand kilowatts needed.
Mr. HILL. The fact is that at the time nitrate plant No. 2 was
operated, it was operated entirely on steam power; the dam at that
time not having been built; is not that true?
Major MILES. Yes: but it was not operated at its full capacity.
Mr. HILL. One unit, I believe?
Major MILES. One unit. only.
Mr. DOUGLAS. Then why. Major, is the American Cyanamid Co.
willing to expend between twenty-five and thirty millions of its own
money to construct Cove Creek so as to stabilize the flow of the
Tennessee and so as to insure a sufficient supply of firm power for the
production of 50,000 tons of fixed nitrogen ? [Laughter.]
Major MILES. I am afraid if I went to answer that question I
would give some of my own bias to the situation.
Mr. DOUGLAS. Do you know
Mr. WAINRIGHT. We want to get an honest opinion from an Army
officer. Let us have it.
Mr. STAFFORD. Yes; let us have it.
Mr. DOUGLAS. Let me put the question this way. What is the
firm horsepower that can be developed at the generating station at
Muscle Shoals?
Major MILES. Well that would be purely hearsay as regards the
hydropower at Dam No. 2, and I think Captain Riley, who is here
in the room, ought to answer that question for you; but I well
remember a visit which I made to Muscle Shoals two or three years
ago, when the then commanding officer told me what firm power he
believed could be developed there, and it was astonishingly low.
 MUSCLE SHOALS 173

Mr. DOUGLAS. Astonishingly low ?

Major MILES. Yes; not the normal firm power you would expect
from year to year, but the possible firm power which you had in a
very low stage.
Mr. DOUGLAS. And of course that is the only power that is firm
power.
Major MILES. It is for argument purposes; but, for actual manu
facturing purposes, you can take the average year with very great
propriety.
Mr. DOUGLAS. If you will permit it to enter into an interlocking
agreement with the Alabama Power Co., so as to insure a supply
of power for the years in which there is a deficiency in certain
seasons.
Major MILES. As long as you have your steam plant No. 2 which
will produce the horsepower which you need to operate the nitrate
plants, and vou know the water power has never fallen below 30,000
kilowatts, why do you need to worry about power so much?
Mr. DOUGLAS. Let us get at it this way. What is the kilowatt con
sumption per ton of fixed nitrogen by the American Cyanamid
process ?
Major MILES. Well, I hesitate to give figures of that character.
Mr. DOUGLAS. Then, Major, if you do not know
Major MILES. I can find those figures, but I am not going to give
a lot of figures here and get myself all tied up.
Mr. DOUGLAS. If we do not know the kilowatt consumption neces
sary to produce a ton of fixed nitrogen
Major MILES. We do know, but I do not know it.
Mr. DOUGLAS (continuing). And do not know the firm power at
Muscle Shoals, how can we say there is or is not sufficient firm power?
Major MILES. We do know how much is necessary. I have figured
it out, but I may figure out two and two are four and to-morrow I
may not be able to figure out that two and two are four, but know
that some set of figures do give me two and two are four. It is
a rather abstruse proposition involving the production of cyanamidei
Frst, you have your power. I do know this, that it takes two to
three times as much power to produce by the cyanamide process as
it does by the synthetic ammonia process, but the figures do not run
in my mind. It runs in my mind that it is 3,200 kilowatts a ton of
cyanamide.
Mr. DOUGLAS. And that is what—Ca?
Major MILES. CaCN2.
Mr. DOUGLAS. So that would be very close to 7,500 kilowatts per
ton of fixed nitrogen, would it not, somewhere in that vicinity
anyway ?
Major MILES. Yes: approximately that. I can get you those
figures in due time if you will give me the opportunity, but I
hesitate to furnish you with figures out of my head when I have not
thought about them for some months.
Mr. WAIJJ WRIGHT. Suppose you get them and put them in the
record.
Mr. STAFFORD. How long would it take you to furnish those
figures ?
Major MILES. I can get them in 15 minutes.
101229—30 12
 174 MUSCLE SHOALS

Mr. DOUGLAS. On the basis of your computation of kilowatts re

quired per ton of cyanamide, approximately 353,000,000 kilowatts of
firm power would be required to produce 50.000 tons of fixed nitrogen.
Major MILES. Well, I gave you the wrong figures is the answer to
that if your computations are right.
Mr. WAINWRIGHT. I would like to ask one question, and maybe
it can be developed in Major Miles's testimony: Do you have a
scheme of mobilization of that plant? I mean to say if it was
necessary for you to go into manufacture up to the capacity of that
plant you have a plan entirely developed, and you can tell us how
many men it will take and how much it will cost to run per year?
Major MILES. Yes, sir; Major Poyet keeps that on tap at all
times.
Mr. WAINWRIGHT. I will ask the major, then? if he has it, how
many men are called for in the plan of mobilization to put that
plant into actual operation?
Major POYET. The plan of mobilization provides for approxi
mately 1,500 men.
Mr. WAINWRIGHT. At what expense?
Major POYET. The first year it would be about $8.000.000. Of
course, it is just merely an estimate. We may not require 1.500
men.
Mr. WAINWRIGHT. That is for plant No. 2?
Mr. POYET. That is for plant No. 2.
Mr. WAINWRIGHT. Suppose the Ordnance Department undertook
to put both plants in operation, how much would it take?
Major POYET. The plant No. 1 would require approximately 100
men.
Mr. WAINWRIGHT. Are you all cleared on your patent rights on
both processes, so that the Government, if it so desired, could go right
in and start to operate?
Major MILES. We are not clear on the Cyanamid Co.'s; we are not
clear on plant No. 2, but we will be clear in two or three years now,
and as far as the Haber-Bosch process is concerned there are no
patent difficulties there that I know of.
Mr. WAINWRIGHT. When the plant was in actual operation it was
operated under the direction of the Air Nitrates Corporation, which
is practically the American Cyanamid Co. ?
Major MILES. Yes, sir.
Mr. WAINWRIGHT. But the personnel for the operation of the plant
was entirely supplied by the War Department, was it not ?
Major MILES. No ; I do not think so.
Major POYET. They just had an observer there, Colonel.
Major MILES. The Government only had an engineering force
there, sort of a supervisory force, which assisted the Air Nitrates
Corporation in making the tests here and there, because it was recog
nized, especially at No. 1, not at No. 2, that changes were necessary.
At No. 2 they were well able to take care of the scene themselves.
Mr. WAINWRIGHT. The Air Nitrates Corporation or the War De
partment?
Major MILES. The Air Nitrates.
 MUSCLE SHOALS 175

Mr. WAINWRIGHT. Did they employ all of their own technical

assistants ?
Major MILES. Yes, sir.
Mr. WAINWRIGHT. And supplied all of the labor required them
selves?
Major MILES. Yes, sir. At No. 1 the United States maintained
sort of an engineering force who assisted in some operations. I
suppose the people who were operating it thought they interfered,
but at any rate it was an attempt to cooperate in an effort to get an
entirely new process into operation, and in doing that the War
Department did have a force of engineers and chemists at No. 1
plant.
Mr. WAINWRIGHT. All I was attempting to bring out was that
to-day you would be in a position, if you had to, to go in and operate
those two plants with the two processes ?
Major MILES. Oh, we could do it absolutely, without any question.
Mr. DOUGLAS. For the production of what?
Major MILES. For the production of the militarv requirements ; or,
as a matter of fact, the operation on any basis. l"here is nothing to
worry about.
Mr. DOUGLAS. But the investment would be greater if you went in
for the operation of the plants for the production of something other
than high explosives ?
Major MILES. Oh, yes. You would have to decide, first, what you
were going to make. After deciding that, you would have to decide
what modifications would be necessary.
Mr. WAINWRIGHT. Major, you have been here during the entire
examination of Major Poyet, and you have no comment you desire
to make on any of the testimony he has given this committee, have
-you?
Major MILES. No; I think his .testimony has been very good and
very much to the point.
Mr. WAINWRIGHT. And very accurate?
Major MILES. Yes, sir.
Mr. STAFFORD. Have you any estimates in the department as to
the additional investment required to manufacture these adjunct
chemicals like cyanamide for the manufacture of fertilizer?
Major MILES. No, sir ; we have not. In the Ordnance Department,
to which Major Poyet and I are assigned, we do not make estimates
of that character, because we have to know what you want to do,
first. If you could tell us what your idea was, then we can make
up estimates ; but to attempt to enter the fertilizer field in its rami
fications and to give estimates as to what the costs would be, with
out first knowing what you are going to make, it would be just
like—well, it would be very poor information.
Mr. STAFFORD. What equipment is necessary to the manufacture of
fertilizer if the committee should decide that the Haber process is the
superior one, as you have testified, as far as costs are concerned?
Major MILES. Well, the nitrogen which goes into fertilizer is a
very small part of the total fertilizer: therefore, the cost of manu
176 MUSCLE SHOALS

facturing the nitrogen, as far as it affects the manufacture of a

complete fertilizer, is a very small item. Consequently, if you manu
facture your nitrogen by the cyanamide process, or if you manufac
ture it by the Haber-Bosch process and then put it into fertilizer, by
the time you get your fertilizer made it does not make a whole lot
of difference in the cost of the finished fertilizer, because the nitrogen
content is small, and as it is small, the cost of the nitrogen plays a
correspondingly small factor in the total cost of the fertilizer. I
do not know whether I have answered your question, or not.
Mr. STAFFORD. Have you any estimate or is anyone qualified to
give an estimate as to the proportionate cost of the nitrogen in the
finished product of fertilizer?
Major MILES. Yes. sir; there are plenty of people in the country
who are qualified to do it.
Mr. STAFFORD. Is this Colonel Brown qualified?
Major MILES. Colonel Brown is eminently qualified to give you
information of that character.
Mr. WAINWRIGHT. And Professor Cottrell could?
Major MILES. Doctor Cottrell could. There are plenty of people
in the Department of Agriculture ; we could in the Ordnance De
partment ; but I think you should get it from some source which
thinks in terms of fertilizer continuously. We think of it from the
military point of view and only get into fertilizer incidentally. I
can assure you the cost of nitrogen in fertilizer is not a tremendously
important factor by the time you get the full fertilizer bill.
Mr. WAINWRIGHT. From a military standpoint, how quickly could
you put those plants in operation if you had to ?
Major MILES. Major Poyet has given a pretty good estimate. I
am like all the people who consider a technical proposition of that
kind. My mind might be slightly different from Major Poyet's but,
essentially, he has given you a time, I believe, somewhere between
3 and C months for No. 2 plant and somewhere between 6 months
and a year for No. 1, which I think is a pretty good estimate.
Mr. "WAINWRIGHT. Have you identified yourself for the record?
Major MILES. F. H. Miles, jr., Ordnance Department, United
States Army.
Mr. WAINWRIGHT. And your connection with this plant is what ?
Major MILES. I have charge of the section which has the nitrate
plants in tow ; in other words, I am the nitrate section of the Ord
nance Department, so-called, and Major Poyet is our representative
011 the ground at Muscle Shoals.
Mr. WAINWRIGHT. So that, so far as the Ordnance Department
is concerned, you are the representative of the Ordnance Depart
ment in immediate charge of these plants?
Major MILES. Yes, sir.
Mr. WAINWRIGHT. Were you in charge of this field trip that has
been referred to here?
Major MILES. Yes, sir.
Mr. WAINWIJIGHT. Of those men who made their 15 days' training
at Muscle Shoals?
Major MILES. Yes. sir; I was at Muscle Shoals with that party
last summer.
 MUSCLE SHOALS 177

Mr. RANSLEY. You are in charge, Captain, of Dam No. 2 and the
power plant?
Captain RILEY. I am military assistant to the district engineer at
Chattanooga and, in such position I have been assigned as com
manding officer of the Wilson Dam, which constitutes the operation
of the power plant, known as Dam No. 2, and the river and harbor
works of the Tennessee River in that vicinity.
NITRATE PLANTS, ALABAMA

Since July 1, 1922, the annual allotment for the maintenance of the plants
has been :
Plant No. 1.------------------------------------------------------- $16,000
Plant No. 2 and Waco Quarry------------------------------------- 67,000

Total allotment for the 3 plants----------------------------- 83, 000

with the exception of $10,000 revoked during the fiscal year 1927 and allotted
to Picatinny Arsenal, for the rehabilitation purposes.
Plant No. 1 and Waco Quarry are administered as subposts of Plant No. 2.
ADMINISTRATION SECTION

Designation |Perannum Total

1 accountant-------------------------------------------------------------------- $3,200 $3,200

| clerk-typist-------------------------------------------------------------------- - 1,380 1,380

Note.—There is stored at plant No. 2, construction records of nitrate plants 1, 2, 3, and 4, and the Gorgas
Steam plant. This section, since 1921, has cleared suspensions in excess of $40,000,000 against former dis
łºf officers. It is necessary to refer continually to these records in order to protect the interests of the
United States against claims, etc.
PLANT PROTECTION-PLANT NO. I

Designation Perannum Total

------------------------------------------------------------------------- si, so 00 sl, sco o

lfirefighter chauffeur 1,560.00 1,560.00
2 police and fire fighters. 1,500.00 3,000.00
*--------------------------------------------------------- 939.00 939.00
*ers-------------------------------------------------------- 1,001.60 2,003. 20
Purchase of water------------------------------------------------ 938.96 938.96
Purchase of paints and miscellaneous supplies................................... 516. 16 516. 16

PLANT PROTECTION.—PLANT NO. 2

* pºlice foreman (also in charge of roads, grounds, sanitation, animal transporta

tion, and fire department) $2,160.00
| firefighter chauffeurºl- - - 1,740.00
#Pºlice and fire fighters--------------------------------------------------------- 1,500.00 6,000.00
1 blacksmith (also performs the duties of saddler, nter, shoeing of horses
and mules, repairs to wagons, graders, files saws, etc.).------------------------ 1,627.60 1,627.60
# laborers 1,001. 60 4,006. 40
1 Janitor.....I.I.I. ------------------------------------------------------------ 1,001.00 1,001.60

}*Per------------------------------------------------------------------ 2,300.00 2,300.00

1 laborer 1,252.00 1,252.00
500.00 500.00

Søre.-There is stored at plant No. 1 serviceable property valued at $250,000 and at plant No. 2,
º,000; making a total of $3,750,000. Since the withdrawal of the Ford offer, surplus property to the
º:ºirs has been sold or transferred to other Government establishments. See appendix
178 MUSCLE SHOALS

WATER AND SEWER DEPARTMENT

Designation - Per annum Total

1 foreman (electrical engineer, also pump and filter operator, makes repairs to
batteries, etc)----------------------------------------------------------------- $2,600.00 $2,600.00
1 chemist, junior (analysis of water, etc., also pump and filter operator)- 2,600.00 2,600.00
I pump and filter operator 1,800.00 1,800.00
1 laborer--- 1, 252.00 1, 252.00
Supplies--- 114.67 114.67

MAINTENANCE DIVISION

1 plant engineer (also foreman, machinist, draftsman, etc.)----- 3, 200.00 3, 200.00

1 machinist (lathe and bench man) 2,128.40 2, 128.40
1 electrician (also lineman) 2, 128.40 2, 128.40
1 steamfitter------------- 2, 128.40 2, 128.40
1 painter-------------------- 1,878.00 1,878.00
2 carpenters (general utility)--------- 1,815.40 3, 630.80
1 repairman, auto (also chauffeur)---- 1,627.60 1,627.60
6 laborers---------------------------- 1, 252.00 7, 512.00
7 laborers-------------------------- 1,001.60 7,011. 20
Paints and miscellaneous ºl. ------------------- 4, 909. 70
1 consulting engineer (2 weeks), salary and expenses 484.91

The plants are minutely inspected, annually, by a disinterested Civil En

gineer; who makes report to the Chief of Ordnance, as to the condition of
machinery, buildings, and equipment and makes necessary recommendations.
In addition to the above, the plants are inspected annually, by an officer of
the Inspector General's Department and by the Chief of Ordnance or an officer
from his office.
All machinery is opened, annually, and greased and revolved in bearings; to
prevent rust. Motors have all been disassembled and sprayed with insulating
varnish to prevent the absorption of moisture.
Waco Quarry: One policeman (caretaker), $1,500.
Total, for nitrate plants 1 and 2 and Waco Quarry, $82,491.
When work is required at plant No. 1 or Waco Quarry, the maintenance
force at plant No. 2 is employed.
Respectfully submitted,
A. Poyet,
Warrant Officer, U. S. Army, Commanding.

APPENDIX A

Statement showcing value of property transferred to other Government estab

...;
activities
also revenue from sales, and collections from revenue producing

Transfers:
Engineer department, Wilson Dam----------------------- $2,173, 303.04
Fort Benning, Ga 405, 371.28
Department of Agriculture- 330,075.50
-

Air Corps, Scott Field --- 1, 722. 15 ---

New York general intermediate depot--------------------- 1,400.00

Birmingham district ordnance office----------------------- 728, 85
Department of Justice, Atlanta, Ga----------------------- 5,000.00
United State Military Academy, West Point, N. Y________. 37,750.59
Camp Jesup, Ga. 78, 202.13
Rock Island Arsenal 12, 340.00
-

Frankfort Arsenal 1,724.25

Picatinny Arsenal ------- 231, 423.64
Chief of Ordnance, Washington, D. C.--------------------- 718.00
Fort Bragg, N. C_ ---- 212, 224.58 -

Fort Oglethorpe, Ga 2,617.35 ----

Augusta Arsenal, Ga-- -- 200.00

Savanna Proving Ground-------------------------------- 17,438.05
Erie ordnance depot- --- 270.00
Curtis Bay ordnance depot.------------------------------ 6,844.00
Raritan Arsenal * 14, 563. 20
 MUSCLE SHOALS 179

Transfers—Continued.
Pig Point ordnance depot.--------------------------------- $245.00
Delaware ordnance depot 13,409. 14
Camp Knox, Ky --- ---------- 9, 529. 53
Maxwell Field------------------------------------------- 2,500.00
Charleston ordnance depot------------------------------- 15, 855. 34

Total ----------- - 3, 575,455.62

Sales:
Sale of Gorgas steam plant to Alabama Power Co---------- 3,472, 487.25
Condemned property----------------------- -- 107, 586.83

Total ------------------------------------------------- 3, 580,074.08

Revenues
Revenues from rental of steam plant, dwellings, railroad
track, farm lands, etc.---------------------------------- 2,081, 188. 13

Total revenue Feb. 28, 1930--------------------------- 9,236,717.83

Information concerning cost of erection of plant No. 2, and revenues received

in connection there with
Construction cost:
Nitrate plant No. 2 (less cost of steam plant)------------- $57,049, 785.26
Steam plant (60,000 kilowatts or approximately 90,000
horsepower) ------------------------------------------ 12,627, 103.80
Gorgas steam plant (30,000 kilowatts or approximately
40,000 horsepower)--------------------- - 4, 852, 389.59
Waco Quarry (near Russellville, Ala.)------------------- 856, 476. 88

Total cost----------------------------- ------------ 75, 385, 755.53

Revenues:
Sales—
Gorgas steam plant to Alabama Power Co.------------ 3,472, 487.25
Surplus and condemned property--------------------- 107,572.00

3, 580,059.25
Revenues from rental of steam plants, dwellings, rail
road, etc.------------------------------------------ 2,039, 365. 02
Transfers, property shipped to other Government depart
ments------ 3, 527,953. 43

Nov. 1, 1929, total revenues--------------------------- 9, 147, 377.70

The steam plant is under lease to the Alabama Power Co., at a flat rental of
$120,000 per annum, plus $0.002 per kilowatt-hour for all current delivered to
their transmission line.
Amount allotted per annum for the maintenance of nitrate plant No. 2 and
Waco quarry is $67,000. It can be readily seen that nitrate plant No. 2 is of
no expense to the Government, but the revenue received exceeds the amount
allotted for maintenance.
Capacity of plant: One hundred and ten thousand tons ammonium nitrate,
Per annum. Ammonium nitrate mixed with 20 per cent T. N. T. makes amatol;
which will supply necessary explosives for an army of 30 divisions or approx
imately 1,500.000 men.
Capacity of plant: Fifty thousand tons fixed nitrogen, which is the equivalent
:ertilizer.
i.” tons Chilean nitrate, and would supply 2,500,000 tons of mixed
Time required to place plant in operation, 60 days.
Amount required to place plant in operation, installing belting, lubri
Cating machinery, drying motors and equipment, filtering oil in trans
formers, etc.----------------------------------------------------- $46, 500
Repairs of raw material trestles-- -- 9.500
Repair of railroad tracks------- 20,000
Unforeseen contingencies 24, 000
 180 MUSCLE SHOALS

Estimated post, over a period of 10 months for maximum operation ami

completion of new construction :
First month .$081,406.77 Seventh month $679,669.12
Second month 752. 294. 04 Eighth month 646. 335. 7O
Third month 717.223.42 Ninth month 646,335.79
Fourth month 679, 669. 03 Tenth month 646,335.79
Fifth month 679,669.03
Sixth month 679,669.03 Total 6.808,607.00
NOTE : These figures were partly obtained from records during test period of
the plant. It is believed that with an efficient administration the cost may be
materially reduced.
REPORT SHOWING TYPE OF CONSTRUCTION OF BUILDINGS AND EQUIPMENT AT
UNITED STATES NITRATE PLANT No. 2, NITRATE PLANT, ALA.
ELECTRICAL-SWITCH RUILDING, 50 RY 160 FEET

Brick construction, Barrett 20-year gravel roof on concrete foundation, with,

concrete floors.
Equipment : Panel boards, complete, Westinghouse ; oil circuit breakers,
Westinghouse ; 12 transformers. General Electric Co. ; two 200 kilowatt motor
generator sets, General Electric Co.
LIMEKILN RUILDING, 200 RY 240 FEET

Steel construction, 20-year Barrett specification roofing on 1%-inch rein

forced concrete slabs ; floor, 4-iuch concrete ; foundations, concrete ; walls, cor
rugated iron.
Equipment : Seven limekilns, 8 by 125 feet, 3 Reeves Bros, and 4 Allis
Chalmers; lime coolers, rotary, 5 by 50 feet, 3 Reeves Bros, and 4 Allis
Chalmers ; electric motors, General Electric Co. ; electric conveyors, Stephens
Adnmson Co., Robbins Conveyor & Belt Co., Jeffrey Manufacturing Co., and
H. W. Caldwell & Sons.
COAL-MILL RUILDING, 50 RY 120 FEET

Steel construction, 20-year Barrett specification roofing on 1%-inch rein

forced concrete slabs ; floor, 4-inch concrete ; foundation, concrete.
Equipment: Two 4i/j inch by 42 foot Fuller Lehigh rotary dryers: one 24
by 24 inch Jeffery crusher ; four 42-inch Fuller Lehigh coal pulverizers ; mo
tors. General Electric Co. ; elevators and conveyors, Jeffrey Manufacturing Co.,
Stephens Adamson Co., Robbius Conveyor & Belt Co., H. W. Caldwell & Sous.
RAW-MATERIAL RUILDING, 50 RY 100 FEET

Steel construction, hollow-tile walls, 20-yoar Barrett specification roofing on

1%-lnch reinforced concrete slabs; floor and foundation of concrete.
Equipment : Silos, 8 reinforced concrete ; elevators and conveyors. Stephens
Adamson Co., Robbins Conveyor & Belt Co., Jeffrey Manufacturing Co., and
H. W. C'aldwell & Sons ; weighing equipment. Schnffer Engineering Co. and
American Auto Scales Co.; motors. General Electric Co.
CARRIDE-FURNACE RUILDING, 00 RY 9M> FEET

Steel construction, 20-year Barrett specification roofing on 1%-inch rein

forced concrete slabs; siding of corrugated iron; floor, concrete; foundation,
concrete.
Equipment: Thirty-six Chislen-Moore electrode hoists; electrode heads, Na
tional Anode Co.; motors, General Electric Co.; narrow-gage electric locomo
tive, Goodman Manufacturing Co. ; blowers, American Blower Co. ; transform
ers, General Electric Co.; conveying equipment, Robbins Conveyor & Belt Co.;
buss bars and cable. Detroit Copper & Brass Roll Mill Co.; 4"electric cranes.
Shepard Crane Co.; 12 track scales, Benningtou Scale Co.; 500 chill car bodies,
Central Foundry Co.
 MUSCLE SHOALS 181

ELECTRODE SHOP 90 RY 100 FEET

Steel construction, 20-year Barrett specification roofing on reinforced con
crete slab : corrugated iron siding ; floor, concrete ; foundation, concrete.
Equipment : Blower, American Blower Co. ; hoist, Yale & Towne ; hoist,
Chislen-Moore.
CARRIDE COOLING SHED, 50 RY 950 FEET

Steel construction, 20-year Barrett specification roofing on reinforced con

crete slab ; floor, brick, laid in cement mortar ; foundation, concrete ; corru
gated-iron siding.
Equipment : Two 20-ton Whiting electric cranes, Whiting Foundry & Ma
chine Co.
CARRIDE-MILL RUILDING, 120 RY 150 FEET

Steel construction, walls of hollow tile; floor, concrete; foundation, concrete;

roof, Barrett 20-year specification on reinforced concrete slab.
Equipment : Crushers, three 42-inch Buchanan ; mills, three by 4 by 10 foot
Hardings; mills, three 7 by 25 foot Swidth tube; elevators and conveyors,
Stephens Adamson & Co., Jeffrey Manufacturing Co., Robbins Conveyor & Belt
Co.. and H. W. Caldwell & Son ; motors, General Electric Co.
LIME-NITROGEN OVEN RUILDING, 250 RY 520 FEET

Steel construction, Barrett 20-year specification roofing on reinforced con

crete slabs ; walls of hollow tile ; floor, concrete ; foundation, concrete.
Equipment : Three charging cars, S. D. Wright Co. ; 3 discharging cars, S. D.
Wright Co. ; ovens, Stacey Bros. Construction Co. ; motors, General Electric Co. ;
transformers, General Electric Co.; oil-circuit breakers, Westinghouse ; con
veyors, H. W. Caldwell & Son ; five 5-ton Toledo electric cranes, Toledo
Crane Co.
LIME-NITROGEN COOLING SHED, 50 RY 350 FEET

Steel construction, Barrett 20-year specification roof on reinforced concrete

slab; corrugated iron wall; floor, brick, laid in cement mortar; foundation,
concrete.
Equipment : Two 20-ton Whiting electric cranes, Whiting Foundry & Ma
chine Co.. 3 Shepard jib cranes ; 113 cooling trays, W. B. Scaife & Sou.
LIME-NITROGEN MILL RUILDING, 120 RY 1B0 FEET

Steel construction, roof, Barrett 20-year specification on reinforced concrete

slabs ; walls of hollow tile ; floor, concrete ; foundation, concrete.
Equipment : Three 42 -inch Buchanan crushers ; three 4 by 10 foot Hardinge
mills : three 7 by 25 foot Swidth mills ; motors. General Electric Co. ; conveyors,
H- W. Caldwell & Con, Jeffrey Manufacturing Co., Robbins Conveyor & Belt
Co., and Stephens Adamson & Co.
LIQUID-AIR RUILDING, 100 RY 575 FEET

Steel construction; roof Barrett 20-year specification on reinforced concrete

slab ; floor, concrete ; foundation, concrete.
Equipment : Eight positive-pressure blowers, P. H. & F. H. Roots ; 1C soda
towers, Stacey Bros. Construction Co. ; 10 service air compressors, Sullivan
Machinery Co.: 16 process 3-stage compressors, Xorwalk Iron Works; 14 proc
ess 3-stage compressors, Ingersoll-Rand Co., 40 synchronous motors, General
Electric Co. ; 30 nitrogen columns, Air Reduction Co. ; 30 expansion engines,
Nordbger type; 9 power transformers, General Electric Co.; two 200-kilowatt
motor-generator sets, General Electric Co. ; one 20-ton electric Whiting crane ;
one 5-ton electric Toledo crane.
SILO RUILDING, 56 RY 39 FEET

Steel construction ; roof 20-year Barrett specification on 2-inch yellow pine

decking ; floor, concrete ; foundation, concrete ; walls of concrete, supported by
steel structure.
182 MUSCLE SHOALS

Equipment: Motors. General Electric Co.

Elevators and conveyors: H. W. Caldwell & Son. Robbins Conveyor & Belt
Co., Stephens Adamson & Co., Jeffrey Manufacturing Co.
Nine silos of concrete.
HYDRATING RUILDING, 50 RY 83 FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slabs, floor concrete, foundation concrete.
Equipment: Motors, General Electr'c Co.; 3 hydrating silos, Stephens Adam-
son & Co. ; hydrators, Gilford Wood Co. ; elevators and conveyors, H. W. Cald
well & Son.
PROCESS ROILER HOUSE, 4lj RY 120 FEET

Steel construction, roof 20-year Barrett specification on reinforced concrete

slabs. Floor concrete, foundation concrete.
Equipment: 4 Boilers, Babcox & Wilcox ; 8 pumps, Epplng & Carpenter;
4 draft blowers, Sturtevant Stokers, Westinghouse, Taylor Elevating & Con
veying Co., Jeffrey Manufacturing Co.
AUTOCLAVE RUILDING, SO RY 250 FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slabs. Walls, hollow tile, floor concrete, foundation concrete.
Equipment: 56 Autoclave, M. W. Kellog Co.; motor, General Electric Co.;
transmission, Jeffrey Manufacturing Co. ; elevators and conveyors, H. W. Cald
well & Son ; distilling unit, E. B. Badger & Sons Co.
FILTER RUILDING, IS0 RY 1GO FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slab. Wall, hollow tile, floor concrete, foundation concrete.
Equipment: Twenty 6 by 3 feet rotary filters, International Pilterative
Co. ; 3 vacuum pumps, Ingersoll Kand Co. ; 26 centrifugal pumps, Gould Man
ufacturing Co. ; elevators and conveyors, H. W. Caldwell & Sons Co., Jeffrey
Manufacturing Co., and Goodyear Tire & Rubber Co.; motors, General Electric
Co. ; tanks, the Dorr Co.
CATALYZER RUILDINGS (6), 50 RY 210 FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slabs. Walls hollow tile, floor concrete, foundation concrete.
Equipment: Meters, gas. Superior Meter Co. ; 606 aluin'uum catalyzer towers,
Aluminum Co. of America ; motors, General Electric Co.
NITRIC ACID RUILDING, 200 RY 600 FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slabs. Walls corrugated iron, floor acid-proof brick on concrete foundation
concrete.
Equipment: 24 absorption towers, Chemical Construction Co.; 120 acid lifts,
Chemical Construction Co. ; motors, General Electric Co.
NEUTRAI.1ZER RUILDING, 91 RY IS0 FEET

Steel construction, roof Barrett 20-year specification on reinforced concrete

slabs. Walls corrugated iron, floor acid-pr.oof brick on concrete, foundation
concrete.
Equipment: Towers, lifts, and absorbers. Chemical Construction Co.: tanks,
Chattanooga Boiler Works; filter press, Sperry Co.; motors. General Electric
Co.; pumps, Gould.
AMMONIUM NITRATE HOUSES (o), 00 RY 120 FEET

Steel construction, roof asbestos coated corrugated iron. Walls, hollow tile,
floor concrete; foundation concrete.
 MUSCLE SHOALS 183
Equipment: Motors, General Electric Co.: tanks. Chattanooga Boiler Works;
evaporating pans, Elyria Enameling Co. ; crystallizing pans, Buffalo Foundry &
Machine Co. ; conveyors, Bobbins Conveyor & Belt Co. ; mechanical transmission,
Jeffrey Manufacturing Co.
PUMP RUILDING AND EQUIPMENT, 78 RY 72 FEET

Steel construction, walls brick, roof concrete, covered with Carey-type roof;
floor concrete ; foundation concrete.
Equipment : Four 9,730 gallons per minute process pumps, Allis Chalmers
Co.; two 300 gallons per minute, two 750 gallons per minute, and two 1.500
gallons per minute (pumps for flre and domestic water supply) ; one 60,000,000-
gallon reservoir ; six 12,000/2,300-volt Westinghouse transformers.
FILTRATION PLANT, 40 RT 50 FEET

Brick construction, cast cement roof covered with Carey-type roofing. Floors
concrete, foundation cocncrete.
Equipment : Filters and auxiliaries, 1,500,000 gallons per 24 hours.
STEAM PLANT, RUTLDINQ AND EQUIPMENT, 22S RY 280 FEET

Sixty-thousand-kilowatt power house : Steel construction, roof Carey design,

similar to Barrett 20-year specification as used on plant buildings : laid on rein
forced concrete slabs. Walls brick, floor concrete, foundation concrete.
Equipment : Twelve 1,500-horsepower Babcox-Wilcox Sterling-type boilers, with
Westinghouse-Taylor stokers ; three chimneys, Kellogg Radial Brick ; twelve
force-draft fans, Green Fuel Economizer Co. ; one water softener plant, Ameri
can Water Softener Co. ; coal crushing and handling equipment, Webster Manu
facturing Co. ; two 15,000-horsepower Cochran feed water heaters, Harrison
Safety Boiler Works ; three Worthington centrifugal feed water pumps ; one
motor driven air compressor, Worthington Pump & Machlnery Corporation ;
four 9,730 gallon per minute process water pumps, Allis Chalmers Co. ; four
44,000 gallons per minute circulating pumps, Allis Chalmers Co. ; one Westing-
house-Parsons type double-flow cross compound 60,000-kilowatt generator ; two
Westinghouse-Parsons type double-flow noncondensing 2,500 kilovolt amperes
House turbines; two steam-driven exciters, General Electric Co.; two 50-kilo-
watt motor generator sets, two 200-kilowatt motor generator sets, General
Electric Co. ; 2 electric locomotives, narrow-gauge, for ash disposal, General
Electric Co.
All major electrical equipment from General Electric and Westinghouse Cos.
The building is provided with air and electrical-service outlets, at convenient
locations.
Washrooms provided with hot and cold water.
NOTE.—All manufacturing buildings are provided with outlets for electrical
tools, and air cocnnections for pneumatic tools, which might be needed in plant
maintenance.
Air is supplied by Sullivan compressors in liquid-air building, which machines
also supply air for lifting acid in nitric-acid building.
All buildings are also provided with water for drinking and sanitary purposes.
Work necexmry to place Plant A'o. 2 in rcndinexs to operate
Bus tunnel :
Provide for expansion of 12,000-volt bus bars and replace
broken bus bar support $10, 000
Clear grounds on secondary power lines and lighting
circuit 300
— $10. 300
Distributing house:
Filter oil in oil transformers and circuit breakers 150
Repair starting compensators for 250-volt motor-generator
set and change oil 150
Test out and clear up remote control 100
400
184 MUSCLE SHOALS

Lime-kiln building :
Put on conveyor and drier belts: change oil In bearings
and starting switches. Dry out motors an(l clear up
electrical circuits $450
Coke-dryer building:
Put on conveyor and drive belts. Change oil In starting
compensators and bearings ; dry out motors and clear
up electrical circuits 350
Coal-mill building:
Put on conveyor and drive belts, change oil in bearings
and circuit breakers. Dry out motors, clear up elec
trical circuits 200
Raw-material building :
Put on conveyor and drive belts, change oil in bearings
and circuit breakers. Dry out mot6rs, clear up elec
trical circuit 230
Carbide-furnace building :
Put on conveyor and drive belts $150
Change oil in bearings and circuit breakers 50
Dry out motors, clear up electrical circuit 175
Complete 1920 changes on 19 additional electrode hoists.. 200
Complete assembling of tapping equipment on 10 fur
naces 150
Assemble and install 10 electrodes 250
Filter oil in transformers 150
1,125
Carbide-mill building:
Put on belt and chain drives, dry out motors; change
oil in bearings and circuit breakers. Replace broken
explosion caps on mills 350
Lime-nitrogen oven room: Replace oil in bearings and circuit]
breakers. Filter oil in 2,300-volt transformers. Dry out I OSA
motors [
Lime-nitrogen cooling shed : Replace oil in bearings on crane.j
Lime-nitrogen mill building: Replace chain and drive belt.
Dry out motors, change oil in bearings and circuit breakers.
Clear up electrical circuit. Replace explosion caps on mills 350
Liquid-air building : Put on nil drive belts. Dry out motors,
change oil In hearings and circuit breakers. Clear up all
electrical circuits. Tighten up heads on all air compressors.
Filter oil in transformers 050
Hydrating and silo building: Change oil in bearings and cir
cuit breakers. Dry out motors, clear up electrical circuits 150
Process boiler house : Replace bucket on coal elevator ; close up
and boil out boilers: repack all pumps; close up water
heater; put hydrostatic test on all boilers 350
Autoclave building: Replace oil in bearings and circuit break
ers: dry out motors and clear up electrical circuits; straight
en agitator shaft in No. 32 autoclave: blow out and tighten
up joint on distilling unit—substation : Filter oil in trans
formers; restore altered switchboard connections 550
Filter building: Put on conveying and drive belt; dry out
motors and clear up electrical circu't ; replace oil in bear
ings and circuit breakers : replace impellers in sludge
pumps ; reassemble disk valves on all filters and put on can
vas cover 350
Thomas meter houses: Assemble and install metering equip
ment and connect up traps on ammonia line 150
Catalyzer building:
Complete installation of electrical equipment in Nos. 3,
4. 5. and 0 12,000
Substations 4, 5. and C. to complete 1,200
Acid building (cooling section) : Assemble connection between
high and low temperature coolers and water-hose connec
tion ; low-temperature coolers 250
 MUSCLE SHOALS 185
Acid towers: Clear out acid lift wells, and assemble lift in
place; dry out motors-------------------------------------------- $1,000
Acid storage: Repairs to storage tanks------------------------------ 300
Neutralizer building:
Reassembling acid lift in place-------------------------- $350
Assembling ammonium nitrate pumps and motors--------- 175
525
Ammonium nitrate houses: Completing 1, 4, and 5 houses------------- 15,000
Repair of raw-material trestles------------------------------------- 9, 500
Repair of railroad tracks------------------------------------------- 20,000
Unforeseen contingencies------------ ------------------------- 24, 000

Total-------------------------------------------------------- 100,000
Time required to place plant No. 2 in readiness to operate, not over 60 days.
A. Poy ET,
Warrant Officer, United States Army,
Commanding.
NITRATE PLANT, AL.A., November 5, 1929.

WAR DEPARTMENT ACTIVITIES IN MUSCLE SHOALs DISTRICT

The following War Department activities are located in the Muscle Shoals
district:
(1) United States nitrate plant No. 1.-A plant for the manufacture of ammo
nium nitrate by the so-called synthetic process of nitrogen fixation.
(2) United States nitrate plant No. 2.-A plant for the manufacture of ammo
nium nitrate by the cyanamid process of nitrogen fixation.
(3) Wilson Dam.
UNITED STATES NITRATE PLANT No. 1

Plant No. 1, equipped to produce 22,000 tons of grained ammonium nitrate

per year, was constructed during the year 1917–18 at a cost of approximately
$12,000,000. The reservation covers in excess of 1,900 acres, is situated in
Colbert County, Ala., is bordered on the northeast by the town of Sheffield
and on the northwest by the Tennessee River.
Construction of the plant was started in October, 1917, and on November
12, 1918, one day after the signing of the armistice, the first ammonium nitrate
was produced.
The synthetic or modified Haber process is used at this plant. The manu
facture of producer gas is the first step in the manufacture of ammonium
nitrate by this process. The rated capacity of the gas plant is 4,800,000 cubic
feet of producer gas per day generated in blue gas generators. This gas
then flows to gas holders, from which it is drawn to the ammonia process
building, where by the aid of a catalytic material the carbon monoxide is con
verted into carbon dioxide. The pressure is now raised to 1.450 pounds per
square inch. By means of another catalytic material the resulting nitrogen
and hydrogen is combined to anhydrous ammonia. The rated capacity of this
part of the process is 60,000 pounds of anhydrous ammonia per day. About
ºne-half of this ammonia is then oxidized in the presence of a platinum gauze
catalyst to nitric acid in a plant of 200,000 pounds of 50 per cent nitrice acid
Per day capacity, while the other half is used to neutralize this nitric acid
to form ammonium nitrate solution. Approximately 200,000 pounds of 56
Per cent ammonium nitrate solution may be produced per day, which is evapo
rated and grained to the finished ammonium nitrate. Briefly, the elementary
principles of the process follow :
n the gas house steam which contains two parts hydrogen and one part
*Ren is passed over carbon (coke). The oxygen of the steam unites with the
ºon, forming carbon monoxide. The gas, which is now a mixture of hydrogen
*nd carbon monoxide, is carried over to the process building, where air is
introduced. This is now passed over the converters, where the oxygen of the air
"hites with the carbon monoxide forming carbon dioxide. The mixture is now
Passed through the caustic scrubbers containing caustic soda, which removes
186 MUSCLE SHOALS

the carbon dioxide leaving only the nitrogen of the air and the hydrogen from
the steam. This is now passed over the ammonia catalyst, which causes the
hydrogen to unite in chemical combination with the nitrogen in the proportion
of one part nitrogen to three parts hydrogen, forming synthetic ammouia. The
atmospheric nitrogen is now in a fixed chemical form ; to get it in the form oi' a
nitrate a part of the ammonia is oxidized to nitric acid and a part of this nitric
acid is neutralized with still another portion of ammonia which makes am
monium nitrate, when evaporated to dryness, forms white, needle-shaped clear
crystals.
UNITED STATES NITRATE PLANT NO. 2

Plant No. 2, equipped to produce 110,000 tons of ammonium nitrate per year,
is the largest cyauamide plant in the world. The reservation covers 2,300 acres
situated on the south bank of the Tennessee River about 1 mile below Muscle
Shoals.
Construction of the plant began in January, 1918, and operation in October,
1918. The total cost, including the 00,000-kilowatt steam-power plant at Muscle
Shoals but not including the 30,000-kilowutt steam-power plant on the Warrior
River, the Warrior-Muscle Shoals transmission line, and the Waco limestone
quarry, was approximately $70,000.000.
The principal raw materials required, other than the nitrogen of the air, are
limestone and coke. The daily consumption of these materials, when operating
at full capacity, is 1.200 tons of limestone and 300 tons of coke. An ample
supply of limestone of pure quality is located about 30 miles south of Muscle
Shoals. Coke can be procured in the Birmingham district.
When operating at full capacity, the plant requires approximately 85,000
kilowatts. This power will eventually be available at Wilson Dam, which Is
located within a mile of the nitrate plant. To furnish the power during the
war and prior to the completion of the hydroelectric development on the
Tennessee River two steam power plants were erected, one at Muscle Shoals
and the other at Gorges on the Warrior River. The plant at Gorgas, known
as the Warrior extension power plant, was built as an extension to the exist
ing plant of the Alabama Tower Co. The generating unit is 30,000 kilowatts
General Electric turbogenerator. The Muscle Shoals plant contains a 60,000-
kilowatt Westinghouse turbogenerator consisting of one high-pressure and two
low-pressure turbines each connected to a 20,000-kilowatt generator.
The limestone is burned in seven rotary kilns, one of which is a spare unit,
each having a capacity of 200 tons of stone a day. The coke is crushed and
dried and the lime and coke are mixed in suitable proportions for charging
the carbide furnaces.
The carbide furnaces are 12 in number, 10 being required for full-capacity
operation. Each furnace has a rated capacity of 50 tons of 80 per cent
calcium carbide per day. The power consumption of one furnace is 6,000
kilowatts. The current is 3-phase, 60 cycles, and enters the furnace from the
top through carbon electrodes.
At the temperature of the electric arc the lime and coke react to form carbide
in accordance with the equation :
3C + CaO = CaC, + CO
The process is continuous, the molten carbide being tapped from the surface
at intervals of about 40 minutes. The carbon-monoxide gas burns on contact
with the air to carbon dioxide, which escapes into the atmosphere.
The carbide is allowed to cool and is then ground to a fine powder. From
the mill it is conveyed to the lime-nitrogen or cyanamide building, where the
fixation of nitrogen takes place. At a temperature of about 1,000° centigrade,
calcium carbide and nitrogen react in accordance with the equation:
CaC,+N,=CaCN,+C
For this reaction a pure quality of nitrogen is required. The nitrogen is
separated from the oxygen of the air by the Claude process. The nitrogen
or liquid-air building contains 30 Claude columns each having a capacity of
500 cubic meters of nitrogen per hour.
The electric ovens, in which the fixation of nitrogen takes place, consist of
vertical cylinders about 30 inches inside diameter and 5 feet high. The heat
ing unit Is a carbon pencil located in the center of the oven. There are 1,536
 MUSCLE SHOALS 187

of these ovens. The weight of a charge of carbide is about 1,600 pounds.

Nitrogen gas enters at the bottom of the oven. After about four hours the
electric current is turned oft and the reaction, being exothermic, proceeds
without further external heating. The process requires about 40 hours for
completion. The product is removed from the. furnaces in the form of a
cylinder pig of cyanamide or lime nitrogen. After cooling, the pigs are crushed
and ground to a fine powder. In this condition the lime nitrogen contains
about 1 per cent of calcium carbide, which is removed by a spraying with
water, the water reacting with the carbide to form acetylene gas, which es
capes. Calcium cyanamide reacts with steam under high pressure to form
ammonia. The reaction is as follows:
CaCN,+3HO.=2NH,+CaCOi
This reaction takes place in large heavily walled steel autoclaves. The
process is intermittent and requires from six to eight hours. The ammonia
gas passes out at the top of the autoclaves and carries with it a large amount
of steam. Most of the steam is removed from the gas by condensation. The
calcium carbonate is discharged in the form of a sludge and is a waste product.
The plant has a capacity of 150 tons of ammonia per day.
The production of nitric acid from ammonia has never been carried out on
a commercial scale prior to the World War, although the Ostwald process of
the oxidation of ammonia to nitric acid has been tried out on a small scale.
If a mixture of ammonia and air Is heated to a temperature of say 1,000°
centigrade under ordinary conditions the recation products obtained are
nitrogen and water vapor. Ostwald found that by passing the gas over a
suitable catalyzer, such as fine platinum gauze heated to a bright-red heat,
most of the nitrogen in the ammonia may be oxidized to nitric oxide.

On cooling, the nitric oxide combines with more oxygen to form nitrogen
Ptroxide, which is then absorbed in water to form nitric acid. This process
was developed on a tremendous scale in Germany during the war. It has
ilao been used successfully in the plant of the American Cyanamid Co. at
Warners, N. J.
In the Muscle Shoals plant the oxidation takes place in aluminum boxes or
converters, in the bottom of which the electrically heated platinum gauze
is held in a horizontal position. The mixture of ammonia and air is passed
downward over the gauze and the products of the reaction are carried to
coolers and then to the nitric-acid absorption towers. The capacity of the plant
is about 450 tons of 50 per cent acid per day.
Ammonia and nitric acid react readily to form ammonium nitrate in accord
ance with the equation :
NH>+HXO,=NH,NO,
This reaction takes place in tanks lined with acid-proof brick, the ammonia
sas being piped into the tanks from above. The product is a liquid containing
about 45 per cent ammonium nitrate. This liquor, after being freed from
sediment, is piped to the nitrate houses, where the water is evaporated and the
ammonium nitrate is finally obtained in granular form. It is then ready
to be loaded into cars and shipped to powder plants.
During the time the plant was in operation about 1,700 tons of high-grade
ammonium nitrate were produced.
During the war ammonium nitrate was used chiefly in the manufacture of
Btnatol, a mixture of ammonium nitrate and trinitrotoluene in the proportion
of 80 parts ammonium nitrate to 20 parts trinitrotoluene.
Of the several products which the plant is capable of producing without
additional facilities, two are available for use as fertilizer material, viz,
cyanamide and ammonium nitrate. Although certain of its chemical properties
have limited the amount that may be safely used in a ton of mixed fertilizer,
large quantities of cyanamide have been used in commercial fertilizer. Am
monium nitrate has not been used heretofore in commercial fertilizer to any
appreciable extent. While it is entirely suitable as a plant food, its marked
hygroscopic property is an obstacle to its use in fertilizer. If a way is found
to overcome this property, it will undoubtedly be in demand as a fertilizer
material.
188 MUSCLE SHOALS

The one product for which a market is at heand and which could be produced
at nitrate plant No. 2 is ammonium sulphate. To manufacture this material It
would be necessary to provide additional facilities at a cost of perhaps $2,000,000.
In case the plant is operated for the production of fertilizer material, am
monium sulphate will probably be the principal product until such time as a
market is developed for other products.
On November 17, 1921, the 00,000-kilowatt steam generating plant was leased
to the Alabama Power Co. at a flat rental of $10,000 per month plus $0.002 per
kilowatt-hour for all net generation. From December 1, 1920, to February 28,
1930, the Government has received, as rental for the use of this plant,
$1,542,990.02.
On December 1. 1917, in order to supply electric energy for the operation
of United States nitrate plant No. 2, the Government entered into contract with
the Alabama Power Co. for the erection of a 30,000-kilowatt steam generating
plant at Gorgas, Ala., and transmission line of approximately 90 miles con
necting this plant with the nitrate plant, at a cost of $4,,770,974.47. The power
plant and transmission line were erected on land owned by the Alabama
Power Co. From the date of completion of this plant until September 24, 1923,
the date on which this plant was sold to ihe Alabama Power Co. for the sum
of $3,472,487.25, the Government received rental amounting to $338,666.41.
On July 16, 1923, in order to provide electric services at Russellville, Ala.,
the Alabama Power Co. leased from the United States Government the 1,000-
kilowatt substation located at Waco Quarry at a rental of $150 per month.
Up to June 30, 1928, the Government has received, as rental for this station,
the sum of $8,850 ; lease canceled June 30, 1928.
(The committee thereupon adjourned until to-morrow, Wednesday,
March 19, 1930, at 10 o'clock a. m.)
 MUSCLE SHOALS

WEDNESDAY, MARCH 19, 1930

HOUSE OF REPRESENTATIVES,
CoMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10 o'clock, a. m., Hon. Harry C. Ransley,
presiding.
Mr. K AN su.y. At the close of the meeting yesterday, Captain Riley,
who is in charge of Dam. No. 2 and the power plant, was about to
give evidence. Now, Captain, will you kindly make a statement as
to the condition of the power plant?
Mr. WAINWKIGHT. Have we qualified Captain Riley ?
Mr. RANSLEY. I understand he qualified yesterday at the close of
the meeting.
Captain RILEY. Wilson Dam, or Dam No. 2, on the Tennessee
River, has been operated since September, 1925, but at no time at full
capacity ; but all the units are in excellent condition, and, should any
demand be made on us now, we could produce the capacity equivalent
to the river flow at that particular time. All of the equipment is in
excellent condition, properly maintained. I do not think I need say
anything more.
Mr. RANSLEY. Does anybody desire to ask any questions at this
time?
Mr. McSwAiN. Have you kept a record of the volume of water in
the Tennessee River at Dam No. 2, or have records been kept by any
one, that are accessible to you, for the last five years?
Captain RILEY. Yes, sir. The flow at the dam in second-feet is re
iorded daily.
Mr. McSwAiN. Recorded daily?
Captain RILEY. And the quantity that that water can produce has
also been computed.
Mr. McSwAiN. Your present installation of generators is 220,000
horsepower ?
Captain RILEY. Is 184.000 kilowatts. I can give you the horse
power in just a minute—246.000 horsepower.
Mr. McSwAiN. My recollection is it is about 220,000.
Captain RILEY. It is more than that.
Mr. McSwAiN. The dam plans contemplate a total installation of
about 600,000 horsepower?
Captain RILEY. Yes, sir; 610,000;
Mr. DOUGLAS. What is the 610,000 horsepower?
Mr. McSwAiN. That is the total installation capacity of genera
tors; assuming that we might at some time have enough water to
come over the spillway, we will have the wheels there to catch it.
101229—30 13 189
190 AIUSCLE SHOALS

Mr. WAINWRIGHT. As I understand, those generators are not all in

there ?
Captain RILEY. There is space there for 10 additional units.
Mr. McSwAiN. There is space, but the installation now is 220,000.
Now, Captain Riley, judging by the volume of water that has gone
down the river at that point for the last five years, what has been
the horsepower that could have been generated there, if there had
been any use for it, if it had been desired to generate it?
Captain RILEY. Since September, 1925, we could have supplied
four times the amount that we have supplied.
Mr. McSwAiN. That would make a total of what ?
Captain RILEY. The present installation can develop 1,500,000,000
kilowatt-hours per year.
Mr. DOUGLAS. One billion five hundred million kilowatt-hours per
year?
Captain RILEY. Yes.
Mr. McSwAiN. Could you, as we go along, convert those figures
into our layman's lingo of horsepower ?
Captain RILEY. Yes.
Mr. McSwAiN. I mean an average horsepower at any given in
stance of time throughout the year.
Captain RILEY. The minimum flow, of course, only gives you
66,000 kilowatts, or 88.500 horsepower.
Mr. McSwAiN. Eighty-eight thousand five hundred horsepo-wer;
that has been the minimum ?
Captain RILEY. Yes, sir.
Mr. McSwAiN. Within five years?
Captain RILEY. Yes, sir.
Mr. McSwAiN. Now, what has been the minimum for 95 per cent
of the time ; or, if my percentages do not correspond with your tabu
lation, express it according to what you have there.
Captain RILEY. Ninety-five per cent of the time ?
Mr. McSwAiN. Yes.
Captain RILEY. I will have to convert every one of my compu
tations.
Mr. WAINWRIGHT. Take your time. This is important; we are
getting right down to the bedrock on this thing.
Mr. DOUGLAS. The 1,500.000,000 kilowatt-hours that have been
produced as an average over the last five years is equivalent to
170,000 kilowatts.
Mr. COCHRAN. Kilowatts or horsepower?
Mr. DOUGLAS. One hundred and seventy thousand kilowatts.
Mr. STAFFORD. In what space of time ?
Mr. McSwAiN. Check on that, Captain; let us not make any error
as we proceed.
Mr. DOCGLAS. You simplv divide 1,500.000.000 by 8.760.
Captain RILEY. That is right.
Mr. DOUGLAS. To reduce that to kilowatt-years you divide that
by 8,760.
Captain RILEY. It is twentv- four times 365. which is 8.760, is it
not?
Mr. DOUGLAS. Eight thousand seven hundred and sixty kilowatt-
hours in a kilowatt-year.
Captain RILEY. That is right.
 MUSCLE SHOALS 191

Mr. DOUGLAS. So that if your average annual production has been

1.500.000.000 kilowatt-hours, you divide your 1,500,000,000 by 8,760
to translate the kilowatt-hours into kilowatt-years.
Captain RILEY. One hundred and seventy thousand kilowatts.
Mr. DOUGLAS. That is the total power produced; in other words,
the power produced both at the high-water stage of the river and the
low-water stage?
Captain RILEY. Let me explain that.
Mr. DOUGLAS. All right.
Captain RILEY. The minimum flow is 88,500 horsepower ; the maxi
mum flow to the capacity of the generators, which is 216,000 kilo
watts, or 290,000 horsepower, would be the maximum amount that
you could get out o'f there at any time.
Mr. WAINWRIGHT. That is with the present generators that are
installed ?
Captain RILEY. With the present generators. The average of those
two. spaced over the entire period of time as Mr. Douglas has said, is
170,000 kilowatts; but the percentage of time that you have 216,000
kilowatts is about 2 per cent of the time.
Mr. McSwAiN. That is what I want to get at. Now, what horse
power have you had in volume of water—not produced, you under
stand, but in volume of water ?
Captain RILEY. I understand.
Mr. McSwAiN. For the last five years 95 per cent of the time; or,
if you have not got it for 95 per cent, approximately that?
Captain RILEY. I will give it to you for 97 per cent of the time,
because I have that.
Mr. McSwAiN. All right, that is good ; 97 per cent of the time.
Captain RILEY. First I wish to correct my answer as to the mini
mum flow. The minimum low flow was 59,600 kilowatts for 100 per
cent of the time.
Mr. STAFFORD. What is that?
Captain RILEY. Fifty-nine thousand six hundred kilowatts 100 per
cent of the time, which is equivalent to 80,000 horsepower.
Now, 97 per cent of the time it could produce 83,000 kilowatts or
111.000 horsepower.
Mr. McSwAiN. That is 97 per cent of the time ?
Captain RILEY. Yes, sir.
Mr. HILL. That is 97 per cent?
Captain RILEY. Yes, sir.
Mr. HILL. Eighty-five thousand horsepower is 100 per cent?
Mr. McSwAiN. Eighty-five thousand horsepower is 100 per cent
of the time ?
Captain RILEY. Yes, sir.
Mr. McSwAiN. According to your calculations already made, what
is the next percentage of time you have already calculated ?
Captain RILEY. I can give you any per cent.
Mr. McSwAiN. Can you give me the power for 90 per cent of the
time ?
Captain RILEY. Ninety-seven thousand kilowatts.
Mr. McSwAiN. That is 90 per cent of the time, now ?
Captain RILEY. Yes, sir; or 130,000 horsepower.
192 MUSCLE SHOALS

Mr. McSwAiN. Now, then, just for the record, what is it for 80
per cent of the time ?
Captain RILEY. One hundred and nineteen thousand kilowatts or
160,000 horsepower. I am giving you this in round figures.
Mr. McSwAiN. I understand. That is near enough for us. Now,
then, for 70 per cent of the time?
Captain RILEY. One hundred and forty-eight thousand kilowatts,
or 198,000 horsepower.
Mr. DOUGLAS. That is for 70 per cent of the time ?
Captain RILEY. Yes.
Mr. McSwAiN. Now for 60 per cent of the time ?
Captain RILEY. One hundred and seventy-six thousand kilowatts
or 236,000 horsepower.
Mr. McSwAiN. Two hundred and thirty-six horsepower for 60
per cent of the time ?
Captain RILEY. Yes, sir.
Mr. McSwAiN. Now, then, 50 per cent of the time?
Captain RILEY. One hundred and ninety-four thousand kilowatts
or 260,000 horsepower.
Here is a chart ; vou can compute them all from this chart.
Mr. McSwAiN. You will furnish that table to go into the record?
Captain RILEY. Yes, sir.
(The table referred to will appear in the revised print.)
Mr. McSwAiN. Gentlemen, personally I do not see any use in
pursuing it below 50 per cent; but, if anyone else wants to know
what it is below 50 per cent, we can find out.
Now, Captain, what months of the year, what six months of the
year, judging by the history of the past five years, do you find the
maximum volume of water in that river ?
Captain RILEY. From November through to after April, after the
high water.
Mr. MoSwAiN. Exactly. Now, I have asked that for this reason :
The demand for fertilizer is seasonal ; its production can be seasonal
and particularly during this period of six months in the winter
when the maximum volume of water is present, when there is a
vast volume of secondary power for 50 per cent of the time and
electric furnaces can be used with great economy for the business
of producing phosphoric acid from the rock, as well as for the pur
pose of producing nitrogen from the air. That is the reason I was
bringing that out. Now, Captain, what is the present installed
capacity of steam power ?
Captain RILEY. Fifty-six thousand five hundred kilowatts or
75,500 horsepower.
Mr. McSwAiN. So all you have to do is to add this 75,000 horse-,
power to the prime power or
Captain RILEY. To the low-flow power.
Mr. McSwAiN. Or the minimum power at any given percentage
of time, and you will have the power available there at this time
from the source both of the steam and the water?
Captain RILEY. In percentage of time.
Mr. McSwAiN. In percentage of time ; correct.
Mr. WAINWRIGHT. What is primary power at this dam?
Captain RILEY. The word primary " power is used in several
ways; if we do not use that word but'use " low-flow " power, there
 MUSCLE SHOALS 193

will be no misunderstanding. Primary power in electrical usage is

considered that power which is available 100 per cent of the time,
or a block of power that you can demand 365 days of the year ; but
when you speak of low-flow power, it is much easier to understand ;
that is power you can secure 100 per cent of the time.
Mr. McSwAiN. Now, Captain, does your chart which you have
prepared, assume there will oe installed at some time the full capac
ity of 600,000 horsepower?
Captain RILEY. Yes, sir. This particular chart does not, but I
have one here that shows you the per cent of time also and the
power available with the additional units.
Mr. McSwAiN. You will produce that chart for the record, also?
Captain RILEY. Yes, sir.
(The chart referred to will appear in the revised print.)
Mr. WAINWRIGHT. What is the highest capacity of the water flow
there in horsepower?
Captain RILEY. Well, the water greatly exceeds, of course, any
capacity you can install.
Mr. WAINWRIGHT. Does it ever get up to 600,000 horsepower ?
Captain RILEY. Oh, yes, indeed.
Mr. WAINWRIGHT. How high? What is the highest is has been
during the last five years?
Captain RILEY. Speaking in terms of flow, the highest has been
443.000 second-feet, in 1897 ; 8,200 the minimum in 1920.
Mr, DOUGLAS. Second-feet?
Captain RILEY. Second-feet. The average low flow over the period
1895 to 1903, and 1905 to 1923, has been 8,400.
Mr. WAINWRIGHT. Thanslate that into horsepower.
Captain RILEY. That is in second-feet, which is equivalent to pro
ducing 59,600 kilowatts, or 85.000 horsepower.
Mr. WAINWRIGHT. I asked for the maximum.
Captain RILEY. I give you the maximum. The maximum flow was
443,000 in 1897.
Mr. STAFFORD. Your average low flow—what period of time is
that average low flow; the figures you just stated?
Captain RILEY. Eight thousand four hundred?
Mr. STAFFORD. Yes.
Captain RILEY. From 1895 to 1923. with the exception of the
year 1904.
Mr. STAFFORD. Is that for any special period of time or just for a
day?
Captain RILEY. That is the average low flow of any particular
day in those years: that is the minimum recorded.
Mr. STAFFORD. Of the day ?
Captain RILEY. Yes.
Mr. McSwAiN. Of course, at on time, if your maximum installa
tion is 600.000 horsepower, can you ever develop more than 600,000
horsepower, can vou : you can not develop more than your instal
lation?
Captain RILEY. Jfo, sir.
Mr. McSwAiN. I do not care whether you have 1,200,000 horse
power going over the dam in waste water or not, what I want to
ask you is this : Please look at your chart and tell me, on the assump
tion you have already put in generators, or dynamos, to represent
194 MUSCLE SHOALS

a total installed capacity of 600,000 horsepower, what percentage of

the time each year would you be getting 600,000 horsepower?
Captain RII.EY. Twenty-five and one-half per cent of the time.
Mr. DOUGLAS. Twenty-five and one-half per cent of the time you
would get 600,000 horsepower, if the installation were completed ?
Captain RILEY. Yes, sir. Without storage regulation you never
could get the full capacity of the plant out of there beyond that
percentage.
Mr. McSwAiN. Now, then, what percentage of the time would you
be getting 500,000 horsepower?
Captain RILEY. You mean with the 18 units all installed?
Mr. McSwAiN. Yes; on the assumption you have 600,000 horse
power installed. All we have to do is to buy the generators and set
them in.
Captain RILEY. Thirty-three per cent of the time.
Mr. McSwAiN. Now, run on down to 400.000 horsepower; what
percentage of the time?
Captain RILEY. Forty-three per cent of the time.
Mr. McSwAiN. Now, then, for 300,000 horsepower?
Captain RILEY. Fifty-six per cent of the time.
Mr. McSwAiN. Now, 250,000 horsepower—what percentage of the
time ?
Captain RILEY. Sixty-three per cent of the time.
Mr. McSwAiN. And 200,000 horsepower?
Captain RILEY. Seventy per cent of the time. This is all, now,
with 18 units installed.
Mr. McSwAiN. We understand that is on the assumption that we
set the generators right in the place alreadv built in the concrete to
put them there ; all we have to do is to buy them and put them there ?
Captain RILEY. Yes.
Mr. WAINWRIGHT. What do these units cost?
Captain RILEY. To put 6 additional units in will cost approxi
mately $5,000,000; to pu tthe 10 additional units, approximately
$8.500,000. I believe the figure has been given as $10,000,000.
Mr. McSwAiN. How many units are now installed?
Captain RILEY. Eight.
Mr. McSwAiN. And the total is 18?
Captain RILEY. Yes, sir.
Mr. McSwAiN. I have nothing else.
Mr. RANSLEY. Captain, the installation of hydroelectric machinery
is usually made slowly, is it not?
Captain RILEY. You mean bv that the period of time it would take
to install the additional units f
Mr. RANSLEY. It is done as the load is built up and you find a
market for the power?
Captain RILEY. You would add additional units as the demand
came; yes, sir.
Mr. RANSLEY. It would be nonsense to install them all at one time.
Mr. HILL. Captain, have you given any study to the construction
of Cove Creek Dam ?
Captain RILEY. Quite a good deal.
Mr. HILL. Well, now, have you some figures there on that dam ?
Captain RILEY. Yes, sir.
 MUSCLE SHOALS 195

Mr. HILL. Did you compile those figures yourself, if I may ask,
or is it what you have gotten from the survey?
Captain RILEY. They are the results of the surveys that were made
up to that time under the direction of the Chattanooga office, and the
figures are based on the actual work done in the field.
Mr. HILL. Tell us this for the record, too. Captain, in order that
we may have it : What would be the effect on the power at Wilson
Darn of the construction of Cove Creek Dam ?
Captain RILEY. Cove Creek Dam as a reservoir capacity or with
installed generating capacity at Cove Creek?
Mr. HILL. Well, you might want to install some generating capac
ity there at Cove Creek, but my idea was using Cove Creek primarily
as a storage dam.
Captain RILEY. For regulation?
Mr. HILL. Yes. In other words, using it primarily for regulation
of the flow of the river, so as to get the maximum amount of power
from Wilson Dam and other dams on the stream.
Captain RILEY. It will increase the low-flow power for Wilson
Dam as installed or as will ultimately be installed.
Mr. HILL. How much?
Captain RILEY. The stream regulation by Cove Creek, with no
interchange of power, will increase it to 112,000 kilowatts or 150.000
horsepower.
Mr. HILL. That would be nearly double ; that is about what we
have always understood.
Mr. DOUGLAS. The 59,600 kilowatts which the captain has testified
represents the firm or low-water power to be developed at Muscle
Shoals. So that if Cove Creek Dam is constructed and used solely as
a regulating reservoir, then the effect on the firm or low-flow power
at Wilson Dam will be to approximately double it ?
Air. HILL. That is what we have always understood.
Captain RILEY. Correct.
Mr. HILL. Now, Captain, could you tell us how much firm power
would be for disposal at the Cove Creek Dam, provided the Cove
Creek Dam were used primarily as a storage reservoir and for the
regulation of the stream; in other words, we consider the primary
power as being secondary, but there would be some primary power
there—how much would that be?
Captain RILEY. To put in three units of 55.000 kilowatts each
Mr. HILL. I am talking about the units that we have installed;
I am talking about how much the estimates actually show would be
available as primary power at the Cove Creek Dam if you used that
dam primarily for regulatory purposes, to regulate the flow of the
river. Do your charts show that, or not?
Captain RILEY. I do not get your point, Mr. Hill.
Mr. HILL. Here is the point I am trying to get : WTe take the Cove
Creek Dam and use it primarily for the purpose of regulating the
flow of the river, use it primarily to get the maximum power, so to
speak, at Wilson Dam. Even if you used Cove Creek Dam for that
Sirpose, you are going to have some primary power at Cove Creek
am, are you not ?
Captain RILEY. Yes, sir.
Mr. HILL. How much will that primary power at Cove Creek Dam
be ? It may be you have not figured that out.
196 MUSCLE SHOALS

Captain RILEY. I have got it in kilowatt-years, and I just gave it

to you in installed capacity.
Mr. HILL. If I understand it, the installed capacity of a dam and
the primary power of a dam might be entirely different. For
instance, it is the idea that the installed capacity at the Wilson Dam
shall be, I believe, 610,000.
Captain RILEY. That is right.
Mr. HILL. Whereas the primary power, according to your testi
mony, is only about 80,000 horsepower.
Captain RILEY. Let me answer that in a different way. You can
not consider a low-flow power of the reservoir available ; you would
have to regulate your reservoir to take care of the low flow at Wilson
Dam.
Mr. HILL. Yes.
Captain RILEY. And when the time occurred that there was not
sufficient low-flow power at Wilson Dam, you could operate the units
at Cove Creek and interchange power to build that up.
Mr. DOUGLAS. What is the distance from Cove Creek to Wilson
Dam? It is about 270 or 300 miles, is it not; something like that?
Captain RILEY. It is approximately 186 miles from Chattanooga
to Florence, and 111 miles to Knoxville, and it is northwest of Knox-
ville ; not over 300 miles.
Mr. McSwAiN. That is by the line of the river, though?
Captain RILEY. Yes.
Mr. McSwAiN. The air line might be considerably shorter.
Mr. DOUGLAS. Let us say it is 250 miles.
Mr. McSwAiN. Yes.
Mr. DOUGLAS. The cost of transmitting power from Cove Creek to
Wilson Dam would be what ?
Captain RILEY. The cost?
Mr. DOUGLAS. Yes. Roughly, it would be 2 mills, would it not?
Captain RILEY. Not over 3 mills.
Mr. DOUGLAS. Not over 3 mills; and what is the cost of developing
power at Wilson Dam, assuming that you have a constant flow of the
river? It is about 1.76 mills, is it not?
Captain RILEY. I would rather be specific on that.
Mr. DOUGLAS. Not on your present production, including depreci
ation and interest and not on the overhead charges that have to be
eaten up by the relatively small power sold.
Captain RILEY. 1.36 mills.
Mr. DOUGLAS. 1.36 mills is the cost of producing power at Wilson
Dam, assuming a stable flow of the stream ?
Captain RILEY. Economically. '
Mr. DOUGLAS. Yes. So it is perfectly obvious that it follows the
cheapest way of getting power at Muscle Shoals is to use Cove Creek
as a regulating reservoir and let the water flow down, free of charge,
from Cove Creek to Wilson Dam.
Mr. STAFFORD. On what is your figure, 3 mills, predicated as the
cost, particularly as to the character of construction?
Captain RELEY. Well, you have to consider you would have to
build a transmission line from Cove Creek to Wilson Dam, and the
costs are approximately $6,000,000.
 MUSCLE SHOALS 197

Mr. DOUGLAS. From Cove Creek to Wilson Dam the cost is

$6,000,000?
Captain RILEY. Yes, sir.
Mr. McSwAiN. That is the lowest I have heard. My recollection
is it is $13.000,000.
Mr. DOUGLAS. It would run up more nearly to $60,000,000?
Mr. STAFFORD. What would be the character of that transmission
line?
Captain RILEY. It would have to be a 154,000-volt line, steel-tower
line.
Mr. STAFFORD. Capable of carrying how much voltage ?
Captain RILEY. One hundred and fifty-four thousand volts.
Mr. STAFFORD. Would that be a double line or a single line?
Captain RILEY. A single line.
Mr. STAFFORD. How do you arrive at your estimate of 1.36 mills
for the average cost of the power at Dam No. 2? Is that cost the
general cost of all the power developed at Dam No. 2?
Captain RILEY. Well, there are a great many things considered in
there and that was figured on the basis of comparison with other
plant costs and in consideration of the development of the system as a
whole. The result would be that there are no taxes, insurance, and
other things that enter in there ; but, if you develop it economically,
you would find it would cost around 3 mills and, in connection with
the auxiliary steam, around 4, and that is very economical.
Mr. STAFFORD. Per horsepower?
Captain RILEY. No; per kilowatt-hour.
Mr. STAFFORD. You have just stated that it would be between 3
and 4 mills per kilowatt-hour to develop that power at Dam No. 2 ;
would that cost be any ways changed by reason of the installation of
additional units so as to provide for the maximum capacity ?
Captain RILEY. I am giving you the ultimate installation. The
cost to-day of the 184,000 is no where near that, sir.
Mr. STAFFORD. The cost per kilowatt is no where near that ?
Captain RILEY. No. I am operating it now at considerably less
cost than that.
Mr. STAFFORD. What is the present cost and how much power is
being developed there ?
Captain RILEY. At the present day, the Alabama Power Co. is
probably not taking over 10,000 kilowatts. My force and organiza
tion must be the same whether I supply 10.000 or 50,000. The cost
over a period of 4years, I will say, has been less than 2 mills.
Mr. STAFFORD. What do you estimate would be the cost if we were
using the dam with the present installation, with the maximum instal
lation for the present flow ?
Captain RILEY. You mean the 18 units?
Mr. STAFFORD. The 18 units, yes.
Captain RILEY. Well, with the Government rate of interest on the
investment at 4 per cent, proper charges for depreciation, mainte
nance, and operation, but no taxes and insurance and with full eco
nomic capacity of the plant developed, the hydropower mav be
produced at this plant at approximately 1.36 mills per kilowatt-nour.
Mr. STAFFORD. What would be the cost if we established the reser
voir dam at Cove Creek and then utilized the dam to the maximum
capacity?
198 MUSCLE SHOALS

Captain RILEY. I can not answer that without figuring it up.

Mr. STAFFORD. What is the cost per kilowatt-hour for the develop
ment of the auxiliary power at the steam plant?
Captain RILEY. Well, if the steam power was generated and the
power output of Wilson Dam was at an economic output, the com
posite power would cost approximately 3.1 mills per kilowatt-hour.
Mr. STAFFORD. What would the cost of the power be with the
reservoir utilized at Cove Creek and the steam-power auxiliary plant
as a supplement?
Captain RILEY. I can not answer that, because we have never com
puted this data on the basis of not including the installation of gen
erating equipment at Cove Creek.
Mr. STAFFORD. Your estimate of 3.1 mills is predicated upon the
cost of the maximum primary power—the cost of the power at Dam
No. 2 in connection with the steam-power plant ?
Captain RILEY. That figure is based on the additional six units
being added to Wilson Dam, creating approximately 340,000 kilo
watts, and the utilization of the existing steam plants in that vicinity.
Mr. STAFFORD. Why do predicate your answer on 6 units and not
on the 10 additional units?
Captain RILEY. Because it is not economical to add the additional
units up to the 18 units, because in no case can you get 100 per cent
of the time the full capacity of the installation, even with Cove
Creek and the nitrate plant combined.
Mr. STAFFORD. Have you estimated cost of the steam-power plant
at the nitrate plant?
Captain RILEY. Yes, sir.
Mr. STAFFORD. The steam power, that is, the auxiliary plant to
nitrate plant No. 2?
Captain RILEY. Yes, sir ; it cost $12,000,000.
Mr. STAFFORD. Has it ever been considered by the engineers as to
whether it would be feasible to construct an additional steam-power
plant supplementing the water power so as to make available all 10
additional units?
Captain RILEY. There are sufficient steam units already in exist
ence in the Tennessee basin, if properly connected with the existing
steam unit at nitrate plant No. 2 and with the additional power
units installed, to operate the combined system on an economical
basis. I do not see the need of additional steam units being built in
the near vicinity since they are already available and could be inter
connected.
Mr. DOUGLAS. Interconnected with what—with the Alabama
Power Co.?
Captain RILEY. No, sir ; interconnected with our own installations.
Mr. DOUGLAS. You are referring now to which steam stand-bys?
Captain RILEY. Well, there are various steam units within 100 to
150 miles of Wilson Dam that are now operated.
Mr. DOUGLAS. By the Government?
Captain RILEY. No; operated privately.
Mr. DOUGLAS. I see. Then the interconnection would be
Captain RILEY. With other power companies or private companies.
 i_l-i>*

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 MUSCLE SHOALS 199

Mr. DOUGLAS. With power companies?

Captain RILEY. Yes.
Mr. STAFFORD. Have you any figures, Captain, as to what would be
the percentage- of time that the maximum horsepower would be
developed in case we utilized the Cove Creek Dam as a reservoir
and supplementing the power at Dam No. 2 along the lines you have
just given us a little while ago?
Captain RILEY. Yes ; I can give you that.
Mr. STAFFORD. With the present existing water flow ?
Captain RILEY. I can give you the per cent of time and the amount
of power.
Mr. DOUGLAS. Is that predicated on the assumption Cove Creek
is used solely for regulating purposes?
Mr. STAFFORD. For regulating purposes.
Captain RILEY. I can give it to you that way.
Mr. STAFFORD. In that connection, on the question suggested by
the gentleman from Arizona (Mr. Douglas), what other basis have
you as to some of the power at Cove Creek being used for generating
purposes?
Captain RILEY. I have it for stream regulation by Cove Creek,
without any interchange of power; I have it increased by the inter
change of power ; I have it with the additional steam plant at nitrate
plant No. 2 and with the plant as installed ; I have it with the addi
tional steam plant and additional unit installed in the steam plant;
and I have it as to the total auxiliary power secured from outside
sources in per cent of the time. At the suggestion of Mr. James and
Mr. Hill it was requested that we prepare such charts, and they
were to have been submitted to them, but for some reason they were
lost, and they were only sent to the office of the Chief of Engineers a
few days ago. I received them when I arrived in Washington, and
I am willing to present them now to the committee. Chart No. 2
applies in this case and Exhibit C is submitted.
Mr. STAFFORD. Will you kindly, then, just give the amount of
power and the per cent of time that will be available in case we
use Cove Creek solely as a storage reservoir?
Captain RILEY. In per cent of time?
Mr. STAFFORD. In per cent of time and power.
Mr. DOUGLAS. It is the full installation, too?
Mr. STAFFORD. The full installation at Wilson Dam.
Captain RILEY. No ; this is as at present installed. I do not have
it for the full installation at Wilson Dam.
Mr. STAFFORD. The figures you gave us previously are based on
the full installation?
Captain RILEY. No; are based on the present installation, but
increased to the economic development—that is, 340.000 kilowatts,
or 446,500 horsepower, instead of 610,000 horsepower.
Mr. STAFFORD. Then give us the figures based on the present
installation of only eight units.
Captain RILEY. I have given those figures.
Mr. STAFFORD. I beg pardon?
200 MUSCLE SHOALS

Captain RILEY. I have it here with the six additional units added
to Wilson Dam, Cove Creek being built for stream regulation only.
Mr. STAFFORD. Give us that, then, for the 14 units.
Captain RILEY. Stream regulation by Cove Creek, 97 per cent
of the time is 112,000 kilowatts or 150,000 horsepower (taken from
comparison chart see Exhibit E.)
Mr. STAFFORD. This is without any auxiliary power ?
Captain RILEY. Yes, sir.
Mr. STAFFORD. It is with auxiliary power?
Captain RILEY. This is without interchange.
Mr. DOUGLAS. And without steam?
Captain RILEY. Without steam 100 per cent of the time, 112,000
kilowatts, or 150,000 horsepower; 90 per cent of the time, 139.000
kilowatts, or 186,000 horsepower; 80 per cent of the time, 145,000
kilowatts, or 194.000 horsepower; 70 per cent of the time, 167.000
kilowatts, or approximately 224,000 horsepower; 60 .per cent of the
time, 198.000 kilowatts, or 265,000 horsepower; 50 per cent of the
time, 245,000 kilowatts, or 328,000 horsepower. (This is based on
chart D, 1895-1924.)
Mr. STAFFORD. Have you any figures to show, along the same
lines, as to what increased amount of percentage of firm power would
be utilized if the Government would only build Dam No. 3?
Captain RILEY. Yes ; I do not think it need be considered.
Mr. DOUGLAS. You say it need not be considered ?
Captain RILEY. I do not think it need be considered.
Mr. STAFFORD. For what reason?
Captain RILEY. For the additional amount gained for the cost of
building Dam No. 3, unless you consider the development of the
Tennessee basin as a whole, I do not believe we need to consider it.
Mr. STAFFORD. The primary purpose of Dam No. 3 being for
navigation purposes?
Captain RILEY. Navigation, on the system as a whole.
Mr. STAFFORD. Considering the system as a whole ?
Captain RILEY. Yes, sir.
Mr. STAFFORD. And it being much more economical from a prac
tical business standpoint, if we are just considering Dam No. 2 for
power purposes, to build a reservoir at Cove Creek F
Captain RILEY. That is right.
Mr. STAFFORD. Then I will withdraw the question.
Mr. WAINWRIGHT. You mean it is more economical, for the purpose
of impounding water, to build Cove Creek Dam than to adopt Dam
No. 3 for storage purposes?
Captain RILEY. Dam No. 3 won't give the storage any more than
Dam No. 2 does.
Mr. WAINWRIGHT. Is there no way of getting storage, just as a
general proposition, except at Cove (>eek ?
Captain RILEY. No. sir.
Mr. WAINWRIGHT. We can assume that as a fact ?
Captain RILEY. Yes, sir.
Mr. STAFFORD. What has been considered as to the utilization of
the power at Cove Creek, independent of it being used as a storage
basin ?
 MUSCLE SHOALS 201

Captain RILEY. Well, the power that will be gained by the build
ing of Cove Creek is so small an amount in kilowatt years it would
add possibly 10 per cent to the total, that is all.
Mr. STAFFORD. I did not know whether there was any local demand
for its utilization for generating purposes. You said in your original
statement. " Whether desired for generating or reservoir purposes or
not?"
Captain RILEY. No; there are power companies operating in this
area : there is no call or demand for that additional power up there.
Mr. STAFFORD. What is the present economical distance to which
power may practically be transmitted ?
Captain RILEY. Power transmitted from 100 to 350 miles increases
in cost from 3.8 mills per kilowatt-hour to 4.5 mills per kilowatt-hour.
Mr. STAFFORD. Four and one-half mills is the cost for the greater
distance ?
Captain RILEY. Four and one-half mills is the cost for 350 miles,
and 3.8 mills is the cost for 100 miles.
Mr. HILL. Captain, of course the construction of the Cove Creek
Dam would materially affect both the navigation of the river and the
flood control, would it not?
Captain RILEY. Yes, sir; it would be an aid to navigation and
flood control.
Mr. HILL. And flood control?
Captain RILEY. Principally navigation.
Mr. SPEAKS. Captain, how long have you been associated with the
Muscle Shoals project?
Captain RILEY. I had the pleasure in 1920 to assist in building the
dam and was there when they laid the first hydro cone and followed
it in my other assignments as to its completion.
Mr. SPEAKS. The plant as it now exists is in accordance with the
original plan, is it not?
Captain RILEY. Except that the additional units are not installed.
Mr. SPEAKS. With the additional generators installed the plant
would be complete as originally contemplated ; is that correct ?
Captain RILEY. That is correct, except in some minor things which
have not been done in connection with the facilities there.
Mr. SPEAKS. Mr. Bell testified a couple of weeks ago that when the
armistice came the plant was complete and prepared to operate as
originally planned. Could you translate into terms of fertilizer
how much the plant could produce if put into operation at this time.
Captain RILEY. No, sir.
Mr. SPEAKS. You could not?
Captain RILEY. No, sir ; I have not followed that at all.
Mr. SPEAKS. It was intended originally, in times of emergency, to
produce munitions of war.
Captain RILEY. Yes, sir.
Mr. SPEAKS. And in time of peace to produce fertilizer.
Captain RILEY. That seems to be in the national defense act.
Mr. SPEAKS. That is in the national defense act; that is the law
which authorized its construction and under which it was intended
to be operated. But you are not prepared to say whether or not it
202 MUSCLE SHOALS

could be started within 60 days, as one of the officers testified yes

terday, and carry out the original purpose of its construction?
Captain RILEY. As an engineer, I have gone through the plant and
it is in excellent condition. That is all I can say about it.
Mr. FISHER. You are familiar with the land values around the
proposed site for the Cove Creek Dam, are you not ?
Captain RILEY. Yes, sir.
Mr. FISHER. Can you give some estimate about the acreage there,
as to whether or not it is a reasonable price, or whether its use for
agriculture is such that it is a poor grade of land, or just what is
the condition there, as far as the land that would have to be taken for
the flood of the river?
Captain RILEY. Well, the studies and recommendations that were
made in the preliminary report on the Tennessee River Basin indi
cate it is not an expensive land and that the amounts estimated for
are just and reasonable, and that the cost, which was included in the
estimate for the purchase of such lands, seemed to be very reasonable.
(See appendix for estimates on Cove Creek.)
Mr. DODGLAS. Captain, I am not quite clear in my mind—and it is
undoubtedly my fault and not yours—with respect to the matter of
your estimated cost of producing power at Wilson Dam, assuming
18 units to be installed and in operation, and assuming the steam
plant to be in operation. As I recall it, you testified that the esti
mated cost would be between 3 and 4 mills.
Captain RILEY. No; I did not say the 18 units; I said the economi
cal development, which is 340,000 kilowatts. I did not give you any
price for the 18 units, sir.
Mr. DOUGLAS. I see. Then assuming the installed generating equip
ment at a capacity of 340,000 kilowatts, and assuming that installed
capacity to be in operation, and assuming, further, the steam plant
to be in operation, what is your estimated cost for producing a kilo
watt-hour ?
Captain RILEY. With the Government rate of interest on the
investment of 4 per cent proper charges for depreciation, amortiza
tion, maintenance, and operation, but no taxes and insurance, and
with the full economic capacity of the plant developed to 340,000
kilowatts, the hydropower may. be produced at this plant for approxi
mately 1.36 mills per kilowatt-hour. With auxiliary steam, the
hydrosteam firm power may be produced at a cost of approximately
3.17 mills. That includes sufficient steam plants to operate at a
hydrosteam basis of 340,000 kilowatts.
Mr. DOUGLAS. Now, what do you estimate the cost of producing
power by the auxiliary steam plants? I am not talking now about
the nitrate steam plant, but I am talking about these steam plants
to which you must refer in your last answer, which must be installed ?
Captain RILEY. If the steam power were generated in the same
vicinity as the hydropower and no transmission costs are considered,
the cost of the composite firm steam power would be 3.16 mills per
kilowatt-hour.
Mr. DOUGLAS. Now, then, what is the percentage of the total firm
power that would be produced by steam?
Captain RILEY. Five per cent.
 MUSCLE SHOALS 203

Mr. DOUGLAS. Then, Captain, if 95 per cent of the power costs

1.36 mills and 5 per cent of the power costs 3.16 mills, how can 100
per cent of the power cost 3.17 mills?
Captain RILEY. The steam installation necessary to make Wilson
Dam hydropower firm upon the hydrosteam basis of 340,000 kilo
watts, with a regulating dam below Wilson Dam, will require 390,000
kilowatts of steam in that vicinity. Now, the fixed charges on that,
the interest on investment, depreciation and amortization, taxes and
insurance amount to 7 mills per kilowatt-hour. So the difference
between 340,000 and 230,000, which is the difference between that
installed and that that will be required, will cost 7 mills per kilo
watt-hour. Now, one costing 7 and the other 1 mill, with per cent
of the time of steam, 5 per cent will bring it to 3.16 composite.
Mr. DOUGLAS. So that, from the point of view of developing power,
the obvious thing to do is to stabilize the flow of the steam by con
structing Cove Creek.
Captain RILEY. That is the answer to it.
Mr. DOUGLAS. Could you tell me, in order to complete those figures
(and I think your answer ought to be incorporated along with the
other figures which you gave, so that the picture will be complete),
what amount of power will be developed 100 per cent of the time,
assuming an installation of 600,000 horsepower?
Captain RILEY. One hundred per cent of the time ?
Mr. DOUGLAS. Yes.
Captain RILEY. Not more than the minimum flow can produce,
which is same as it is for the present installation.
Mr. DOUGLAS. Just exactly what is the power obtained with the
minimum flow as it exists now, approximately?
Captain RILEY. Fifty-nine thousand six hundred kilowatts.
Mr. DOUGLAS. Assuming an installation of 600,000 horsepower at
Wilson Dam, what would be the effect of the construction and opera
tion of Cove Creek solely as a regulating reservoir ?
Captain RILEY. That will increase the low flow to 106,000 kilo
watts, of course, or approximately 142,000 horsepower. (See
Exhibit B.)
Mr. STAFFORD. Increase or bring up to that much?
Captain RELEY. Bring up to 106,000, sir, or 142,000 horsepower.
Mr. DOUGLAS. Now, to get this clear, assuming Cove Creek to be
constructed and to be operated primarily as a regulating dam, what
would be the prime power to be' developed?
Captain RILEY. At Wilson Dam ?
Mr. DOUGLAS. No; at Cove Creek.
Captain RILEY. I do not think I have got it.
Mr. DOUGLAS. Would you mind sending it up here for the record?
Captain RILEY. I can give it to you in kilowatt-years; 15,000 kilo
watt-years, or 20,100 horsepower-years. (See Chart D.)
204 MUSCLE SHOALS

EXHIRIT D
Comparison of output! in per cent of time, Wilson Dam No. 2, tabulated from
Exhibits A, B, and C

Dam No. 2 with instal Dam No. 2 plus 56.5OO

'Per Dam No. 2 as in lation of 18 units, Dam No. 2 with instal kilowatts or 75,500
cent stalled, 8 units based on streamflow lation of 14 units horsepower as now
of curves for 1904-1924 installed at nitrate
time plant No. 2
1 2 3 4

;../'.„»/'.-. Horsepower Kilowatts Horsepower Kilowatts Horsepower Kilowatts Horsepower

100 59,600 80,000 59,600 80,000 59,600 80,000 116, 100 155,600
97 66,000 88,600 73,000 97,800 73,000 97,800 122,500 164,000
90 88,000 117,900 93.000 124,600 93,000 124.600 144.500 193, 400
80 108,000 144, 700 116,000 155, 400 116,000 155. 400 164,500 220.2OO
70 140,000 187,600 154,000 206.O00 154,000 206,000 196.500 263,100
60 180,000 241,200 202.000 270,700 202,000 270,700 236,500 316,700
SO 212,000 285,000 258,000 345, 700 258,000 345,700 268,500 360, 5OO

Dam No. 2 plus

83,000 kilowatts or Dam No. 2 with instal Column No. 6 plus Data from separate
Per 111,300 horsepower lation of 14 units plus Cove Creek plus ni curve, being duration
cent with additional Cove Creek trate plant No. 2 load curve for Dam
or unit installation in with additional unit No. 2 with 8 units
time nitrate plant No. 2
5 6 .7 8

Kilowatts H0'tfpow(r Kllowatli Horsepower Kilowatt Horsepower Kilowatts Horsepower

100 142,600 191, 300 106,000 142,500 188,600 252,800 59,600 80,000
97 149,000 199,800 112,000 150,000 193,000 258,600 83,000 111,200
90 171,000 229,220 139,000 186, 260 222,000 297,500 97,000 130,000
80 191,000 256,020 145,000 194,300 228,000 305,500 119,000 160,000
70 223.000 298,900 167,000 223,780 250,000 335,000 148.000 198,320
60 263,000 352,500 198,000 265,300 281,000 376,500 176,000 235. 840
50 295,000 396,300 245,000 328,300 328,000 439,500 194,000 260,000

Columns Kos. 1, 5, 6, and 7, based on Exhibit C.

Columns Nos. 2 and 3, based on Exhibit R.
Column No. 8, based on Exhibit A.
Furnished to Military Affairs Committee, House of Representatives, by Captain Riley, March 19, 1930.

Mr. DOUGLAS. Now let us get back to tie all of this testimony in
with the testimony with respect to the Cyanamid Co.'s bid. Mr.
Bell, when he appeared before the committee, was asked whether
the firm hydroelectric energy to be developed at the existing generat
ing plants is sufficient to meet his requirements, and he replied as
follows :
No ; not as they are projected in this offer. If \ve undertook to manufacture
only 20,000 tons of fixed nitrogen, yes; that would be adequate; or if we
were to produce our phosphoric acid only by the wet process, which is the one
which we are now using at the moment at Warners, N. J., then it would be ade
quate ; but we are in this situation, that we have done a great deal of work
oil the electric furnace phosphoric acid, and we are inclined to believe it
will eventually be the method by which our phosphoric acid will be produced,
and that anyone who has got himself in a position where he must manufacture
so much mixed fertilizer as is necessary to contain 50,000 tons of nitrogen
will find that if he is to stay in competition he must make both his phosphoric
acid and his nitrogen, both of them, with electric power. And once he gets
into that boat, then he requires more power for the phosphoric acid even
than he does for the ammonia by the cyanamide process or the electrolytic
process and synthetic process, from there on. So our estimate is, we might
require as much as 280,000 horsepower in order to meet the guaranty, which
we want to do not only for the 50.000 tons of nitrogen but also for the corre
sponding amount gf phosphoric acid that goes with it. That is why, In order
to meet these views as regards the quantity of nitrogen, we found it necessary
 MUSCLE SHOALS 205

to include a requirement that the Government construct Dam. No. 3 and the
Cove Creek Dam, so that we would be sure we would have enough power.
Does that make it clear to you?
Subsequent to that testimony, Mr. Bell testified that his company
would be willing to construct Cove Creek, and you say that Dam
Xo. 3 was not at all necessary, because it added nothing to the power
possibilities at Wilson Dam ?
Captain RILEY. Not materially.
Mr. DOUGLAS. So that we can cut that part of his answer out.
Now, to tie that in with the testimony that has been brought out
this morning, there is not a sufficient amount of firm power sus
ceptible of being developed at Wilson Dam, even with the installation
up to 340,000 kilowatts, to meet the requirements of Mr. Bell for
much more than 50 per cent of the time?
Captain RILEY. What was the amount—280,000 horsepower ?
Mr. DOUGLAS. Two hundred and eighty thousand horsepower.
Captain RILEY. Did he say that 280.000 horsepower was required
365 days in the year ?
Mr. DOUGLAS. Well that was the implication.
Captain RILEY. It may be. but it does not say so.
Mr. DOUGLAS. Inasmuch as my question referred to firm power,
then his answer was in terms of firm power.
Captain RILEY. I do not think so.
Mr. HILL. Well he has always testified that, if I may interpose
there.
Captain RILEY. With the additional steam unit at the Nitrate
Plant installed and with Cove Creek for storage regulation only,
and Dam No. 2. the sum is 195.000 kilowatts, or 261,300 horsepower.
That is the stream flow regulated by Cove Creek, plus the nitrate
plant, with the additional unit installed.
Mr. DOUGLAS. Yes ; but I asked this question : Mr. Bell has stated
that his requirements will be 280.000 firm horsepower—Is there
available at Muscle Shoals, assuming the installation at 340,000
kilowatts, sufficient firm power to meet his firm-power requiremnts ?
I am not including in the assumption the construction of Cove
Creek as a regulating reservoir.
Captain RILEY. No; there is not, without Cove Creek.
Mr. STAFFORD. But with Cove Creek installed, as I understand,
there is 261,000 horsepower available?
Captain RILEY. That is correct; that is, without interchange, of
course.
Mr. DOUGLAS. Mr. Chairman, I do not think I have any more
questions to ask.
Mr. STAFFORD (presiding). I wish to direct an inquiry along a
line that has not been brought out so far, and that is as to the
utilization of the horsepower during the last several years since you
have been in charge of the direction of affairs at Muscle Shoals.
How much has been used ; under what contracts, and what is the
present arrangement for the disposition of the horsepower?
Mr. HILL. If I may interpose there, if the Captain could put in
the record a statement showing, month by month, the amount of
power available there, the amount of power that was sold, and the
price received for that power, and the price which the amount avail-
10122&—30 14
206 MUSCLE SEIOALS

able would have brought had it been sold, it would be most in

teresting.
Mr. STAFFORD. That is the purpose of my inquiry.
Captain RILEY. The Florence Times have done that on data we
have given them and computed it, but we have never done that. I
can give you the total power generated by months and delivered
to the only contractor we have, the Alabama Power Co., and the
revenue received therefrom by months, since September 1925, to
date, if necessary.
Mr. STAFFORD (presiding). Will you kindly insert that in the
record?
Captain RILEY. Yes, sir.
ExHIBIT E

Power generated and revenue, Wilson Dam, September, 1925, to December, 1929

Total gen- Power used | Delivered to

Period era in camp transmission Revenue
kilowatt-hours and plant line

7, 510, 100 79, 100 7,431,000 $4,987.09

10,767,900 96,900 10,671,000 19,699.50
12, 932,800 85,800 12,847,000 24,093.04
13, 578,600 98,600 13,480,000 24,673.74
44,789,400 360,400 44,429,000 73,453.37

12, 584, 200 *184,800 12,321,000 20,851.20

13,678,900 199,800 13,381,000 25,259.33
21,403, 100 232,300 21,007,000 40,866.05
22,891, 100 302,100 22, 589,000 44,364.86
56,288, 100 579, 100 55,709,000 93, 168.35
60,226, 100 700, 100 59,626,000 118,855.15
27,870, 100 702, 100 27, 168,000 65,444.26
42,853,000 675,000 42,178,000 87,409.06
58,613,000 604,000 58,009,000 126,323.65
51,402,600 745,600 50,657,000 106,650.74
42,634,600 722,600 41,912,000 86,483.45
28, | 763,500 28, 172,000 56,941.35

439,380,300 6,411,000 || 432,629,000 sºlº.47

51,787, 500 737,500 51,050,000 105,334.08
32,043,700 655,700 31,388,000 67,401.51
20,368,200 708, 200 19,660,000 39,115.63
40,039, 300 540, 300 39,499,000 78,774.39
59,036,600 471,600 58, 565,000 27,396. 55
55,678, 300 447,300 55,231,000 123,047.15
58,403,600 859,600 57, 544,000 123,064.64
65,494, 200 1, 107,200 64,387,000 136,332.20
57, 158, 300 932,300 56,226,000 117,049.64
51, 556, 100 916, 100 50,640,000 103,019.99
61, 532,500 613, 500 60,919,000 124,447.87
12, 511,200 595, 200 11, 916,000 23,779.68
565,609, 500 8,584,500 557,025,000 | 1, 168,763.33

Jan. 1-31 48,959, 300 724,300 48,235,000 104,533.78

Feb. 1-29.--- 53, 198,900 640,900 52, 558,000 111,673.13
Mar. 1-31 -- 38,296,600 586,600 37, 710,000 80,448. 42
Apr. 1-30------- 18,005, 100 459, 100 17, 546,000 36,830.75
May 1–31 - 3,506,100 346,100 3, 160,000 6,220.55
June 1–30------- 3, 146,400 284,400 2,862,000 5,632.83
July 1–31 3,109,300 227,300 2,882,000 5,673.73
Aug. 1–31 14,635,900 236,900 14,399,000 28,699.94
Sept. 1–30---- 7,501, 100 210, 100 7,291,000 14,478.21
Oct. 1-31 8,773,800 368,800 8,405,000 16,700.01
Nov. 1-30 7,357,800 512,800 6,845,000 13,581.77
Dec. 1-31 15,606, 500 640, 500 14,966,000 29,812.75

Total for year-------------------------- 222,096,800 5, 237,800 216,859,000 454,285.87

 MUSCLE SEIOALS 207

Poncer generated and revenue, Wilson Dam, September, 1925, to December,

1929–Continued

Total gen- || Power used Delivered to

Period erated in camp transmission Revenue
kilowatt-hours and plant ine

1929
Jan-1-31------------------------------------- 21, 175,500 638,500 20, 537,000 $40,948.09
Feb. 1-2S------------------------------------ 3,404,300 569,300 2,835,000 5,559.78
Mar. 1–31– 3,601,600 520,600 3,081,000 6,041.35
Apr. 1–30- 3,371,900 353,900 3,018,000 5,934.92
May 1–31-- 3,415,300 348,300 3,067,000 6,026.87
June 1–30- 3,322,700 278,700 3,044,000 5,976.99
July 1-31------------------------------------ 5,370, 500 295, 500 5,075,000 10,043.39
Aug-1-31------------------------------------ 38,915, 400 475,400 38, 440,000 76,775. 14
Sept. 1–30- 40,560, 500 450, 500 40, 110,000 80, 112.91
Oct. 1–31-- 32, 106,200 598, 200 31, 508,000 62,891. 14
Nov. 1–30--- - 10,287,600 596,600 9,691,000 19, 274.74
Dec. 1–31----- 6, 150, 100 735,100 5,415,000 10,688.85

Total for year-------------------------- 171,681,600 5,860,600 165,821,000 330,274.17

Grand total.---------------------------- 1,443, 556,600 26,454, 300 1,416,763,000 2,899, 394.21

Mr. STAFFORD. What arrangement is now in order for the disposi

tion of power there to the Alabama Power Co.?
Captain RILEY. We have an existing contract with the Alabama
Power Co. to furnish them power up to the capacity of their lines
for a period of one year, if no other disposition is made of Wilson
Dam. If there is disposition made of it, the contract is revocable on
30 days' notice, on which we shall receive $16,000 per month for each
month which it is operated. If at the end of the current year, Janu
ary 1 to January 1, they have not taken from us $560,000 worth of
power, they will pay us the difference between the amount they have
paid us to that date for that year, and the $560,000.
Mr. STAFFORD. $560,000 being $60,000 more than the contract for
the last calendar year?
Captain RILEY. That is correct.
Mr. STAFFORD. Is there any demand for waterpower as developed
at Dam No. 2, other than from the Alabama Power Co.?
Captain RILEY. Any other demand?
Mr. STAFFORD. For the utilization of the hydropower.
Captain RILEY. There has been no other request for power that I
know other than the Alabama Power Co.'s request.
Mr. STAFFORD. At the conclusion of the hearing on yesterday, some
gentleman out in the hall stated that the municipalities of Chatta
nooga and other cities were only too willing to have purchased this
power for their own use, if they could have had the advantage: Are
you qualified to testify on any matters like that?
Captain RILEY. There has been correspondence on that matter. I
can not give the name specifically, but P. it is Muscle Shoals
city. The demand was for a small amount which the War Depart
ment did not believe worthy of entering into a long-term contract,
which would be required, until proper action had been taken by Con
gress, any more than they would enter into a long-term contract with
the Alabama Power Co.
Mr. STAFFORD. There are a number of power companies operating
in that district for furnishing hydro power to various concerns and
208 MUSCLE SHOALS

municipalities that need it. Can you state the names of the various
companies ?
Captain RILEY. The only other power company that is in that
vicinity is the Tennessee Power Co., known as the Southern Tennes
see Power Co.
Mr. STAFFORD. Is that a subsidiary of the Alabama Power Co., or,
in other words, affiliated with it ?
Captain RILEY. As I understand it, the Tennessee and Alabama
power companies are subsidiaries of the Commonwealth Southern.
Further than that, I do not know.
Mr. STAFFORD. Can you testify as to the reason why the Alabama
Power Co. has been withdrawing or utilizing power at Dam No. 2 in
varying amounts these past several years?
Captain RILEY. There is a very good reason, sir. The Alabama
Power Co. had what you might call a short-term contract. If they
were cut off from Wilson Dam in 1926, say, at that time they did not
have sufficient generating capacity without Wilson Dam; since that
time they have put in an 83.000 kilowatt unit; they have a steam
plant at Gorgas and they would not need Wilson Dam. The shortage
of power on their part could be carried by their steam stand-by sta
tions; at the present time their Dam No. 12 is spilling water and
there is no reason why they should take from us power when their
dams are spilling water. The only time they take power from us is
when they have to pool; that means, to build up their pool and main
tain it to their head height.
Mr. STAFFORD. That is during the low-water season ?
Captain RILEY. That is during the low-water season. They are
taking 10?000 from us, because we are on this far end of their system
and that is merely to feed Huntsville and vicinity.
Mr. STAFFORD. What territory does the Alabama Power Co.
supply ?
Captain RILEY. Practically all of Alabama and interconnected
with the Georgia Power Co. and the Tennessee Power Co. and
others.
Mr. STAFFORD. And those two companies supply what territory?
Captain RILEY. The whole southeastern district.
Mr. STAFFORD. Comprising what States?
Captain RILEY. Seven States, I believe—Tennessee, Alabama,
Georgia, North and South Carolina, Florida, and Mississippi.
Mr. STAFFORD. What is the extent of the property on which the
Muscle Shoals system is located—the acreage?
Captain RILEY. I do not know specifically the nitrate plant area;
it is some 2,300 acres, I believe. I do not know definitely.
Mr. STAFFORD. You are acquainted with the report made by the
officers who visited the plant last summer for a special study as to
the utilization ?
Captain RILEY. No, sir. I met some of them, but I know nothing
of their report.
Mr. STAFFORD. That report suggested if we would allow certain
of those plants to stand by in stand-still condition, then the other
plants should be disposed of or utilized for other purposes.
Captain RILEY. That is all in the nitrate area; that is not under
Wilson Dam. The nitrate plant area is all on the south side of the
river.
 MUSCLE SHOALS 209

Mr. HILL. I have no questions, but want to say that on yesterday

I stated to the committee about the trip Mr. James and I made to
Muscle Shoals the last of October or the first of last November, and
I spoke of the splendid condition in which we found the nitrate
plants under the care and supervision of Major Poyet. The same
statement would apply to Captain Riley here and the Wilson Dam
and the hydroelectric equipment—that it is in the very pink of
condition.
Captain RILEY. Thank you.
Mr. STAFFORD. A question has just been suggested to me: It may
be of some value, Captain, to have you state the expense of the
maintenance of Dam No. 2, the numbers of officers and enlisted men
and civilians that are now employed in the upkeep of the dam.
Captain RILEY. Wilson Dam is operated under the War Depart
ment as part of the activities of the Chattanooga district, Florence
being a suboffice. I am in charge of that suboffice. I have employed
approximately 91 men on maintenance and operation of Wilson Dam.
The Congress has appropriated approximately $270.000 each year for
the operation and maintenance of this dam. The expenses during
the year 1929 were $187,894.22. actual cost of operation. We received
from the Alabama Power Co. $500,000.
Mr. STAFFORD. Of what does the personnel consist in your force ?
Captain RILEY. The personnel consists of a superintendent of
operation of the plant and an assistant, and the necessary clerical
force; the station operators; the hydraulic and other foremen neces
sary for the operation of the lock gates ; the electrical and mechanical
foremen; and the men for the proper maintenance of the spillways,
the switchyard, and utility buildings. We have, in addition to that,
under a requirement by the State, to properly take care of the malaria
control on Wilson Lake, which is 14% miles long.
Mr. STAFFORD. How many men all told ?
Captain RILEY. A total of 91 men, at an expense not exceeding
$500 a day.
Mr. DOUGLAS. Major, I am very glad you came to testify before the
committee, but may I ask at whose request you came ?
Captain RILEY. I can not tell you, sir.
Mr. STAFFORD (presiding). I am informed, at the request of the
committee.
Captain RILEY. My order reads :
The Secretary of War directs that you will proceed to Washington and appear
before the Military Affairs Committee at 10.30 o'clock Tuesday, March 18, and,
upon being excused by that committee, return to your proper station.
I have no other knowledge concerning it.
Mr. DOUGLAS. May I ask that the captain do this for the record,
that he correct accurately, by the use of the proper factor, his trans
lations of kilowatts into horsepower?
Captain RILEY. I will furnish the corrections with the photostat
of the curves which you have requested.
Mr. DOUGLAS. And I think in your verbal testimony it should be
corrected, so that there will be no discrepancy.
Captain RILEY. You can correct the verbal testimony from the
copy of the exhibits I attached to this.
210 MUSCLE SHOALS

Mr. STAFFORD. What would be the capacity that the Alabama

Power Co. had the privilege of utilizing under their contract?
Captain RILEY. Just the capacity of the lines—120,000 kilowatts.
Mr. STAFFORD. What is the character of the transmission lines
they use in connection with that power ?
Captain KILEY. They are 154,000-volt lines and 110,000-volt lines.
The 110,000-volt line goes to Huntsville and the Alabama Power
connect at the nitrate plant. We own the line from Wilson Dam
to nitrate plant No. 2, and it has a capacity of 136,000 kilowatts.
Mr. DOUGLAS. What is the distance to Huntsville ?
Captain KILEY. Huntsville is 67 miles, but the lines go down by
way of Decatur.
Mr. DOUGLAS. That is the Alabama Power Co. line ?
Captain RILEY. We only own from nitrate plant No. 2 to Wilson
Dam.
Mr. STAFFORD (presiding) . In behalf of the committee, I wish to
say we are very much indebted to you, Captain, for the information
you have given us. The committee will now stand adjourned until
10.30 o'clock to-morrow.
(The committee thereupon adjourned until to-morrow, Thursday,
March 20, 1930, at 10.30 o'clock, a. m.)
 MUSCLE SHOALS

WEDNESDAY, MABCH 26, 1930

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Washington, D. C.
The committee met at 10 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. General Williams is here to-day. He will kindly
take his place at the end of the table and qualify to the stenographer.
STATEMENT OF MAJ. GEN. C. C. WILLIAMS, CHIEF OF OKDNANCE
UNITED STATES AKMY
General WILLIAMS. Major General Williams, Chief of Ordnance.
Mr. RANSLEY. General, we have before us that familiar subject of
Muscle Shoals, and will you now proceed and make a statement.
General WILLIAMS. Mr. Chairman, I do not know for what rea
son I am called. I have no particular statement to make about
Muscle Shoals.
Mr. RANSLEY. Well, our understanding, General, was that you
were absolutely familiar with the plant and that you could give us
considerable information, not only as to the condition but the possi
bilities of the plant in producing not only munitions of war but
possibly give us some idea as to the amount of fertilizer that could
be produced.
General WILLIAMS. Does the committee want me to give a general
statement ?
Mr. RANSLEY. The idea is to have you make a general statement.
Mr. SPEAKS. General, I have heard what you had to say in your
previous appearances before the committee. I simply want to keep
the picture straight. You are thoroughly familiar with the law
authorizing the creation of Muscle Shoals?
General WILLIAMS. Yes ; I am familiar with it.
Mr. SPEAKS. Now it was completed to meet the requirements of
that law ; is that correct ?
General WILLIAMS. Well, the original act providing for the plant
there at Muscle Shoals appropriated a sum of money, as I recollect
some twenty millions of dollars, but a great deal more than twenty
millions were spent on these plants.
Mr. SPEAKS. But the big idea was this, a plant that in time of
emergency could be used for the manufacture of munitions of war
and which, in times of peace, could be maintained in stand-by condi
tion by the manufacture of fertilizer to be sold to farmers; that is
the general proposition ?
211
212 MUSCLE SHOALS

General WILLIAMS. Correct.

Mr. SPEAKS. The law further provided that it should not be oper
ated in connection with any private enterprise. Now, somebody tes
tified—I think it was Mr. Bell—that when the armistice arrived the
plant was complete, prepared to operate to manufacture the muni
tions of war, or fertilizer as the occasion demanded; that we had
expended about $160,000,000. Is that a statement of about the facts ?
General WILLIAMS. Not in my opinion. The plant as it stands
now is not equipped to manufacture fertilizer; it never has been
equipped to manufacture fertilizer, and it can not be equipped to
manufacture without very considerable Changes. Now, then, I will
qualify that by saying the product the plant does turn out, which
is ammonium nitrate, can be used to a certain extent as a fertilizer,
but it has certain very difficult qualities that make it hard to ue it
and, as a matter of fact, it is not used so far as I know as fertilizer.
Mr. SPEAKS. Well, when I say the manufacture of fertilizer, why
I intend to imply, at least, that it produced the bases for fertilizer.
General WILLIAMS. Well, it fixes nitrogen and that is simply one
of the three important plant foods.
Mr. SPEAKS. Yes.
General WILLIAMS. Now, then, it does not as it stands now fix
nitrogen in a form that can be used directly as a fertilizer and. in
order to prepare the nitrogen that it does fix so that it could be
used as a fertilizer, would require very considerable additions and
expenditures of additional moneys on the plant.
Mr. SPEAKS. I will not continue my questioning, although I would
like this to go in the record : The plant was constructed for the sole
purpose of manufacturing munitions of war in time of emergency
and, in time of peace, to be maintained in stand-by condition, that
is, in a condition to operate, by manufacturing fertilizer to be sold
to the farmer. Now, if that was the purpose and intent of the law,
do you say that it does not meet such requirements ?
General WILLIAMS. You mean the plant as it stands does not meet
the requirements?
Mr. SPEAKS. Oh, well, it will have to be overhauled, I admit ; but is
it sufficiently up to date to meet the requirements of the law after it
has been overhauled ?
General WILLIAMS. If you mean by that if it is sufficiently up to
date to produce a fertilizer, I should say decidedly no.
Mr. SPEAKS. That is all.
Mr. WUKZRACH. It is sufficiently up to date, though, is it not, Gen
eral, to manufacture nitrates?
General WILLIAMS. The plant No. 2 is right now in exactly the
same condition that it was at about the time of the armistice. It
can now operate to the same end that it could operate then, to produce
the same products that it produced then, and it can not do anything
else without changes. Now, then, there is one product that it was
built to turn out, that it turned out at the time of the armistice, and
that it can turn out to-day, and that is ammonium nirate, which is
one of the ingredients of high explosive shell filler, the other in
gredient that we use being T. N. T.
Perhaps I had better start right at the basis of this* whole thing.
One of the essentials, of course, for use in war is explosive and there
 MUSCLE SHOALS 213

are various kinds of explosives that are used in war ; but they are all
made by the use of a combination of sulphuric acid and nitric acid
in treating some other substance like cotton, for guncotton, toluol for
T. N. T., ammonia for ammonium nitrate, and so on. The United
States is one of the largest producers of sulphuric acid. We have,
of course, large deposits of sulphur in Texas and Louisiana that sup
ply not only the markets of the United States, but, to a large extent,
the markets of the world, and the sulphur is the basic raw material
for the manufacture of the sulphuric acid.
So, therefore, endowed as we are by nature, we do not have to
worry about sulphuric acid; we can just put that aside and forget
about it. On the other hand, we do not produce in this country, or
nature did not give us the essential raw material for the manufacture
of nitric acid in the way that it gave us the essential raw material
for the manufacture of sulphuric acid.
Up to the time of what we call the atmospheric or synthetic fixa
tion of nitrogen, the essential raw material for the production of
nitric acid was sodium nitrate, and, as you gentlemen all know, the
main source of sodium nitrate was Chile. Therefore, that is the
reason why at the beginning of the war we were absolutely depend
ent upon the saltpeter beds of Chile for the production of an essen
tial material of war. Now, then, not so very long before 1914, there
had been considerable work done, particularly experimental work,
in the development of methods of fixing nitrogen from the air. The
Germans took the lead in this and one of the processes developed was
what was called the Haber process and another process was the
cyanamide process. When we came into the war, there was practi
cally no synthetic nitrogen produced in the United States. The
only concern that had a process that was working was the American
Cyanamid Co. and they had what was known as the Cyanamid proc
ess. The General Chemical Co., for some years previous to our.
entering into the war, had been doing a lot of laboratory work on
a modification of the German Haber process and they had built
up a small laboratory unit that they thought operated sufficiently well
to form the basis of a larger or a commercial unit. So that when we
caine into the war, there was just one process for the fixation of
nitrogen that we knew we could get in this country, and, above all,
that we knew we could get people that could build the plant and
run it. and that one company was the American Cvanamid Co.
When it was decided to put up these plants at Muscle Shoals, a
contract was made with the American Cyanamid Co. for what we
now know as nitrate plant No. 2 and all of you gentlemen who have
visited Muscle Shoals will remember that nitrate plant No. 2 is the
one that is spread over a large area and consists of a great many
buildings and a great many of them very large and excellent build
ings. Now, then, that plant was designed by a subsidiary of the
American Cyanamid Co. called the Air Nitrates Corporation. The
actual contract for the building was given to Westinghouse, Church,
Kerr & Co., and the cost of that No. 2 plant was $67,500,000 in round
numbers. Now, after that plant was built, an experimental run
was made on its sufficient to prove that it met the purposes for which
it was designed and built.
214 MUSCLE SHOALS

The plant that we know as nitrate plant No. 1 was a plant that
was based on a modification of the Haber process that was developed
by the General Chemical Co. We made a contract with the General
Chemical Co. to design this plant; we made a contract with the
J. G. White Engineering Corporation to erect the buildings. The
cost of No. 1 plant was $12,800.000. The No. 1 plant was not a
success and in order to do anything with it you would have to throw
away a great deal of the equipment that is there now and substitute
new equipment of different design. The General Chemical Co. had
not gone sufficiently far in their work with their modification of the
Haber process at that time to design a successful plant. In this con
nection, however, I think I should say that the General Chemical Co..
which is now one of the subsidiaries of the Allied Chemical & Dye
Corporation, is certainly the largest and. perhaps, one of the most
successful producers of synthetic nitrogen, not only in the United
States, but perhaps in the world. That is a modification of the
Haber process. After the armistice, the Ordnance Department en
deavored to get the General Chemical Co. to redesign plant No. 1,
but they decilned to do so. A subsidiary of their company at Syra
cuse, N. Y., designed a plant for themselves. It was really an experi
mental plant, but on a sufficient scale to be sure that they could work
out the commercial production of synthetic nitrogen. They worked
at this plant, operated it very successfully, for five or six years and
then they started on a new development, new construction of a tre
mendous plant down here at Hopewell, Va., which is the largest
plant by all odds in the United States.
That, in general, covers these two plants that were designed and
built down at Muscle Shoals. They were completed right after
the armistice. As I say, No. 1 plant did not operate successfully.
No. 2 plant did; and those plants stand to-day just about as they
'were when the trial runs were completed some 11 or 12 years ago.
Now, of course, the question of the disposition of these plants has
been before the Congress for some 10 or 11 years and is still there.
That is all I have in the way of a general statement, Mr. Chairman.
Mr. WURZRACH. General, how much do you think it would cost to
put plant No. 2 in such a condition that it would be possible to manu
facture fertilizer, or have you any opinion on that?
General WILLIAMS. I would not dare to make an estimate. To
begin with, as I said before, you can not take that plant as it is and
manufacture an ingredient of a fertilizer—that is, one of the three
ordinary commercial ingredients. You first have to put in new
capital and change the design and equipment of the plant in order
to produce whatever you might decide upon as an ingredient of a
fertilizer you are going to produce there.
Mr. WURZRACH. Suppose you have the nitrogen and, let us say,
the phosphorus
General WILLIAMS. There is no way of producing phosphorus at
that plant.
Mr. WURZRACH. How about potash ?
General WILLIAMS. There is no way of producing potash there.
Nearly all of our potash is imported from Germany and France.
There are some potash mines. I believe, being developed down in
Texas, down in the southeast country, but the United States is not a
 MUSCLE SHOALS 215

serious producer of potash. There is some produced from seaweed,

I believe, out on the Pacific coast ; but as compared with the total
tonnage required for the United States, I do not think the produc
tion is serious.
Mr. WURZRACH. Now, plant No. 2 was operated by power from the
steam plant?
General WILLIAMS. Yes, sir.
Mr. WURZRACH. Close by ?
General WILLIAMS. Yes, sir.
Mr. WURZRACH. What part was the water power intended to play
in the operation of that plant ?
General WILLIAMS. The water power was built for the purpose of
producing economical power; and the steam plant was put in there,
as is generally the case, to supplement the water power, so as to
increase the amount of primary power you can produce in the com
bined plant. That, I believe, is generally the practice in all power
companies that use hydroelectric power.
Mr. WTJRZRACH. And in your opinion it would take quite a large
sum of money to convert plant No. 2 into a plant that would be
suitable for the manufacture of fertilizer?
General WILLIAMS. Nobody can answer your question without first
knowing exactly what you mean by " fertilizer and without going
down there and spending weeks and perhaps months of the time of
engineers and expert people to determine just what would have to
be done and make an estimate of the cost. But first you would have
to specify exactly what you mean. The term " fertilizer " is too
general for anybody to give you an answer.
Mr. WAINWRIGHT. With all the talk we have had, do you mean
nobody has yet done that, General ?
General WILLIAMS. What is that?
Mr. WAINWRIGHT. With all the talk we have had for all of these
years, do you mean to say that nobody has done just what you say
is so practical to do at this time? Do you mean to say that to-day
this committee has no source to which it could go to get an absolute
answer to Mr. Wurzbach's question?
General WILLIAMS. Not until you specify what you want to pro
duce.
Mr. McSwAiN. I am satisfied there is abundant evidence in the
record on that. Doctor Cottrell, for instance, testified on that, as
well as Mr. Bell. There is abundant evidence on that.
Mr. WURZRACH. What is your recollection of the testimony as to
the probable cost, or an estimate of cost, Mr. McSwain?
Mr. McSwAiN. It depends on what you mean by " fertilizer." Of
course, meat is food, but it is not a complete food; there are lots
of elements of food. But we know nitrates are one of the essential
ingredients of a fertilizer and that we pay eight or nine hundred
million dollars a, year for it ; we pay the Chilean Government alone
§12.000.000 a year export duty on the nitrates we bring from there.
That is fertilizer, and it has not any potash in it and it has not
any phosphorus in it.
Mr. WAINWRIGHT. General, there is just one other question I
would like to ask : Do you mean to say that that plant to-day is not
designed and equipped and capable of turning out an ingredient of
fertilizer, or one of the ingredients?
216 MUSCLE SHOALS

General WILLIAMS. The only thing that that plant was designed
for, that it was ever equipped for, that it ever could do, that it can do
now, is to turn out ammonium nitrate.
Mr. WAINWRIGHT. Is not ammonium nitrate one of the bases of
fertilizer ?
General WILLIAMS. Not one of the accepted ingredients of a com
mercial fertilizer. Now I can answer your question: You said, Has
this committee never had anything definite about these things?
The Ordnance Department itself, in 1919, presented a bill for the
Government operation of these plants, of plant No. 2, for the pur
pose of producing an ingredient; but the Ordnance Department,
before it could do that, had to make the assumptions that, I say,
you have got to make when you answer these questions.
Mr. WAINWRIGHT. But it made the necessary assumptions ?
General WILLIAMS. Of course, we did. The thing we assumed
was we would make ammonium sulphate; that that would be an
ingredient of the fertilizer that we produced. Then, having assumed
that, you can go ahead and determine what your changes and addi
tions to the plant must be in order that you may produce that.
Mr. WAINWRIGHT. That is exactly what we are trying to get at.
General WILLIAMS. Now, at the time we presented our plan for the
operation of Muscle Shoals, ammonium sulphate was selling in
the market for about $65 a ton, and it was upon that basis our esti
mates were made. We estimated that we could produce it at a cost
of $48.20 a ton. Ammonium sulphate is selling in the market to-dav
for $38 a ton. Now, when these gentlemen like Mr. Ford, Mr. Bell,
and the others, the American Cyanarnid Co., come before you and
make definite propositions, why, of course, they have examined these
places and made their assumptions. They do not necessarily tell
you what all their assumptions are; but, of course, they have a basis
on which they come to you and make a bid for these properties.
Mr. WAINWRIGHT. You tell us, though, that in the plan you re
ported here for putting that plant in operation for the manufacture
of ammonium sulphate, you did go into that and make the necessary
assumptions and arrived at a cost for that ?
General WILLIAMS. We had to before we could present a plan; it
was essential.
Mr. WAINWRIGHT. If that was done, then what was the additional
cost required in order to put it into operation as you reported?
General WILLIAMS. The total fund for new construction we esti
mated at $3,000,000; that is, the additional plant and equipment that
you would have to have, and ammonium sulphate was about the
simplest thing that you could produce.
Mr. WAINWRIGHT. And you had your scheme also all prepared for
actually putting the plant in operation ?
General WILLIAMS. Everything. A bill was drafted, and here is a
statement
Mr. WAINWRIGHT. That is, you had your scheme of mobilization,
so as to put that plant into operation ?
General WILLIAMS. We must have that any way; but, of course, our
scheme of mobilization has nothing to do with fertilizer. The whole
thing we want when it comes to mobilization is to produce explosive ;
we do not care anything about fertilizer, so far as our mobilization
scheme is concerned.
 MUSCLE SHOALS 217

Mr. WAINWRIGHT. But there would be a very close relation be

tween the two ?
General WILLIAMS. None whatever.
Mr. WAINWKIGHT. Would it take more or less?
General WILLIAMS. As it is now, it produces what we want. In
order that the benefit of the plant may remain to the United States,
then it should be maintained so that it still can produce what it was
designed to do and what it can do now, to-day.
Mr. McSwAiN. But, General, what the colonel means is this : Con
verting it over to make either ammonium sulphate or ammonium
phosphate will not deprive it of its capacity to fix ammonium nitrate?
General WILLIAMS. No.
Mr. McSwAiN. It can be very easily cut off at a certain process and
the next day go to turning out ammonium nitrate only ?
General WILLIAMS. One of your first steps, of course, has got to be'
fixing of nitrogen. That is the basis.
Mr. MoSwAiN. That is the intermediate connection between the
two, as the colonel says, is scientific and practical.
Mr. WAINWRIGHT. Then the modilization to produce ammonium
nitrate would have a direct bearing upon the production of am
monium sulphate; there might be come additional personnel and
additional talent required, but the two things dovetail?
General WILLIAMS. It is an essential part of the process that would
not have to be changed. In order to produce your ammonium sul
phate, you have to add to what you already have there.
Mr. WAINWHIOHT. That is all ; thank you.
Mr. DOUGLAS. Referring to the amount you gave as necessary to be
expended, that was to produce ammonium sulphate ?
General WILLIAMS. That additional expenditure, according to our
estimates in 1919, was to provide the additional equipment that is
needed to produce ammonium sulphate.
Mr. DOUGLAS. And that did not include any estimate of cost for
the production of phosphoric acid ?
General WILLIAMS. None whatever.
Mr. QUIN. General, what is the production in the United States
now, if you know?
General WILLIAMS. Of what ?
Mr. QUIN. Ammonium sulphate, that you speak of?
General WILLIAMS. My recollection of the last figures from the
Department of Commerce Yearbook is that we exported something
dose to 200,000 tons—exported.
Mr. QUIN. Do you know to what countries that was exported?
General WILLIAMS. A good deal of it was exported to the East. I
think. I have forgotten the exact distribution of it.
Mr. QUIN. Perhaps it went to the natural market for that product ?
General WILLIAMS. Yes, sir. Now, then, there is rather an inter
esting fact there that at the time we came into the war the United
States was importing yearly about 165,000 tons of ammonium sul
phate. The production in our by-product coke ovens of the gas
anunonia as a by-product has been so great and, it being convenient
to convert the most of that into ammonium sulphate, the production
of ammonium sulphate has been so great in this country that instead
of being an importing nation, as we were in 1914, we are now an
exporting nation.
218 MUSCLE SHOALS

Mr. QUIN. Through what process is the most of that made; do

you know?
General WILLIAMS. Passing the mother liquor through sulphuric
acid. That is the general outline.
Mr. QUIN. You spoke of the process necessary to make this in the
form of nitrogen like Chilean nitrogen : Do you know what that
process would cost to be added at Muscle Shoals, plant No. 2 ?
General WILLIAMS. I do not know what it would cost. You can
take the nitrogen as fixed in the plant now existing there, convert
that into nitric add in the plant and equipment that now exists
there for the conversion, and then carrying that on and converting
it into sodium nitrate.
Mr. QUIN*. That is what I mean.
General WILLIAMS. I have no estimate of the cost of doing that.
- Mr. QUIN. One gentleman told us the other day that $100.000
would do it?
General WILLIAMS. Well. I would not want to assume responsi
bility for any such figures.
Mr. QUIN. You are the head of the Ordnance Department?
General WILLIAMS. Sir?
Mr. QUIN. You have been a long time in this?
General WILLIAMS. Yes, sir.
Mr. QUIN. They can make the sodium nitrate there ready to go
on the soil, can they not?
General WILLIAMS. If you want to expend the necessary money to
put in additional equipment, beyond a doubt you can do it.
Mr. QUIN. You do not know what that will cost; you have not
seen fit to go into that part of the expenditure that would be
necessary?
General WILLIAMS. No. sir. That, of course, is a perfectly well-
recognized method of using that fixed nitrogen. In the big plant
of the Allied Chemical & Dye Co. down here at Hopewell, in which
I understand they have put' some $35,000,000, one of their products
at least is sodium nitrate which you talk about ; which is, oi course,
one of the well-recognized and well-known ingredients of fertilizer.
Mr. QUIN. Do you know the capacity of that plant at Hopewell,
Va., that was just built about two years ago?
General WILLIAMS. So far as we can find out, it is 200 tons of
anhydrous ammonia per day.
Mr. QUIN. All of the different plants that produce this ingredient
of fertilizer make the stuff that is necessary for explosives, and,
if we were to get into a war very suddenly, those amounts exported
from the United States could be turned into powder, or explosives
for canon, guns, and so forth ?
General WILLIAMS. It would be a long chemical process to do
that. You can not just turn it into powder and explosives ; it takes
a long process to do it.
Mr. QUIN. What do you mean by "long process"; what length
of time? If you are familiar with that kind of business, what
length of time would it take to turn the plant into making explosives,
making the necessary ingredients for explosives, or powder?
General WILLIAMS. Let us apply your question to Muscle Shoals.
One of the essential parts of the operation at Muscle Shoals and at
any other plant for fixing nitrogen and converting it into other
 MUSCLE SHOALS 219

things is the oxidation of your ammonia gas into nitric acid. Now
that is a well-developed thing that was known before even the process
of fixation was known, and a lot of equipment and so on, that you
use for that purpose is commercial equipment ; so that you could take
ifuscle Shoals as it stands to-day and you need not fix one pound
of nitrogen at Muscle Shoals ; you could go to the by-product coke
ovens, probably right at Birmingham, Ala., and get all the ammonia
gas you needed, put it in there and start right at your oxidation
process and, from the oxidation process on, No. 1 plant is just as good
as No. 2. No. 1 plant was not successful as a plant for the fixation,
the welding together, of nitrogen and hydrogen, but the rest of it
was practically commercial; you could send out in the market and
buy it. Now, as it stands to-day, the things at Muscle Shoals that
are useful and important so far as the defense of the country is con
cerned, is not the fixation of nitrogen; there is no use bothering
about the fixation of nitrogen, because it is done to-day commercially
in quantities sufficient to meet any demand that is probable in time
of peace or in time of war. So that, as a problem of national de
fense, it practically does not exist. The problem that does exist,
through, where there is not sufficient capacity, is increasing it at
the point you go to oxidize ammonia gas into nitric acid and then
carry that on into your explosives. That is the neck of the bottle;
the rest of it is not the neck of the bottle.
Mr. QnN. Then for the benefit of those people who fear we will
jump into a war next week, would there be anything alarming about
our not having sufficient nitrogen (
General WILLIAMS. In my opinion, no, sir.
Mr. QnN. We would not be dependent on Chile, from your answer
to my questions *.
General WILLIAMS. Personally. I do not believe we would.
Mr. QuiN. And the only thing that the United States would be
dependent on any foreign country for at all would be the manganese
and opium. Is not that true, if a war should come?
General WILLIAMS. There are other things. Take rubber, for
instance—rubber is quite as important as almost any other material
that is used in war, and we are dependent upon foreign countries
for rubber.
Mr. QUIN. Well we make rubber : but manganese, we can not make
that. I reckon we have some of it, though ?
General WILLIAMS. There are deposits of manganese in the United
States, but they are not very important deposits and not very high
grade.
Mr. DOFGLA.S. If I may interpolate with respect to manganese, the
Bureau of Mines is now making a survey of the available tonnage
of manganese within the continental limits of the United States, and,
as I understand it, the tonnage available is much larger than was
thought.
Mr. STAFFORD. But that is a very low grade of manganese ore.
Mr. DOUGLAS. Yes, a very low grade of manganese ore; but it is
manganese, aiid there have been developed processes by which low-
grade manganese may, under conditions of emergency, be sufficiently
concentrated so that it will be just as serviceable as high-grade
manganese is that we now import.
220 MUSCLE SHOALS

General WILLIAMS. That was done during the war. I think Col
onel Swann, of Birmingham, Ala., was instrumental in processing it.
Mr. QUIN. Yes ; we had a man before this committee who was a
very able man.
General WILLIAMS. Yes, sir; and Colonel Swann, at his own ex
pense, has had worked out by his staff and his experts a plan for the
production of manganese along the lines you talk about.
Mr. DOUGLAS. And there are manganese deposits now being oper
ated at a profit which were not being operated at a profit several
years ago?
General WILLIAMS. Yes, sir.
Mr. DOUGLAS. As a result of the development of a high-grade
metallurgical progess (
General WILLIAMS. Yes, sir.
Mr. QUIN. If we can get our necessary supply of manganese, and
there is no question about that, from what Mr. Douglas says, then
we can raise the opium, can we not?
General WILLIAMS. I personally do not think there is very much
reason to be particularly scared about any of these things, when we
think that Germany, with practically all of the navies of the world
against her, was still able to supply herself, and she is not endowed
with anything like the richness that we are endowed with. You take
the question of manganese, it will be just exactly like the question
of cotton in the South during the Civil War : Of course, the price
will go up, but when you think manganese is produced in Brazil,
East Africa, India, Russia, and you look at the map and see what
our coast line is, to my mind it is absurd to think that anybody is
going to blockade the coast line of the United States so that you can
not get any manganese. It is going to cost more, but you can do it.
Mr. QUIN. You can get anything as long as you 'have got the
money ?
General WILLIAMS. Of course you can.
Mr. McSwAiN. General, what use is made now of this present
enormous production of synthetic nitrogen?
General WILLIAMS. It has a number of uses. As I understand it,
one of the big uses is in the refrigerating trade. You take the re
frigerated cars, I think it is used in some of the mechanical refrigera
tors, and it is used in the production of nitric acid. I have here a
table showing the three principal explosive producers in the United
States. They have turned over practically all of their equipment for
the production of nitric acid, which has been changed over from the
use of sodium nitrate to the use of ammonia. In this connection, I
think I might say (perhaps the committee has heard it before,
though) that since the war the Du Pont Co. has worked out a very
efficient process and equipment for the manufacture of nitric acid
and, above all. for the concentration of the nitric acid after the
ammonia gas is oxidized.
Mr. McSwAiN. In other words, General, the production of nitrogen
in its various forms, whether nitric acid, or nitrous acid, or sodium
nitrate, or whatever else it may be, is being consumed by industry?
General WILLIAMS. In large quantities.
Mr. McSwAiN. Exactly ; and by " industries " I mean the pharma
ceutical industry also.
General WILLIAMS. Yes, sir; in large quantities.
 MUSCLE SHOALS 221

Mr. McSwAiN. Now, in the event of war. if the product of these

plants had to be applied indirectly and by any intermediate process
to the production of explosives, then industry would suffer from a
lack of nitrogen or nitric acid ?
General WILLIAMS. I very much doubt that. You can not change
industry overnight from the producing of materials of commerce in
a time of peace to producing materials of war.
Mr. McSwAiN. If you can not change industry overnight, if it
has been a custom to combine nitrogen products from these existing
plants, and if the Government takes all of the products at Hopewell,
Syracuse, and this plant at Charlestown, W. Va., what will indus
try do?
"General WILLIAMS. You did not let me finish; if you will let me
finish, I will tell you what my opinion is.
Mr. McSwAiN. Surely.
General WILLIAMS. It will take maybe from nine months to a year
ind a half to change over industry so that it will be requiring a full
•upply of these materials that are necessary for powders and ex
plosives. In that time you can add to your present capacity in my
ttpinion, so that you need not cause anything more than a minimum
of disturbance to your industrial and agricultural demands.
Mr. McSwAiN. Now, General, do I understand the trend and force
of your argument to be this, that so far as national defense is con-
terned, we can just simply wreck and destroy the Muscle Shoals
plant? Let us come right down and see what we mean about this
thing?
General WILLIAMS. I am perfectly willing to say, and give it as
my opinion, that the parts of the Muscle Shoals plant that were
built for the production of ammonium nitrate, that should be re
tained for the national defense or that are necessary for the national
defense, are those parts that take the fixed nitrogen in the form of
the ammonia and oxidize it, and then, from there on, all the parts
that lead up to or are used in the fixation of nitrogen and hydrogen
in forming ammonia gas, if they burn down to-night, I do not think
it will malce one particle of difference so far as national defense is
concerned.
Mr. McSwAiN. But, of course, you know there is a physical con
tinuity between them.
General WILLIAMS. Oh, yes.
Mr. McSwAiN. There is an unbroken continuity between the ini
tial stage of fixation to the last stage of nitric acid ?
General WILLIAMS. Yes.
Mr. McSwAiN. To the making of ammonium nitrate, is there not ?
General WILLIAMS. Yes. sir.
Mr. McSwAiN. Then, of course, you could not burn down one
without expecting the rest to get burned, also ?
General WILLIAMS. I am speaking figuratively.
Mr. McSwAiN. I understand. And then your' theory is you could
fix your initial stage elsewhere and take your ammonia gas from
down here in Virginia at Hopewell
General WILLIAMS. There are dozens of places where you can
get it.
Mr. McSwAiN. Take it from Hopewell. or elsewhere, by train and
put it through its last stages down at Muscle Shoals '.
101229—30 15
222 MUSCLE SHOALS

General WILLIAMS. Yes; beyond doubt.

Mr. McSwAiN. We could do it, but would that be practicable and
reasonably good business for the Government?
General WILLIAMS. Anybody who is responsible for starting those
plants operating in my opinion would be foolish if he did not start
exactly that way ; because by doing so, he would gain time. If you
wait until you put it through your process there and fix your am
monia, you are losing time in the manufacture of nitric acid and
converting it into explosive. So that the thing he would do would
be to go right straight and buy ammonia gas and start right after the
fixation process.
Mr. McSwAiN. Now, General, you were in the ordnance during the
war ?
General WILLIAMS. Yes, sir.
Mr. McSw.AiN. Did you sign the contract to build these plants
down there?
General WILLIAMS. No, sir ; those contracts' were made before I
came back from France. I was Chief of Ordnance from the 30th
of April, 1918, up to the present time.
Mr. McSwAiN. Is it your view that was all just a foolish waste of
money and an unnecessary step to take at that time?
General WILLIAMS. No, sir; it was not. It was absolutely essen
tial for the defense of the country and it would have been criminal
not to do it.
Mr. DOUGLAS. At that time?
General WILLIAMS. At that time. But that time and now are
tremendously different. We have had 12 years in the development
on this whole problem of the fixation of nitrogen and large sums of
money have gone into it.
Mr. McSwAiN. Now, then, you ire the Chief of Ordnance now
have been for 8 or 10 years;
General WILLIAMS. For 12 years.
Mr. McSwAiN. Have you any Government arsenals where you
manufacture cannon, rifles, and so on ?
General WILLIAMS. Yes, sir.
Mr. McSwAiN. By the same token you would abolish those Gov
ernment plants and depend on private industry and depend on the
manufacture of cannon and rifles by private industry?
General WILLIAMS. No, sir; I would not do that; not at all.
Mr. McSwAiN. If the Government were not manufacturing them,
private industry would be glad to get the contracts, would it not?
General WILLIAMS. The parallel is this: It would be foolish, in
my opinion, for the Government to build blast furnaces to produce
pig iron. We use pig iron at all times and, if the Government should
go and try to produce it, it would be foolish. You would go out in
the market and buy it, and so you could go out in the market now
of commerce and industry and buy the ammonia gas you want.
Mr. DOUGLAS. And it would be cheaper to do that. General ?
General WILLIAMS You would gain time that way. If you think
you need the productive capacity down there, you could start initially
with the process of producing your ammonia gas, say. your oxida
tion of ammonia, right into nitric acid, and it would save time.
Mrs. KAHN. And. in case of emergency, time is essential?
General WILLIAMS. Of course.
 MUSCLE SHOALS 223

Mr. McSwAiN. General, the final product of nitrate plant No. 2

at Muscle Shoals is, as vou say. ammonium nitrate ?
General WILLIAMS, "fhat is all.
Mr. McSwAiN. That is the final product ?
General WILLIAMS. That is all.
Mr. McSwAiN. But is not there an intermediate stage, known as
the cyanamide stage ?
General WILLIAMS. And cyanamide is one of the ingredients of
fertilizer; it can be used as a fertilizer and is used to a certain
extent.
Mr. McSwAiN. Do you remember the chemical formula for
cyanamide ?
General WILLIAMS. CaCN2.
Mr. McSwAiN. Now, there is a stage in that long process right
there at Muscle Shoals where it is cyanamide?
General WILLIAMS. Yes. There is likewise a stage where it is
carbide, which is likewise a commercial thing.
Mr. McSwAiN. Could you not cut it off at cyanamide there by
'-hanging that, at a cost that has been estimated of about three and
a half million dollars, and have cyanamide and leave the rest of. the
process in a stand-by condition to be used when we need it for war
purposes to make ammonium nitrate?
General WILLIAMS. If you are going to produce the cyanamide,
then you must first produce the carbide; then you must take that
and pass it through those furnaces where they change the carbide
into cyanamide. Now, then, you pass the cyanamide through the
great big autoclaves, those great Dig kettles which those of you
who have been there remember, and it is brought under steam pres-
-ure and the hydrogen from the steam takes up the cyanamide and
forms your ammonia gas.
Mr. McSwAiN. Yes; but here is the point: When you get to the
i yanamide. can you not stop ?
General WILLIAMS. Why, you can stop it before you get there.
Mr. McSwAiN. You can stop when you do get there, can you
not?
General WILLIAMS. Oh. yes.
Mr. McSwAiN. That is the only question I asked. When you get
to the cyanamide, you can stop?
General WILLIAMS. Yes.
Mr. McSwAiN. Have you seen the cyanamide plant at Niagara
Falls?
General WILLIAMS. No; I have never seen that.
Mr. McSwAiN. Then, you do not know about it ; but you do know,
a? a matter of history, that is where that stops ?
General WILLIAMS. I know they stop and do use a certain amount
of cyanamide, as I understand it, in the fertilizer trade. As I under
stand, likewise cyanamide is much more used abroad than it is
here, and one of the main reasons is it has a certain toxic quality
and it is very difficult to get our farmers to take the necessary care
to use it; but if you can get it used properly, it is a very good fer
tilizer.
224 MUSCLE SHOALS

Mr. McSwAiN. Now, General, you are becoming an expert on the

fertilizer business. I did not ask you about that, but do you know
anything about the fertilizer business?
General WILLIAMS. Yes.
Mr. McSwAiN. Have you ever farmed any?
General WILLIAMS. On, yes; I have farmed.
Mr. McSwAiN. But not since you were a boy.
General WILLIAMS. No, sir.
Mr. McSwAiN. Not since you were 18?
General WILLIAMS. No, sir.
Mr. McSwAiN. In what State was that?
General WILLIAMS. Georgia. I am giving you the result of a
report. One of the best known experts on fertilizer in the United
States is a professor at Rutgers, N. J., and the War Department,
when it was considering this question of what it could do with
Muscle Shoals, sent Doctor Lipman, I think his name was, abroad
to all of the main agricultural countries in Europe, and he came
back and gave a very detailed and very valuable report. Now, then,
in what I have said about the use of cyanamide, I am talking almost
entirely from my memory of his report.
Mr. McSwAiN. You say the War Department sent him over there?
General WILLIAMS. Yes, sir.
Mr. McSwAiN. At its expense?
General WILLIAMS. I think so.
Mr. McSwAiN. What is his name ?
General WILLIAMS. Lipman, I think. Did not we pay his ex
pense ?
Mr. HOWARD. I think so.
Mr. McSwAiN. Now we are considering what we can do with
Muscle Shoals; the War Department is done considering, and we
would like to have Mr. Lipman's name, so that we can summon him
down here and get his opinion as to what to do down there, at the
expense of the taxpayers. Now, then, where does the chemical com
pany that operates at Hopewell, Va.. get the sodium content for its
sodium nitrate?
General WILLIAMS They bring it down, as I understand, from
Syracuse, as soda ash. Doctor Lipman's name is Dr. J. G. Lipman,
director New Jersey experiment station and dean of the department
of agriculture, Rutgers University.
Mr. McSwAiN. Where do they get the soda from ?
General WILLIAMS. The Allied Chemical & Dye Corporation, of
which the General Chemical Co. is one of the subsidiaries, is one
of the important producers of soda ash. That soda ash, as I under
stand, is shipped from Syracuse down to the Hopewell plant and
there is used in the production of the sodium nitrate. Now I would
like to verify that statement.
Mr. McSwAiN. In your general statement, you told us you could
take this ammonium nitrate and convert it into ammonium sulphate.'
General WILLIAMS. No, sir ; I beg your pardon, I did not tell you
that.
Mr. McSwAiN. Then I beg your pardon ; I misunderstood you.
General WILLIAMS. Yes.
 MUSCLE SHOALS 225

Mr. McSwAiN. I will ask you this question: Can you not take
ammonium nitrate and, by processing, convert it into ammonium
sulphate ?
General A\'ILLIAMS. If you were going to make ammonium sul
phate down there, you would never make ammonium nitrate; you
would take ammonia and pass it through sulphuric acid and stop.
Mr. McSwAiN. You would stop at that?
General WILLIAMS. You would not have to produce ammonium
nitrate.
Mr. McSwAiN. At any rate, vou were telling us that ammonium
nitrate is one of the favorable forms of ingredients in the fertilizer
proposition.
General WILLIAMS. It is one of the three ingredients.
Mr. McSwAiN. There are many more ingredients than three;
there are many other plant foods, but the three main commercial
plant foods are potash, ammonium nitrate, and phosphorus?
General WILLIAMS. Yes.
Mr. McSwAiN. And each one is a fertilizer.
General WILLIAMS. Quite so.
Mr. McSwAiN. And we farmers buy lots of sodium nitrate by
itself.
General WILLIAMS. Quite so.
Mr. McSwAiN. And use it by itself.
General WILLIAMS. Quite so.
Mr. McSwAiN. And use it just the same way as we use sodium
nitrate.
General WILLIAMS. Yes, sir.
Mr. McSwAiN. And we never use any phosphoric acid. Now
could not you, instead of making ammonium sulphate, make am
monium phosphate?
General WILLIAMS. Ammonium phosphate is a combination of
two different things.
Mr. McSwAiN. Just like ammonium sulphate is.
General WILLIAMS. Ammonium phosphate—just how is it made?
Mr. MrSwAiN. Let me tell you. First, in order to have am
monium sulphate, you have to treat sulphur and make sulphuric
acid in the acid chamber ; do you not ?
General WILLIAMS. You take phosphate rock and treat it with
sulphuric acid; then you take pnosphoric acid and treat it some
way or other with the ammonia, and that gives ammonium phos
phate. Just what the processes are, I am not chemist enough to
tell you.
Mr. McSwAiN. I was raised on a farm down in South Carolina,
but can not we now produce phosphoric acid without the use of
the acid chamber, by the use of the electric furnace? What we
want is phosphorus in some form, and can not you produce it by
the electric furnace?
General WILLIAMS. Yes. sir. My recollection is I mentioned
Colonel Swann before, and I think one of his organizations down
in Alabama and Tennessee produces phosphoric acid by the treat
ment of phosphate rock in the electric furnace. That is my recol
lection.
226 MUSCLE SHOALS

Mr. McSwAiN. Would not that be the common-sense method, in-

stead of producing any sulphuric acid and making sulphate, to get
your phosphoric acid and combine it with ycur ammonia and pro
duce ammonium phosphate?
General WILLIAMS. Mr. McSwain, I have not pretended to say to
you and I certainly would never pretend to say to you what is the
best thing to do at Muscle Shoals. In answer to Colonel Wain-
wright's question I simply stated a thing that you can do.
Mr. McSwAiN. Yes ; all right. Now, General, to come right down
to it, you would not want to be responsible for the future safety of
this country by saying that we might just as well wreck the Muscle
Shoals plant, would you?
General WILLIAMS. There, again, I did not say that. I said a
certain portion of the plant ; that in my opinion you can pretty well
wreck it without one particle of danger to the country in any way;
but not all of it, Mr. McSwain.
Mr. McSwAiN. Now we have this plant that you say we can wreck;
having invested, all told, practically $100,000,000 to date in the steam
plant, in the dynamos and in the nitrogen plants, would it not be
common sense to keep them and to keep them in a stand-by condition
and use them so that we could have something for our own protection
in the event private industry tried to hold us up by charging unrea
sonable and excessive prices ?
General WILLIAMS. That the Government, by Government opera
tion, could take hold of that plant down there and cheapen any
product I personally very much doubt. Now, then, speaking of what
is the
Mr. McSwAiN. You think it would be cheaper for the Government
to manufacture its own cannons and its own rifles?
General WILLIAMS. I do not think the Government should manu
facture anything that it could get anybody else to manufacture.
Now, the reason why the Government manufactures 6-inch guns and
8-inch guns and 10-inch guns, and so on, is because they are not pro
duced in the ordinary course of commerce. Anything that is pro
duced in the ordinary course of commerce I do not think the Gov
ernment ought to manufacture. Let us take the Springfield Armory:
That is the only place in the country where the military rifle is pro
duced. On the other hand, as a matter of essential defense, essential
protection, it seems to me to be essential that the Government main
tain that. It must maintain other things, too. that can not be assured
in the course of industrial production; but anything that can be
assured in the course of industrial production the Government should
not produce.
Mr. GARRETT. Is not that exactly the position that industry took
during the war, that anything they could not do they wanted the
Government to do, and anything and everything the Government
could do that interfered with them they wanted the Government to
quit doing? Is not that exactly the position we found ourselves in
during the war?
General WILLIAMS. My recollection is the Government either took
over or financed everything done during the war: it took over the
 MUSCLE SHOALS 227

railroads and operated them and financed a great many private

concerns that were doing large operations for the Government.
Mr. GARRETT. Surely. Everybody that came down here before
this committee during that time for aid from the Government wanted
the Government to go in and put up money for everything that they
themselves could not do; but, if they could do something, they
wanted the Government to abandon it and to take all of the losses
on what the Government put in there, and that is what they wanted
to do with Muscle Shoals.
General WILLIAMS. Personally, that is not my view of it.
Mr. McSwAiN. Well, somebody let a contract to build a $65,000,000
plant down here at Muscle Shoals, known as plant No. 2 to a thou
sand-dollar corporation, did they not; the Air Nitrates Corporation
was just a thousand-dollar corporation?
General WILLIAMS. It was a subsidiary of the American Cyanamid
Co. and had all of the backing of the American Cyanamid Co. and
all of its engineering skill, all of its professional and personal
knowledge. That is why it was employed.
Mr. McSwAiN. But did the American Cyanamid Co. contract and
become financially responsible for a single obligation incurred by
the Air Nitrates Corporation?
General WILLIAMS. The actual construction of plant No. 2 was
under a contract with Westinghouse, Church, Kerr & Co.
Mr. McSwAiN. And the Air Nitrates Corporation just got through
suing the Government a year or two ago, did it not?
General WILLIAMS. I have forgotten. What was the suit about?
Mr. McSwAiN. Why it was a suit for the balance of their com
mission and compensation for building the plant.
General WILLIAMS. They designed it ; they did not build it ; they
designed it.
Mr. McSwAiN. Yes.
General WILLIAMS. It was something in the nature of an archi
tect,
Mr. McSwAix. In other words, the United States Government
furnished the money to a little thousand-dollar corporation which
went down there and built it?
General WILLIAMS. The United States Government was making
use of all the professional skill and knowledge of the private concern
and, in my opinion, the United States Government got it for that
use and I doubt if it paid anvthing it was not fair to pay.
Mr. McSwAiN. A sixty-imllion-dollar corporation put out a little
thousand-dollar corporation as sort of a cat's-paw down there so
that the big company could not get bit if things went wrong. Now,
talking about private industries supplying all the needs of the
country for war and industry, in the event of war; why, as a matter
of fact, now the people of the United States are importing over
1.000,000 tons a year of Chilean nitrate?
Mr. STAFFORD. Who is vour authority?
Mr. McSwAiN. Well, if I am wrong, you tell me how many are
imported. I will ask you the question: How many are we im
porting?
228 MUSCLE SHOALS

General WILLIAMS. I can put that in the record. The maximum

importations during the war, as I remember it, were around a mil
lion and a half tons ; something like that.
Mr. McSwAiN. Maybe I got the figures wrong.
Mr. HILL. A million tons.
Mr. McSwAiN. A million tons a year, and the, Chilean Govern
ment collects over $12 a ton export duty on it, does it not ?
General WILLIAMS. Just about that.
Mr. McSwAiN. So at least, then, the people of the United States
who use this Chilean nitrate are paying to the Chilean Government
$12,000,000 a year tax for nitrogen?
General WILLIAMS. Yes.
Mr. McSwAiN. Yet you say we are producing enough in this coun
try and can produce enough by private industry to supply the com
mercial needs of industry and to supply the Government in the event
of war?
General WILLIAMS. I do not admit your statement that we are
importing a million tons. I think it is very much less than a mil
lion tons, is it not, Mr. Howard?
Mr. HOWARD. It is a million tons now.
General WILLIAMS. It runs around a million tons now.
Mr. McSwAiN. I stand corrected on the preliminary part, but the
point is this : Our farmers who use sodium nitrate are paying the
taxes of the Chilean Government.
General WILLIAMS. Well, I do not know as there is anything
criminal about that.
Mr. McSwAiN. No: there is nothing criminal about that, but it
does not set well in my craw, and if we have a plant down there
which already belongs to the Government, which you say was wisely
built bv the Government as a war expenditure, and it would have
been criminal for the Government not to have built it, the taxpayers
of the United States paid for it, and they still have it, and if we
can stop these importations from Chile by using it, I say we ought
to use it.
General WILLIAMS. Your whole statement is based on the assump
tion you can compete in the market with Chilean nitrate. Person
ally. I do not think we have a ghost of a show of doing it.
Mr. McSwAiN. I think we have a good show. You and I differ
on that, but I am going to vote for it.
General WILLIAMS. All right.
Mr. McSwAiN. I am going to vote for something to put the
Chilean Government out of the business of collecting its taxes from
the taxpayers of the United States.
Mr. DOUGLAS. What is the estimated cost of producing sodium
nitrate at Muscle Shoals?
General WILLIAMS. We have never made an estimate for produc
ing sodium nitrate.
Mr. McSwAiN. We do not want to produce sodium nitrate as
far as the farmers are concerned ; we do not want sodium nitrate
from Muscle Shoals.
 MUSCLE SHOALS 229

Mr. DOUGLAS. What is it that is imported from Chile ?

Mr. McSwAiN. Sodium nitrate, in order to get nitrogen.
Mr. DOUGLAS. Surely.
Mr. McSwAiN. But we do not want to produce sodium nitrate at
Muscle Shoals; we wish ammonium phosphate.
General WILLIAMS. The Germans have sold synthetic sodium
nitrate in Bolivia in competition with Chile.
Mr. DOUGLAS. What is the minimum estimated cost of producing
ammonia, which is the common compound in which nitrogen is
used ? It was $48 a ton, did not you say, in 1919 ?
General WILLIAMS. I said our estimated cost of producing am
monium sulphate ; that that was our estimated cost in 1919.
Mr. DOUGLAS. And ammonia?
General WILLIAMS. At that time the estimated cost of producing
ammonia was 10 cents a pound. Ammonia is selling in the market
now for Ql/2 cents a pound.
Mr. McSwAiN. In response to the general's statement that he be
lieves we can not produce at Muscle Shoals ammonium phosphate
as cheaply as it can be produced by private industry, I say that at
the present time the American Cyanamid Co. is fixing nitrogen and
producing ammonium phosphate and selling it on the basis of the
unit of plant food for less than C0 per cent of what we are paying
private industry for plant food. They are doing that now. and
they are paying taxes, and they are paying insurance, and they are
paying high rates on their money borrowed, and their stock is
worth two for one. Now, if they can do it. we can do it at Muscle
Shoals, I think, for 50 per cent of the cost of plant food that we
are paying private industry to-day.
Mr. WAINWRIGHT. When you say " private industry,"' do you mean
for Chilean nitrates?
Mr. McSwAiN. No: I mean ordinary commercial fertilizer.
Mr. WAIN WRIGHT. How would the cost compare with the cost of
producing Chilean nitrate, which is what we are talking about?
Mr. McSwAiN. Only 50 per cent of the amount it costs to pro
cure it from Chilean nitrate.
Mr. WAINWRIGHT. What we are trying to do is to become inde
pendent of the supply from Chile, if we can ?
Mr. McSwAiN. Certainly; and we will cut that at least in half in
cost.
Mr. QUIN. Now. as to the cost of this: You say, General, that you
know something about farming?
General WILLIAMS. Excuse me ; I know very little about farming.
Mr. QUIN. We can take vetch and plant it on the land, wintei-
graze on top of that, and let the stock get all of the greens they
need, and put 106 pounds of nitrogen in the soil, plow it in in Sep
tember, and turn it over about this time of year or a little earlier,
after having grazed your stock on it. at an expense of $6 an acre.
How does that compare with this Government manufacture of fer
tilizer, or buying it from Chile or these private concerns in the
United States?
230 MUSCLE SHOALS

General WILLIAMS. I do not know, sir; I can not answer your

question.
(After informal discussion:)
Mr. McSwAiN. I simply want to call the committee's attention to
the table found on page 88 of the hearings of this committee in 1924
and 1926, on the importation of Chilean nitrates. It shows that,
all told, up to 1922, we had imported fifteen and a quarter million
long tons and that we had paid to the Chilean Government, up to
1922, an export duty which was added to the price of fertilizer
amounting to $188,625,000.
Mr. QUIN. That cost more than Muscle Shoals.
Mr. McSwAiN. We have paid that much to the Chilean Govern
ment.
Mr. GARRP:TT. What would they do if we had not done it?
Mr. McSwAiN. They would have had to go to work. [Laughter. 1
Mr. HILL. General, are you familiar with what they are doing in
Germany in the fixation of nitrogen?
General WILLIAMS. Only in a general way. I know, of course,
that in Germany the fixation of nitrogen by the Haber process has
been carried to a most efficient point.
Mr. HILL. Well they have some cyanamid plants operating there,
have they not?
General WILLIAMS. I think they have some that were built in the
early days. My information is there has been little, if any, addition
to the cyanamid plants there since the war.
Mr. HILL. But they have not junked or scrapped those cynamid
plants which they have, have they?
General WILLIAMS. Not so far as I know.
Mr. WAINWRIGHT. You are asking as to the present situation in
Germany ?
Mr. HILL. That is right.
Mr. WAINWRIGHT. Is not there any way we can get some abso
lutely accurate information as to what these foreign countries are
doing (take France, Germany, England, and maybe Italy), the last
word we have on what they are producing, what they are doing with
what they are producing, and how much it is costing them?
General WILLIAMS. We can get that.
Mr. HILL. The truth is there are about 32 of those cyanamid plants
operating in the world to-day, are there not?
General WILLIAMS. I do not know, sir.
Mr. HILL. And you have not heard of any being junked or
scrapped, have you?
General WILLIAMS. I do not know of any being junked or
scrapped, nor do I understand they have added to them.
Mr. WAINWRIGHT. I understand you will prepare a statement of
what the foreign art is on this, so that it can go in the record?
General WILLIAMS. Yes, if the committee wants that.
In answering the above question it is thought that the statement
below indicates the distribution of cyanamide manufacture, and also
indicates the approximate world production of nitrogen in this and
other forms in 1928.
 MUSCLE SHOALS 231
Syn Cyan- Rv Arc
thetic amide product process
nitrogen nitrogen nitrogen nitrogen

Tom Tom Tom Tom

450,000 114,000 100.000
116,700 53,500 5,000
En-land 55,000 100, 000
i"cited States - . - . 25,000 40,666 147,000
Italv 63 700 20,000 3,500
43,500 20,000 5,000
22,000 10,000
7,200
3,000 30,000
4,500 6,000
-Vonray 15,000 46,500
Ku»m . .. .... ... 7,300
2,500 11,066
5,000
1 ar.a«la 60 000 5 000
2,200
Jugoslavia — 14,000
802,600 383,500 375,500 46,500
700 000 200 000 370 000 30,000

Mr. HIIJL. Before the World War did not Germany import a lot
',f sodium nitrate from Chile ?
General WILLIAMS. I think practically all the using countries of
the world imported it.
Mr. HILL. Is it not a fact to-day that Germany does not import
anv sodium nitrate at all from Chile?
General WILLIAMS. I understand not only that but Germany to
day is an exporter of synthetic sodium nitrate.
Mr. HILL. If Germany can produce all of her domestic needs by
the fixation of nitrogen and then can have enough left over to be
u large exporter of the same, why should not this country do the
jame thing?
General WILLIAMS. I suspect you will find this country will do the
same thing.
Mr. HILL. And can do the same thing?
General WILLIAMS. I suspect so.
Mr. HILL. We are not doing it to-day, are we?
General WILLIAMS. We are getting to a point to-day where it is
harder and harder to sell Chilean nitrate.
Mr. HILL. For the last fixe or six years, ever since I have been
on this committee, we have had witnesses before this committee who
have told us the day was at hand now when our farmers were going
to get some relief from private industry through the fixation of nitro
gen, and they are paying as much for nitrate to-day as they did five
»r six years ago, and they are still importing large amounts of
sodium nitrate from Chile ; so that there is no reason why we should
not free ourselves from dependence on Chile as Germany has freed
herself, is there?
General WILLIAMS. It is inevitable that we shall do so, in my
opinion.
Mr. HILL. And one of the best ways to make that start is through
the operation of the plant at Muscle Shoals, is it not?
232 MUSCLE SHOALS

General WILLIAMS. I do not think that would contribute one mite

to it.
Mr. HILL. Do you know what the production of that plant is?
General WILLIAMS. Yes, sir.
Mr. HILL. What is the production of that plant?
General WILLIAMS. It is 168 tons of anhydrous ammonia per day.
Mr. HILL. What is it in terms of pure nitrogen ?
General WILLIAMS. My recollection is it is 50,000 tons of nitrogen
and 110.000 tons of ammonium nitrate.
Mr. HILL. Is not that 50,000 tons of pure nitrogen approximately
a third of the nitrogen we are importing to-day in the form of
Chilean nitrate—sodium nitrate?
General WILLIAMS. It seems to me your whole statement is based
on the assumption you can fix nitrogen down there in competition
with Chile or with existing private plants.
Mr. HILL. Yes.
General WILLIAMS. I do not believe you can do it.
Mr. HILL. I will tell you, General, if you do not believe that, if
you will just go up to Niagara Falls you will see where the American
Cyanamid Co. is already doing that very thing and not only doing
it in competition but it is my belief they are making a very hand
some profit out of the operation of the plant there.
Mr. McSwAiN. And their stock is worth two for one.
Mr. HILL. And their stock is worth two for one and here, within
the last two or three years, they have been continually increasing
the output of the plant until to-dav that plant is so large that it has
a 50 per cent greater output production than the plant at Muscle
Shoals, which snows how successfully it is being done.
Mr. WAINWKIGHT. What are they doing with it; are the farmers
getting it?
Mr. HILL. They are shipping it mostly abroad.
Mr. WAINWRIGHT. The last word we had here was the farmers
had not yet learned how to use it or had not used it as yet.
Mr. HILL. Oh, it is being consumed by the farmers abroad.
Mr. WAINWRIGHT. I am talking about the American farmers.
Mr. HILL. Some of it is being consumed here in this country,
surely; some of it is being used right to-day in Alabama.
Mr. McSwAiN. They do not have to be educated to use Ammo-
Phos; all they need is a chance to buy it. They have not had a
chance to buy it because it is sent out of the country, because they
do not want to compete with other commercial fertilizer manufac
turers, which are their best customers for the cyanamide. I bought
a ton of it and paid for it and used it and was pleased with it, and
I would like to buy some more.
General WILLIAMS. The American Cyanamid Co.. according to my
recollection, has been producing Ammo-Phos for close on to 10
years.
Mr. HILL. And has been producing it very successfully, too.
General WILLIAMS. If the profits are what you say, I do not think
the committee need to worry, because you will get your bonanza.
Mr. HILL. But the thing we are trying to do is to get cheaper
fertilizer and not have to pay all that the freight will bear.
 MUSCLE SHOALS 233

General WILLIAMS. If the profits are what you say, it will attract
other people, like everything else, to the point where your price
will go down.
Mr. HILL. The record shows it has not gone down; the farmer
is paying an enormous price to-day for his fertilizer. That is all.
Mr. STAFFORD. From what source does the ordnance department
now secure its explosives and what supplies of reserve stores has it
on hand for emergency purposes ?
General WILLIAMS. At the end of the war, we had left on our
hands a very considerable quantity of explosives, particularly
T. N. T. We had a certain amount of ammonium nitrate, too. The
explosive that we used as a shell filler during the war was a mixture
we called amatol. Amatol was a mixture of a varying per cent of
ammonium nitrate and trinitrotoluol. The reason why we used
a mixture instead of T. N. T. was because such large quantities
were needed that there was not sufficient explosive of the T. N. T.
which, of itself, is the best explosive. So that we used the mixture ;
that is, for the explosive shell filler. The powder that we used, the
propeller, is made from guncotton, and we have a certain amount
of guncotton left on hand still that was produced during the war.
Mr. STAFFORD. Then, since the war closed, we have not been pur
chasing any decided quantities of explosive?
General WILLIAMS. We have purchased practically no explosive,
and the propellants we have purchased have been of a new type that
have been developed since the war.
Mr. STAFFORD. In the eventuality of war, would we rely on private
concerns for the production of explosive?
General WILLIAMS. Yes, sir; we would have to, because, take the
explosive bases
Mr. STAFFORD. Have those private concerns adequate capacity to
produce the needs of the service?
General WILLIAMS. No. sir. You see the use of explosives in peace
time is for dynamites and things like that and those are not proper
explosives for shell fillers. In the event of war you would have to
build your plants for the manufacture of your T. N. T. and have to
build plants for the manufacture of smokeless powder that you use.
Mr. STAFFORD. In that connection wherein would nitrate plant No.
2 and nitrate plant No. 1 be serviceable, just purely for the explosive
end?
General WILLIAMS. They would be serviceable in the production
of ammonium nitrate; that is, we would probably use ammonium
nitrate again as a shell filler, because in the event of a major emerg
ency it would be difficult to get enough toluol to manufacture T. N. T.,
although toluol is being produced in increasing quantities. So that
we would probably again use the mixture for the shell filler.
Mr. STAFFORD. You stated the department had a bill in 1919?
General WILLIAMS. Yes, sir.
Mr. STAFFORD. Which it recommended for the manufacture of
ammonium sulphate. That was predicated, then, upon existing in
dustrial conditions?
General WILLIAMS. Yes. sir; all of it.
234 MUSCLE SHOALS

Mr. STAFFORD. Is the committee to understand that the depart

ment would recommend that bill to-day, in view of the changed
industrial conditions?
General WILLIAMS. No, sir.
Mr. STAFFORD. Why not?
General WILLIAMS. At least, I would not; I do not know what the
War Department would do.
Mr. STAFFORD. Give your individual reason why not?
General WILLIAMS. At the close of the war we had these plants
and we were faced with the question of what to do with them
Mr. STAFFORD. To which plants do you refer1—nitrate plant No. 1 '
' General WILLIAMS. Nitrate plants Nos. 1 and 2. The first thing
we did was to endeavor to get some of the big private concerns to
operate them. We took it up with the General Chemical Co., with
the United States Steel Corporation, and with a number of others
whose names I have forgotten now. There was not one of those bit:
industrial concerns that was willing to take over the plant at a rea
sonable rental, or what not, or on any arrangement that we could
make. As a matter of fact they were not interested in it at all ; they
did not want to touch it. So, that failing, the effort to make an
arrangement to have the plants operated by a private concern the
ordnance department then took up the question of Government oper
ation, and we worked out the bill which I have here, Senate 3390,
Sixty-sixth Congress, first session, dated November 3, 1919.
Mr. STAFFORD. Wherein have there been industrial changes that
would impel you as an expert on this subject not to recommend that
bill to-day?
General WILLIAMS. Our whole scheme of calculations was based
upon the price of ammonium sulphate, for one thing, which was then
selling in the market at $65 a ton. We estimated we could produce it
for $48.20 a ton, but ammonium sulphate is to-day selling in the
market for $38 a ton.
Mr. STAFFORD. And for how long has that price been prevailing?
General WILLIAMS. That I do not know, sir; I will have to look it
up and put it in the record for you. A bill for Government opera
tion was presented only because all of the efforts to arrange for pri
vate operation failed. The price of $38 has just been reached; in
December, 1926, it was $50; December, 1927, $47; December, 1928,
$46; December, 1929, $42.
Mr. STAFFORD. Are there many private manufacturers engaged in
the manufacture of ammonium sulphate
General WILLIAMS. Yes, sir.
Mr. SIAFFORD (continuing). That causes competitive conditions
in the price that you just cited?
General WILLIAMS. There has been a tremendous increase in the
production of synthetic ammonia in the United States since 1919.
At that time there was practically no production outside of these
plants owned by the Government.
Mr. GARRETT. Who introduced that bill in 1919?
General WILLIAMS. It was introduced by Mr. Wadsworth in the
Senate; I have forgotten who it was in the House. In 1919 there
was practically no production of synthetic ammonia by private agen
cies, but since that time there has been a tremendous development and
 MUSCLE SHOALS 235

a tremendous increase in the production of synthetic ammonia by

private concerns.
Mr. STAFFORD. Can you name some of the private concerns that
have since entered the field ?
General WILLIAMS. Yes, sir. The Du Pont Co. has a large plant
at Belle, W. Va., which is now producing 140 tons a day. The du
Pont Co., likewise, under the Pacific Nitrogen Corporation, Seattle,
Wash., is producing 3 tons per day. The Atmospheric Nitrogen Cor
poration, of Syracuse, N. Y., is producing 60 tons per day, and the
Atmospheric Jsitrogen Co.—that is a subsidiary of the Allied Chemi
cal & Dye Corporation, at Hopewell, Va., is producing 200 tons per
day. The Matheson Alkali Co., of Niagara Falls, is producing 10
tons per day; the Roessler & Hasslacher Chemical Co.. of Niagara
Falls, is producing 5 tons per day; the Commercial Solvents Cor
poration, of Peoria, 111., can produce 10 tons per day, and the Great
Western Electrochemical Co., of Pittsburg, Calif., is producing 1%
tons per day, making a total private production of 427.5 tons per day.
Mr. STAFFORD. In the eventuality of war, for the manufacture of
explosives, what additional equipment would have to be installed and
what changes would have to be made in nitrate plant No. 1 and
nitrate plant No. 2?
General WILLIAMS. In the event of war nitrate plant No. 2 could
be used for its original purpose without change.
Mr. STAFFORD. And as to nitrate plant No. 1?
General WILLIAMS. For nitrate plant No. 1 I personally would
not advocate the spending of one dollar there beyond going over and
putting it into proper order for operation of the process which takes
ammonia gas and oxidizes it into nitric acid, and so on, and finally
producing ammonium nitrate.
Mr. STAFFORD. Would that still be the so-called Haber process?
General WILLIAMS. I do not think it would be worth while to
attempt to put in that process there ; I would go down to Birming
ham or some near-by place and buy ammonia or go to some near-by
coke ovens and buy ammonia gas.
Mr. STAFFORD. How is that gas transported—by tube containers?
General WILLIAMS. It is transported in tank cars all over the
country. I was down at Belle, W. Va., just about a year ago. I think
it was, and you saw long lines of tank cars there waiting to take the
stuff all over the country.
Mr. McSwAiN. Then if for war purposes we bought all of the
sulphate of ammonia and some enemies destroyed the Panama Canal
and the enemy fleets kept sodium nitrate from coming here from
Chile the farmers would not have anything to encourage the growth
of their crops and the soldiers would have plenty of munitions, but
no bread to eat ?
General WILLIAMS. That is rather darker, it seems to me, than the
real picture.
Mr. STAFFORD. There would be a line of soldiers across the Cana
dian border, so that we would not be able to import any wheat or
anything like that. Highly inconceivable
General WILLIAMS. Yes, sir.
Mr. STAFFORD (continuing). Except to fertile brains. Is the cy-
anamide used for any other purposes than fertilizer?
General WILLIAMS. I do not know. Mr. Howard, can you answer
that?
236 MUSCLE SHOALS

Mr. HOWARD. Yes; it is used as a raw material for a great number

of products. Cyanamide is a most important raw material.
General WILLIAMS. Mr. Howard is the senior chemical engineer in
the Fixed Nitrogen Research Laboratory of the Department of Agri
culture. He used to be in the Ordnance Department and was for a
long time in charge of this nitrate work.
Mr. STAFFORD. Should the Government decide to go into the manu
facture of the necessarv ingredients to make fertilizer in conjunc
tion with nitrate plant No. 2, would the installation of the fertilizer
equipment be interchangeable, so that in case of war the Govern
ment could readily utilize the nitrate plant equipment as is for the
manufacture of explosives?
General WILLIAMS. Yes, sir. Let us say that here would be your
line reaching down to the production of ammonium nitrate [illus
trating] , and at a point back of ammonium nitrate you would branch
off and put in your machinery and equipment for the production of
ammonium sulphate, and there would be no difficulty about letting
the rest of the plants stand.
Mr. STAFFORD. In your opinion, then, if the Government would
not go into the manufacture of the fertilizer adjunct, it would be
advisable to keep nitrate plant No. 2 in a stand-by condition?
General WILLIAMS. I think it is desirable to keep that portion of it
that is used for the oxidation of the ammonia, from that point on to
the production of the complete ammonium nitrate; I think that por
tion of the plant should be kept.
Mr. STAFFORD. And what would you recommend so far as nitrate
plant No. 1 is concerned, considering it purely as an emergency
reserve for war purposes ?
General WILLIAMS. I would retain the machinery and equipment
there again from the point where you take the ammonia and oxidize
it into nitric acid, from that point on until you produce the finished
ammonium nitrate.
Mr. DOUGLAS. General, the committtee is confronted with one of
three things : Either doing nothing with Muscle Shoals, leasing it to
some private enterprise, or operating it itself, and I think it is the
attitude of the committee, certainly it is my attitude, that Muscle
Shoals should be utilized to the greatest possible advantage for all
purposes, particularly for the production of fixed nitrogen from
which fertilizers can be made—fertilizers of various kinds. I would
like to ask you some questions with respect to the patents. You have
testified that you do not know how much it would cost to place
plant No. 2 in condition ?
General WILLIAMS. Yes.
Mr. DOUGLAS. To produce some sort of nitrogenous product.
General WILLIAMS. Yes.
Mr. DOUGLAS. To put it in shape to produce ammonium sulphate,
I think you testified it would cost about $3.000,000?
General WILLIAMS. Yes; $3.000.000.
Mr. DOUGLAS. But you do not know how much it would cost to
place it in a condition so that it could produce fixed nitrogen effi
ciently?
General WILLIAMS. You mean sodium nitrate?
Mr. DOUGLAS. Some sort of fixed nitrogen in the form of ammonia,
according to the most modern Cyanamid process?
 MUSCLE SHOALS 237

General WILLIAMS. Well, you would use—our assumption in our

bill was that we would use the installed machinery and equipment for
fixing the nitrogen.
Mr. DOUGLAS. Yes ; but is it true, or isn't it, that since that equip
ment was installed—which, as I understand it, was installed for the
purpose of carrying into operation the American Cyanamid process.
General WILLIAMS. Yes.
Mr. DOUGLAS. There have been improvements made in the Cyana
mid process?
General WILLIAMS. I think there have been some improvements.
I am not expert enough to give you any details about it.
Mr. DOUGLAS. Then it would be at least a partial waste of time for
me to proceed further along that line.
General WILLIAMS. I can not give you any information on it
now.
Mr. DOUGLAS. Have you any information with respect to patents?
General WILLIAMS. We, of course, have all that information down
in our office about the patents, but I can not give to you offhand what
the contract is about the patents. There are certain payments that
we are obligated to make to the Air Nitrates Corporation in the
event we use certain processes, and those rates expire at a certain
time and I think they vary with the quantity of production.
Mr. WAINWRIGHT. Is that a very long contract?
General WILLIAMS. It is quite a long contract.
Mr. WAINWRIGHT. I wonder if we could not put it in the record.
General WILLIAMS. I think it is already in the record.
Mr. WAINWRIGHT. I suggest that General Williams be requested
(o furnish that for the record, as to the patent situation.
General WILLIAMS. Yes. sir.
Mr. DOUGLAS. In addition, it is my understanding that the manu
facture of phosphoric acid by the arc process and the subsequent
conversion of phosphoric acid into ammonium phosphate, is likewise
patented by the American Cyanamid Co.. and if you could, sir,
would you also give us some information with respect to the patents
on that?
General WILLIAMS. Yes, sir.
The contract between the Air Nitrates Oorixiratlon and the United States of
America, and the contract between the American Cyanamid Co. and the United
States of America, together with the patents involved (pp. 149-150) are given
on pages 135 to 172, inclusive, of the hearings before the Committee on Military
Affairs, House of Representatives. Sixty-seventh Congress, second session,.
February 9, 1922, to March 13, 1922.
Of the 27 patents involved in the contract. 9 have expired as follows : 776314,
785161. 12762, 987674. 999071. 996011. 1006927. 1009705. 1010404.
Twelve are not used as follows: 1100539, 1103060. 1103061. 1103062, 1193796,
1193798. 1193799. 1193800, 1206062, 1206063, 1217247, 1242953.
Six cover process and apparatus involved in the Cyanamid process at Muscle
Shoals, they are:

Patent
No. Title Date

1100382 Process of Crushing and Grinding calcium Carbid. Walter S. Landis June 16 1914
"49B53... Process of Making Ammonia from Calcium Cyanamid, Walter S. Landis Aug. 10 1915
1154640.. Process of Producing Ammonia, Walter S. Landis Sept 28 1915
HB3095... Process of Making Ammonia from Calcium Cyanamid, Walter S Landis Dec 7 191.1
11S38S5... Process of Producing Ammonia, Walter S. Landis May 23 1916
1193797... Process of an Apparatus for Oxidizing Ammonia, Walter S Landis \Ug 8, 1916
-— —

101229—30 16
238 MUSCLE shoals
Of the preceding six patents only three are deemed essential :

Patent -->
No. Title Date

wº. Process of Crushing and Grinding Calcium Carbid, Walter S. Landis June 16, 1914
1154640--- Process of Producing Ammonia, Walter S. Landis--------------------------- - Sept. 28, 1915
1193797--- Process of an Apparatus for Oxidizing Ammonia, Walter S. Landis.------------- Aug. 8, 1315

The above three patents are sufficiently generic to include the process de
fined by two of the patents, namely, 1149653 and 1163095. The sixth of the
patents number 1183885 directing to a particular type of autoclave bearing is
considered inconsequential. In view of the foregoing the value of the license
is restricted to the three patents listed above and deemed essential. There
are given below a list of the patents held by American Cyanamid Co. which
have been issued since the patents referred to above as a part of the original
contract and which might affect the operation of nitrate plant No. 2 by parties
other than the holder of the patents:

Fººt Title Date

- - - - - - - - -

----
1258747 | Making Calcium Cyanamide-------------------------------------------------- Mar. 12, 1918
1275535 | Improving the Grade of Calcium Cyanamide----------------------------- .. Aug. 13, 1918
1277898 || Crude Cyanamide and Producing Same----------------------------------- - Sept. 3, 1918
1277899 | Electric Furnace------------------------------------------------------------ - Do.
1277900 | Process of Producing Sodium Cyanamide----------------------------------- -* Do.
128.2381 Making Calcium Cyanamide------------------------------------------------ - Oct. 22, 1928
1282395 || Alkali Metal Cyanamid and Producing Same------------------------------- - Do.
1282405 | Preventing the Decomposition of Molten Cyanamide--------------------- - Do.
1292715 Process and Apparatus for Making Calcium Cyanamide------------------ - Jan. 28, 1919
1292814 | Producing Nitric Acid----------------------------------------------------- - Do.
1296820 | Production and Purification of Ammonia--------------------------------- -' Mar. 11, 1919
1313884 || Apparatus and Process for the Production of Ammonia-------------------- - Aug. 25, 1919
#: Production of Ammonia-------------------------------------------------- to.
131 Purifying Ammonia------------------------------------------------------
1317755 Recovering Hydrocyanic Acid
1315674 Producing Ammonium Nitrat
1315678 Manufacturing Cyanamide--- - d.
1319148 Producing Alkali Metals from hlor Oct. 21, 1919
1314229 Mººg, of and Apparatus for Producing P
the Same.
|
-
Aug. 26, 1919

1331742 Apparatus for Improving the Grade of Calcium Cyanamide-------------------- Feb. 24, 1920
1352.655 Producing Hydrocyanic Acid----------------------------- | Sept. 4, 1920
1355369 Nitrogenous Phosphatic Material and Producing Same Oct. 12, 1920
1355384 Recovering Hydrocyanic Acid----------------------------------------------- Oct. 10, 1920
1359.211 Pºs of and Apparatus for Produring Phosphoric Acid and Compounds of Nov. 16, 1920
the Same.
1359.257 Cyanamide Compound and Producing Same tº.
1367846 Fertilizer and Producing the Same----------- Feb. 8, 1921
1373471 Sintering Phosphatic Materials------------------ Apr. 5, 1921
1398453 Producing Ferrocyanids------------------------ Nov. 29, 1921
1513051 Fumigating and Disinfecting------------------ Oct. 28, 1924
1513088 Phosphoric Acid Recovery--------------------- Do.
1541793 Fumigating Apparatus.------------------------ June 16, 1925
1559892 Fumigating---------------------------------- Nov. 3, 1925
1562295 Producing Cyanamide Solutions
15770.57 Method of and Means for Stabilizing Liquid Hydrocyanic Acid
1586175 Fumigant and Fumigating---- -------------- May 25, 1926
1588731 | Preparing Cyanogen Chloride-----------------------------,--------------- June 15, 1926
1589041 || Making Potassium Ferrocyanide--------------- Do.
1593385 Rubber Accelerator and Making the Same- June 20, 1925
1599198 | Fertilizer----------------------------------------- Sept. 7, 1926
1599.212 Cyanide Product and Process of Producing the S Do.
1599226 Fertilizer Corrective---------------------------------------------------- Do.
1601854 | Fertilizer Composition-------------------------------------------------- Oct. 5, 1926
1607261 | Fumigation------------------------------------------------------------- Nov. 16, 1926
1611941 | Preparing Substitute Cyanamides--------------------------------------- Dec. 28, 1926
-------- Jan. 4, 1927
3590 -----'do------------------------------------------------------------------- d.
1614521 || Making a Nitrogenous Fertilizer Material------------------------------- Jan. 18, 1927
1614523 Producing Heavy Metal Cyanides-------------------------------------- Do.
1615439 Closure for Shipping Containers----------------------------------------- Jan. 25, 1927
1618047 | Treating Calcium Cyanamid------------------------------------------ Feb. 15, 1927
1618504 || Making Dicyandiamid------------------------------------------------ Feb. 22, 1927
1620074 || Lactonitrile Fumigant------------------------------------------------ Mar. 8, 1927
1627371 | Ammonia Cylinder Cap---------------------------------------------- May 3, 1927
1630785 Closure--------------------------------------------------------------- May 31, 1927
1638522 Converting a Cyanide Compound into Ammonia------------------------------ Aug. 9, 1027
 MUSCLE SHOALS º 239

Patent
No. Title - Date

1631573 || Refrigerant - - -- June 7, 1927

1642511 1 Cooling Wheel--------- | Nov. 15, 1927
1642920 Fumigations Applicator---- ----- Sept. 20, 1927
1642779. Apparatus for Spraying Liq Hydrocyanic Acid--- Do.
1650390 Producing Ferrocyanides from Crude Calcium Cyanides- -- Nov. 22, 1927
1651363. Fertilizer Product and Producing Same---------------------- Dec. 6, 1927
1654918 Hydrometallurgical Process---------------------------------- Jan. 3, 1938
165S597 Condensation Product and Making Same-- III Feb. 7, 1928
1660667 Separating Cyanides from Mixture--------- -- Feb. 28, 1928
1662489 Phosphorus Material--------- Mar. 13, 1928
1663,125 Treating Calcium Cyanide Mar. 20, 1928
1663128 Guanidine Compound--- Do.
1666.437 Manufacturing Formic Ac Apr. 17, 1928
1667S38 Making Hydrocyanic Acid from Crude Cyanides- | May 1, 1928
1667839 Producing Potassium Ferrocyanide---------------------------- Do.
1669674 Phenol Resin and Making the Same------------------------------------- May 15, 1928
1670344 Dusting Apparatus------------------- -------------------------------------- May 22, 1928
1672449 Making Alkali Cyanides------------------------------------------------ ---- June 5, 1928
1572253 Making Arºmatic Nitriles;-- - Do.
1674465 Making Calcium Cyanamide June 19, 1928
1678719 Making Esters----------------------------------------------- July 31, 1928
16787.21 Recovering Combine Do.
1687480 Recovering Oxalates- ------------------------------- -- Oct. 9, 1928
1684758 Cyanamide Oven------------------------------------- -- Sept. 18, 1928
1695081 Fertilizer----------------------------------------------------------------------- Dec. 11, 1928

Complete study of these patents has not been made, but it is the opinion
of this office that no critical interference with the operation of nitrate plant
No. 2 would ensue if the plant were unable to take advantage of these last
patents.
It is not known who really holds the basic patent on the conversion of phos
phate rock into phosphoric acid by the electrical method and the subsequent
conversion of phosphoric acid into ammonium phosphate. So far as can be
learned, the American Cyanamid Co. holds six patents which are listed above,
namely: 1314229, 1355369, 1359.211, 1373471, 1513088, 1662489, which have to
do with the manufacture of phosphorous materials. The exact value of these
six patents can not be determined in the time available by this office.
Mr. Douglas. General, from the point of view of national defense.
do you consider the manufacture of fixed nitrogen at Muscle Shoals
as important as the establishment of a ferro-alloys industry in the
South :
General WILLIAMs. Well, it seems to me, there is a little difficulty
in making a comparison there. There is existing a ferro-alloy in
dustry that spreads all over the country.
Mr. WAINwright. What is it?
General WILLIAMs. All kinds of alloyed steel, like nickel steel.
chrome steel, manganese steel, tungsten steel, and the steels for
different purposes.
Mr. McSwain. If there is any one thing that private industry has
spread all over the country, it certainly is the ferro-alloy industry of
the United States Steel Corporation and all its subsidiaries. -

Mr. WAINwRIGHT. By ferro-alloy you mean the plain steel in

dustry?
General WILLIAMs. It is a little bit more than the plain steel in
dustry: it is the ºf of a high quality of tool steel, of which
tungsten is one of the large elements, or a high quality of nickel
steel, or a high quality of rustless steel.
Mr. WAINwRight. But the ferro-alloy industry—that term must
have a definite significance.
General WILLIAMs. Oh, yes; it is perfectly well known.
240 « MUSCLE SHOALS

Mr. WAINWRIGHT. What does it mean ?

General WILLIAMS. It is alloys of iron with other metals that
form metals of peculiar characteristics, and they differ one from
another.
Mr. WAINWRIGHT. I understand it, but I think somebody else
might not.
General WILLIAMS. The steel that you use, for instance, for a tool
steel is entirely different from the steel that you use in the frame
work of a house, although both of them are ferro-alloys.
Mr. DOUGLAS. It is true that Muscle Shoals is in the heart of a
country that is very rich in mineral deposits, it is not ?
General WILLIAMS. Quite.
Mr. DOUGLAS. There are large iron deposits?
General WILLIAMS. Yes.
Mr. DOUGLAS. And bauxite deposits, from which aluminum is
made?
General WILLIAMS. Yes.
Mr. DOUGLAS. Lead and zinc?
General WILLIAMS. Yes. Likewise, it is very true for pur pur
poses, so far as the explosive part is concerned, that it is right in a
part of the country where great quantities, of course, are produced,
and sulphuric acid, and where the facilities for the production of
nitric acid can be very quickly installed ; so that it is a part of the
country where we can and probably would use the Government land
there for the purpose of putting up large factories for the production
either of powders or explosives.
Mr. McSwAiN. Would you also permit me to let the record show
there are vast quantities of phosphate rock in that same area, as
well as limestone?
Mr. DOUGLAS. Surely. So that Muscle Shoals is ideally located
at least in many respects for the establishment of a considerable
industry of varied characteristics ; is not that true ?
General WILLIAMS. Yes.
Mr. DOUGLAS. And if there can be some disposition made of Muscle
Shoals which will guarantee the utilization of those plants and the
power available for the establishment of electrochemical industries
of all kinds, it would certainly be of no disadvantage to the United
States?
General WILLIAMS. Oh, no.
Mr. DOUGLAS. From the point of view of national defense ?
General WILLIAMS. Oh, no.
Mr. DOUGLAS. Reference has been made to the profitable operation
of the American Cyanamid Co. at Niagara Falls.
General WILLIAMS. Yes. sir.
Mr. DOUGLAS. I think it is pretty clear that the American Cyan-
amid Co. is operating at a profit ; I do not think there is much ques
tion about that. But to say that it operates at a profit because of its
sale of cyanamide. may not be a true statement of the case; is not
that true. General?
General WILLIAMS. Yes, sir.
Mr. DOUGLAS. Do you know much about the operations of the
Cyanamid Co.?
 MUSCLE SHOALS 241

General WILLIAMS. I do not know very much about them. I do

know they have been expanding in the chemical field: that they
have been expanding for a good long time and they have been
taking over new concerns for the past several years, so that now
they are ver\' much larger than they were at the time of the war,
or right after the war, and they have very many more products now
than they had at that time.
Mr. DOUGLAS. General, if it is true that the Haber .process is a
cheaper one than the cyanamid process for the fixation of nitrogen,
and it probably is, it does not tell the whole story, however, with
respect to the manufacture of some ingredient in commercial fertili
zer, does it ?
General WILLIAMS. No.
Mr. DOUGLAS. And is it not probable that if anybody, including
the Government, were to operate Muscle Shoals for the manufacture
of fertilizer, they would have to sell the fertilizer, exclusive of Ammo-
Phos, in the open market, that is, the fixed nitrogen ; or do you know
enough about the market conditions to say as to thatl
General WILLIAMS. No; I should think they would have to go into
the open market. I do not know what else they would do. My
recollection is that right after the war anhydrous ammonia was sell
ing for something like 35 cents a pound and, due to developments that
have taken place since the war, the price of anhydrous ammonia
to-day is approximately 6 cents.
Mr. HOWARD. Five and a quarter to-day.
Mr. DOUGLAS. Inasmuch as we have this plant which will require
additions and improvements, and so forth, if we are to use it for the
purpose of manufacturing fertilizer, and inasmuch as we are attempt
ing to dispose of it so that at least fertilizer will be produced down
there, is not the question of the relative merits of the cyanamide
process and the Habcr process a rather irrrelevant one?
General WILLIAMS. Well it seems to me if you would say to some
company, ''Gentlemen, here is a plant: take it and operate it and
make what you can out of it," so that they will have no capital charge
or anything like that, perhaps they can do it; but if you are going to
put upon your output any price that would show really its costs,
why then I have some question myself.
Mr. DOUGLAS. And it would be irrelevant, too, whether or not it
was a going concern?
General WILLIAMS. Yes.
Mr. DOUGLAS. Assuming they were producing only fixed nitrogen?
General WILLIAMS. Yes.
Mr. DOUGLAS. And in the case of most electrochemical industries
producing fixed nitrogen, is it not true they also produce a lot of
by-products ?
General WILLIAMS. Oh, a lot of other things.
Mr. DOUGLAS. And is it not true that they do produce by-products?
General WILLIAMS. The biggest producer is the Du Pont Co.; of
course they are the biggest concern in the whole chemical industry:
next are the Allied Chemical & Dye—they are about the same. Those
two are probably the two dominant factors in the chemical industry.
Mr. DOUGLAS. And iu a competitive market?
242 MUSCLE SHOALS

General WILLIAMS. Yes ; they are both large producers ; they have
the two largest plants. The Du Pont Co. plant at Belle, W. Va., is
producing now 140 tons of anhydrous ammonia a day and, so far as
we know, the Hopewell plant of the Allied Chemical & Dye Corpora
tion is producing 200 tons.
Mr. DOUGLAS. So that while it is conceivable', is it not, that some
body might operate Muscle Shoals for the purpose of producing fixed
iiitrogen with which fertilizer could be made, it is conceivable, is it
not. that concern might have to sell its fertilizer, providing it is
ammonium phosphate, at a loss and still, by virtue of its production
of by-products, make it show a profit on its entire operation?
General WILLIAMS. Yes, sir.
Mr. DOUGLAS. And is not the question of by-products a very im
portant one?
General WILLIAMS. A very important one.
Mr. DOUGLAS. In the consideration of Muscle Shoals?
General WILLIAMS. I think you have the complete answer to that
question in the two important prospositions that have l>een made for
the purchase of Muscle Shoals, one by the Ford Co. and the other
by the American Cyanainid Co. In both of these cases the question
of the production of the fertilizer ingredient came up. Mr. Mayo,
the chief engineer of the Ford Co., in stating his case to the Military
Affairs Committee, some 7. 8. or 10 years ago. was asked the direct
question, "If vou can not produce the fertilizer at a profit, what
would you do,v and he said, "We would not produce any at all."
The American Cyanamid Co. makes practically the same statement—
unless then can produce at a profit they will stop producing. Their,
contract, which is very carefully drawn up. provides for that very
contingency. So that there is no proposition that has appeared be
fore this committee where anybody guarantees you anything about
the production of your fertilizer.
Mr. DOUGLAS. With respect to your last answer, I am not certain,
because the cyanamide bill is a complicated one (you have to go from
page 1 to page 40 and back again, and to page 90 and back to page 2),
as to whether or not there is in that bill an absolute guarantee that
a certain tonnage of fixed nitrogen must be produced. Off-hand, in
reading the bill, I should say there is no guarantee, if they fail to
produce, that then the Government has the right of recapture. Have
you read the newest bill ?
General WILLIAMS. We have had the bill studied in the Ordnance
Department, in the Chief of Engineers' office, and in the Judge
Advocate General's office and. as we have stated in letters I think
to the committees, that is the Secretarv of War has stated, we can
discover no positive guarantee in those bills.
Mr. WAINWKIGHT. Did you discover what the condition would be
if they did not come up to the basis of production on which the bill
is founded—how the Government could get back its property?
General WILLIAMS. As I remember it, recapture was provided for
after a very considerable time and contingent on a number of other
conditions, and it was questionable at least to the legal staff of the
War Department.
 MUSCLE SHOALS 243

Mr. WAIXWRIGHT. Mr. Chairman, I think some of the simple souls

on this committee ought to have that very definitely and clearly
stated.
General WILLIAMS. That has been stated.
Mr. McSwAiN. Do you think General Williams is qualified to
interpret that contract, merely as an Army officer?
Mr. WAIXWRIGHT. Oh, no ; I say we ought to have some legal opin
ion on the exact legal effect of this contract.
General WILLIAMS. Colonel Wainwright, I am quoting from a let
ter which I know was written in which these views were expressed in
a letter from the Secretary of War.
Mr. WAIN-WRIGHT. On this particular bill ?
General WILLIAMS. On this particular bill.
Mr. WAINWRIGHT. In this session ?
General WILLIAMS. This session, I think, to this committee—one to
this committee and one to the Senate committee.
Mr. WAINWRIGHT. I suggest that that letter be inserted in the
record.
Mr. STAFFORD. I suggest, further, that we ought to call before the
committee the representative of the department who gave that opin
ion, so that we may have an opportunity to question him.
(After informal discussion, the committee went into executive ses
sion, at the conclusion of which further hearing was adjourned sub
ject to the call of the chairman.)
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 MUSCLE SHOALS

THURSDAY, APRIL 10, 1930

House of REPRESENTATIVES,
CoMMITTEE on MILITARY AFFAIRs,
Washington, D. C.
The committee met at 10.30 o'clock a.m., Hon. Harry C. Ransley
presiding.
Mr. RANsley. Members of the committee, to-day Mr. Charles J.
Brand, executive secretary and treasurer of the National Fertilizer
Association, is here and will address the committee. You may pro
ceed, Mr. Brand, with any statement you have to make.
STATEMENT OF CHARLES J. BRAND, EXECUTIVE SECRETARY AND
TREASURER THE NATIONAL FERTILIZER ASS00IATION

Mr. BRAND. Mr. Chairman, my purpose in asking for an oppor

tunity to be heard was to present the present picture in the fertilizer
industry as it is affected by your consideration of the problem of dis
posing of the Muscle Shoals plant. It is two years since I appeared
before your committee and, in the interim, there have been many
changes in the situation and I wanted, if agreeable to the committee,
to develop that in an oral statement, to be supplemented with a type
written statement which, I regret to say, we did not quite complete
and which we will complete and furnish to each member of the com
mittee. We worked late at it last night and did not get it done.
We are using about 7,900,000 tons of fertilizer a year at the present
time. We estimate, roughly, that fertilizer contains about 4 per
cent of nitrogen, about 10 per cent of phosphoric acid, and about 3
per cent of potash—4–10–3; in other words, roughly an average
plant-food content of about 17 per cent.
Mr. McSwain. That is a little high, is it not?
Mr. BRAND. It is a little high for your section, Mr. McSwain, but
it is very low for a section like Indiana and a section like Ohio.
Mr. SPEAKs. About what proportion of all fertilizer manufactured
and sold would be of that j.
Mr. BRAND. That is the average analysis I was speaking of and
my statement will show, by tons, the number of tons that contain
each of these ingredients and the sources of the ingredients, the
material used in making the potash salts of our nitrogen carriers,
whether it comes from sulphate of ammonia, nitrate of soda, cyana
mid, or what not. I am preparing that more for a reference that I
hope will be useful to you. The figures also, include, of course, a
considerable quantity of nitrate of soda, sulphate of ammonia, and
245
246 MUSCLE SHOALS

a few other materials that are used as top and side dressing, unmixed
with any other material.
The 4^10-13 constituents of fertilizers of course represent the per
cent in terms of actual plant food. Four per cent means 80 pounds
per ton of nitrogen ; 10 per cent of phosphoric acid means 200 pounds
of phosphoric acid ; 3 per cent of potash means 60 pounds of potash,
or K2O as such—not of the carrier, but of the potash itself.
Now there is so much misrepresentation, Mr. Chairman, regarding
the rest of the ton that I want to discuss that. We are accused of
selling millions of tons of filler, of shipping common dirt and sand
around at the farmers' expense, and all that sort of thing. Of course
every manufacturer minimizes that as far as he can in his power.
Natural superphosphate is not pure phoshoric acid and can not
be and if it-rere, it could not be used. It must be in a carrier that
it is practical l*. KJ/J-'Y to the soil, and the remainder of the material
above this content is -^ery, very largely material that is a con
comitant of the natural xtaterials that are used. It is no different
from the situation with mila.- You do not have 100 per cent milk.
because that would be about 15> -^er cent of dry matter, and nobody
can drink dry matter. The water i*. there has to be considered and
it is a natural concomitant of the m'Jk. So it is with superphos
phate. For instance, there is about a thousand pounds of gypsum
and land plaster in every ton of phosphate. This occurs in the rock
which is treated to make superpnosphate. I mention that, because
there has been so much misrepresentation of this matter of the filler.
Mr. QUIN. However, that is not fertilizer, is it—that filler?
Mr. BRAND. Frequently it is ground limestone. They use the ma
terial that is most convenient to use and that um be had cheapest.
Many of them use pure sand.
Mr. QTJIN. I do not want to have any misrepresentation ; I want to
be honest in everything I say about fertilizer, and 1 wish you would
tell us the actual truth about that stuff.
Mr. BRAND. So far as I can tell the truth, this is the truth : It is
economically necessary for make-weight and the conditioning that
they use that substance which is suitable for the purpose, "chat they
can secure most cheaply, because it is put in purely to cond\tion or
make weight in order to bring the ton up to 2.000 pounds, \yhnt is
paid for is units of plant food, and you can not sell 5-8-7 a- ™e
price you can sell 8-3-3, because there are more units and the grt^er
the number of units have to be paid for. With the growth of ?K-
centrated fertilizer, it is going to be necessary in many cases to ut
in even more filler, because there are less concomitants of weig'-
making material in the actual products.
Mr. WURZRACH. In the 4—10-3 fertilizer—that is. 17 per cen^
what does the other 83 per cent consist of; that is, the average if'
tilizer?
Mr. BRAND. In that case, for instance, the largest single const *°-
ent in addition will be the gypsum contained in the superphosph*6'
Mr. WURZRACH. How much, about? »
Mr. BRAND. A thousand pounds out of every ton of superI,*10- 'r]/
phate, roughly, is gypsum. I
Mr. WURZRACH. That would take up 50 per cent of the 83 perf061
Mr. BRAND. Koughly that.
f
 MUSCLE SHOALS 247

Mr. WURZRACH. Of course, you can only approximate this.

Mr. BRAND. Yes.
Mr. WURZRACH. Now. has that any value as plant food?
Mr. BRAND. Oh, yes; it has a good, useful calcium content in many
respects. In fact, in some soils, it is very definitely useful. It is
not as useful as lime, but in some soils it serves a similar purpose.
Mr. WtJRZRACH. What is the remainder?
Mr. BRAND. If I may, I will take a broad illustration, in order to
make the point clear. If I may, I will take 5-8-7, which is a very
widely used fertilizer, rather than the average. 5-8-7 is the custom
ary way of designating a particular analysis of fertilizer. The 5
means 5 per cent of nitrogen, as ammonia ; the 8 means 8 per cent of
phosphoric acid, almost universally secured from superphosphate;
the 7 refers to the potash content, K,O. That may be obtained by
muriate of potash, calcium fluoride, kainit or manure salts, or any
potash carrier, and it is always customary, except in certain trade-
named or branded fertilizers, to purchase and describe fertilizer by
these numerals. For instance, in Mr. Hill's country, they will use
2-12-2 or 12-2-2. In the South, in the past—they are changing that
custom now—they named the phosphoric acid first and then the
nitrogen and the potash; they have changed over to naming the
nitrogen, then the phosphoric acid, and then the potash, and that is
the way the fertilizer analysis is described. That is what you buy,
and the higher these numerals are, all three of them, the more valu
able the fertilizer. And those numerals are not just chance numer
als; they are definite proportional relations—what we call ratios:
3-9-3. for instance, is a 1-3-1 ratio. So there is a definite ratio that
' has l>een worked out that gives better results on certain soils and in
certain crops.
Just to answer Mr. Wurzbaoh, if I may. He wanted to know what
is contained in it: what is the rest of this stuff: how it is made up:
what is it. I took a 5-8-7, because that is so widely used. It is the
fertilizer used to make the big potato crops; it is what gives the
Maine farmer an average of something like 267 bushels to the acre:
whereas the Michigan farmer gets 103 to 105 bushels to the acre.
That would be made up and need to contain, in order to be a very
jroorl fertilizer, we will say, 240 pounds of sulphate of ammonia.
The nitrogen content of the sulphate of ammonia, is 20.5 per cent
. nmghly. The rest of it is sulphur and the concomitants of that par
ticular chemical. The nitrogen content is 20.5 per cent: we will say
> 110 pounds of nitrate of soda, because we have to get to this 5 per
ioCent in this 2.000-pound mixture; that is what we are trying to do.
he nitrate of soda is about 15.66 per cent of nitrogen and the rest
>n I Sodium and what not—some impurities. Even chemically pure
i itrate of soda has only about 16 per cent of nitrogen in it. Then,
ecause many users find it advantageous to have an organic, we put
;tp&. say 250 pounds of tankage. As you know, that is the natural
,/, organic material that is a by-product of the packing industry. That
fives us. when you take that poundage and add it together, our ne'--
essary 5 per cent of nitrogen. Now. we get our superphosphate by
adding 1.000 pounds of 16 per cent superphosphate: 500 pounds of
'hat is gypsum and I might say that the rest is silica, iron, aluminum,
and other substances that occur in the phosphate rocks in the natural
248 MTJSCLE SHOALS

beds. Then we get our potash; we will say 280 pounds of 50 per
cent muriate. Then we still lack 120 pounds of having our 2,000
pounds, and we put in 120 pounds of filler, or makeweight, or con
ditioner, according to what we can put in at the lowest cost.
Mr. SPEAKS. You are speaking now of 5-8-7?
Mr. BRAND. I am speaking now of 5-8-7, General.
Mr. SPEAKS. Now, after all that description, when you ship a ton
of fertilizer, what proportion of that ton is filler, so-called—gypsum
or whatever it may be?
Mr. BRAND. Well, the only proportion of it that is filler is 120
pounds.
Mr. SPEAKS. You have indicated how much is of this substance
and how much of that. Now, finally, there is added what is com
monly known as filler, which you described in this instance as
gypsum. It might be common sand, it might be clay, it might be
anything.
Mr. BRAND. That is right.
Mr. SPEAKS. Now, what proportion of that ton is of that nature?
Mr. BRAND. Well, 120/2000 is your fraction. You figure the per
centage
Mr. SPEAKS. We have 2.000 pounds of fertilizer that has been
shipped.
Mr. BRAND. Yes.
Mr. SPEAKS. What proportion of that 2.000 pounds is filler, gyp-
turn, or whatever you use, is in that ton ?
Mr. BRAND. I think I get your point. You want to know how
much of the total ton is genuine plant food ?
Mr. SPEAKS. Absolutely.
Mr. BRAND. An average of 500 pounds in that case.
Mr. SPEAKS. So that 1,500 pounds
Mr. BRAND. Is of this concomitant material.
Mr. SPEAKS. Is put in there for convenience?
Mr. BRAND. Oh, no; it is in there because nature makes it that
way.
Mr. SPEAKS. I understand. It is necessary to utilize sand, gypsum,
or other substance to carry the plant food.
Mr. BRAND. Yes, as a carrier; that is quite correct.
Mr. WURZRACH. Is it not a fact. Mr. Brand—I think what General
Speaks has in mind is, taking your percentage of 5-8-7, that makes
20 per cent of strictly plant food.
Mr. BRAND. That is right.
Mr. WURZRACH. Exclusive of the gypsum or other content?
Mr. BRAND. Exactly so.
Mr. WURZRACH. You really only have 400 pounds out of the 2.000
pounds that is strictly plant food, and 1.600 pounds is filler in a strict
sense; but still it has something over and above 20 per cent plant
food, as you designate?
Mr. BRAND. Exactly so.
 MUSCLE SHOALS 249

Mr. SPEAKS. In a considerable measure, that 1,600 pounds of ma

terial that is used for mere convenience is part of the overhead of the
fanner.
Mr. BRAND. No, it is the chemical reaction that produces that
material.
Mr. McSwAiN. Of course that is not absolutely so, scientifically;
you can produce fertilizer that will carry 85 per cent of plant food,
which would be over 1,600 pounds of plant food per ton, chemically
and scientifically, whether economically or not, can you not ?
Mr. BRAND. We are actually using as fertilizer materials plant
food combinations containing as much as 73 per cent.
Mr. McSwAiN. In fact, the Department of Agriculture reports
they have ascertained and find they can be combined to the extent of
85 per cent, does it not?
Mr. BRAND. I think, as far as that is concerned, that is absolutely
correct.
Mr. McSwAiN. The report of the Secretarv of Agriculture for
1928 states that, does it not?
Mr. BRAND. Yes. For instance, monoammonium phosphate is on
the market, containing 72.2 per cent of plant food; diammonium.
containing 73 per cent, and various percentages up to that high.
But the point I made a little bit ago was where we used these mate
rials strictly, we have to put in more of the makeweight, because
there is less of the natural material in the compound. Mr. Wurz-
bach, did I adequately cover the point you had in mind?
Mr. WtrRZRACH. Yes. I have forgotten what you say had to bo
added with any kind of substance. How much was that 240 pounds ?
Mr. BRAND. In 5-8—7, 120 pounds in this particular case.
Mr. WURZRACH. That could be sand, or anything?
Mr. BRAND. Exactly so : whatever is cheapest for the purpose that
is suitable.
Mr. WURZBACH. What is the use of putting that in?
Mr. BRAND. Purely to make it to the weight. It has been tried
in the past, by a certain number of companies of the fertilizer in
dustry, to sell 1,880 pounds of something, we will say, as being the
ton; but the farmer is not satisfied to receive it and the firms that
have tried that have given up the plan of thinking to save a little on
the freight.
Mr. WURZRACH. Is not that a pure waste and merely adding to the
expense of fertilizer to the farmers?
Mr. BRAND. No; it is not.
Mr. WURZRACH. Why could it not be sold as 1,880 pounds, instead
of 2,000 pounds ; because the farmer could just as easily, when he got
the 1,880 pounds to his farm, take a shovel and mix the stuff himself
and add 120 pounds; whereas, under the present system, he pays
freight on 120 pounds of 'absolutely worthless substance, so far as
pure fertilizer is concerned. Now, why should they want to make
it up to the arbitrary weight designated as a ton, or 2,000 pounds:
why do not they sell that as 1.8X0 pounds of fertilizer?
Mr. BRAND. As I say, that has been tried and the fanners' long-
established purchasing habits have prevented its becoming general.
Mr. WURZRACH. Do not you think if the farmer was thoroughly
educated on that and was perfectly familiar with the fact he is pay
250 MUSCLE SHOALS

ing for 120 pounds of something, paying freight on it, he would only
buy the 1,880 pounds?
Mr. BRAND. Well, in our efforts to bring about the use of a higher
analysis of fertilizer—and our association led that movement, begin
ning back in 1818, to bring about a higher concentration—we have
constantly tried to put that point over, with the cooperation of the
farm press and everybody else, and we have made progress; because,
before the war, the average content was only about 12 per cent; im
mediately after the war it was 14 per cent, and now it is about 17 per
cent. In other words, our teaching is taking effect, but very slowly
indeed—slower than we wish it might. As far as that is concerned,
Mr. Wurzbach, it is not as simple a process as it might seem. In
getting the 1,880 pounds, that is all right, because the present ferti
lizer distributing machinery is adequate for distributing that mix
ture ; but, if you go to the concentrations Mr. McSwain has in mind,
you would have to go around with a teaspoon spreading them over
the land ; because the fertilizer distributing machinery is not adequate
for the purpose.
Mr. WURZRACH. I understand that. I am talking about the use
of commercial fertilizer. It seems to me it would be a very simple
thing to educate the farmer to the fact that under the present prac
tice he is buying something and shipping it -a thousand miles that
he has on his farm, that he could supply just as well himself.
Mr. BRAND. Well, I brought my associates, Mr. Smalley and Mr.
Warner, with me this morning. They are engaged in our soil im
provement work. We spend about $125,000 a year on educational
work and have for many years, with a staff of 10 agronomists en
gaged in that work.
Mr. WURZRACH. It is a further fact that 120 pounds do not have
to be added at all to make it necessary to apply that kind of fertilizer
on the farm ?
Mr. BRAND. No ; in the case of that particular analysis, it would
not be necessary, because the machinery is adequate for that.
Mr. WURZRACH. So it would not even be advisable for the farmer,
when the 1,880 pounds reached his farm, to add the 120 pounds of
sand to it at all ; he could apply it in its then condition, without add
ing the 120 pounds.
Mr. BRAND. He would have some difficulty in the rate of applica
tion, but that is the only difficulty that I can think of; because the
machinery is adequate for that purpose. Just to give you the
picture of the difficulty of the machinery and show you it is not
something we are merely arguing, we are carrying on an investiga
tion of the adequacy of fertilizer distributing machines, and last
year we tested 24 different machines under control conditions, in
South Carolina. I have in mind one particular machine that was
very highly regarded and the rate of distribution in a 50-foot strip
varied from a rate of 50 pounds per acre to over 600 pounds per acre,
in the delivery from the shoe, of the fertilizer. So you see the
problem is a complex problem. We are carrying on research work
which we are financing, and the Department of Agriculture is co
operating, to bring about an improvement in these distributing ma
chines, which must go hand in hand in the use of these higher
analvses.
 MUSCLE SHOALS 251

Within the last 24 months over 100 plants have been adapted to
the use of either ammonia liquor or anhydrous ammonia produced
synthetically, for direct application to the superphosphate mass and
absorption of as high as 5 per cent has become practical under that
method, disposing of the necessity of producing a salt like sulphate
of ammonia or some other material, sulphate of soda, to be mixed
with it. You get a heavy absorption with the removal of the inter
vening costs, and that is a very important factor in the recent reduc
tion in prices.
Mr. STAFFORD. What do you mean by an absorption of 5 per cent?
Mr. BRAND. The ammonia liquor, or anhydrous ammonia, is
shipped, in this case, from Hopewell to the fertilizer plant and is
released from pressure tanks to the mass of superphosphate, and it
is immediately absorbed by the superphosphate and you get your
nitrogen content through the absorption, instead of through mixing
the dry material, up to as much as 5 per cent that it will absorb.
That is one of the important recent developments in fertilizer, and
I might say. right in that connection, it is constantlv repeated—
not. I think, to be untruthful but through ignorance—that no nitro
gen manufactured synthetically is available for the fertilizer indus
try. It is largely available: its use is increasing at a wonderful
pace. and. aside from that, every pound of nitrogen that is produced
for the refrigeration industry releases another pound somewhere
for the fertilizer industry. That is all substitutable.
Mr. HILL. How much nitrogen. Mr. Brand, would you say is be
ing manufactured synthetically and going into the fertilizer indus
try in this country to-day, and that nitrogen manufactured in this
country?
Mr. BRAND. Mr. Hill, if you will permit me. I am going to show
a series of charts here that disclose that whole picture in a graphic
way and. if I might do that. I think it would save the committee's
time.
Mr. HILL. All right; go right ahead in your own way.
Mr. WTJBZRACH. There is one term that has been used that I do
not understand : What do you mean by superphosphates ?
Mr. BRAND. In the past, we have referred to certain material as
acid phosphate very generally. It is a product that arises when the
phosphate rock is treated with sulphuric acid, and the usual treat
ment is approximately a ton of sulphuric acid. I think about 60
Baume, and a ton of rock, combined and acidulated together, which
gives a product known as superphosphate, which was formerly
known as acid phosphate. We led the way to do away with the
name of acid phosphate, for the reason the farmer gets the thought
it creates acid soils, whereas it is a neutralizer and does not create
acid soils.
Now, if I may—I am sure the committee does not want to stay here
and listen to this harange for too many days—I would like to give
you the whole picture, if I can. Another accusation is that the
fertilizer industry is profiteering. As a matter of fact, it is " defici-
teering" and not profiteering. This chart [indicating] shows the
relation of the index prices between various commodities and ferti
lizer. The fertilizer prices, which is the figure for the month of
March, were 9.1 above the pre-war level of that date: all commodi
ties were 39 per cent above; building materials almost CO per cent
252 MUSCLE SHOALS

above; farm labor cost almost 59 per cent above; non-agricultura!

commodities, almost 46 per cent above the average pre-war level:
tobacco, 82.6 per cent above the pre-war level
Mr. QUIN. I did not understand that.
Mr. BRAND. The tobacco prices are 82 per cent above the pre-war.
Mr. QUIN. You mean the kind I smoke in my pipe? [Laughter.]
Mr. BRAND. I do not know what kind you smoke, but that is the
average of the quotations of the Bureau 01 Labor Statistics. Wheat,
we regret to say, is down very low, only 14.6 per cent above the
average pre-war level; cottonseed is very low, only 21 per cent above,
but all farm products are 31 per cent above the pre-war level, fer
tilizer is 9.1 above the pre-war level, and all commodities 39 per
cent above pre-war. Those percentages are all based on official data :
those are not anything we have cooked up to mislead the Committee
on Military Affairs or anyone else.
Mr. STAFFORD. Your statistics range over what period of time?
Mr. BRAND. This particular chart covers the date of March 15.
compared with the average prices that prevailed for the five pre-war
years of 1910 to 1914, using the old Bureau of Labor statistics basis
and not the one which they are now using, which is the 3-year basis,
as I recall it. including 1925. 1926, and 1927.
Mr. WURZRACH. What is the other year you use?
Mr. BRAND. This compares March of this year with the average of
the five pre-war years.
Now, we show that in a more conventional way here [indicating.]
This is the line of all commodity prices; this broken line is the war
time, you see ; they all had this prolification in war time ; this is agri
culture, the dotted line; the vellow line is mixed-fertilizer prices at
retail ; the red line is the wholesale price of mixed fertilizer ; the blue
line is the price of fertilizer materials that go into these mixed
fertilizers that are represented by the red wholesale line. The two
at the bottom show the purchasing power of these fertilizers in terms
of farm products. In other words, as low as the farm products have
been and with all of the distress that has been created, fertilizer
prices are still very much below farm products in purchasing power.
I think those two charts disclose effectively
Mr. RANSLEY. Mr. Brand, is not that due to the competition in
your line of business?
Mr. BRAND. There are over 650 manufacturers in the fertilizer
business, ranging from those that produce 250,000 tons down to those
that produce 1,000 tons. You only need a small sum of money to
go into the fertilizer business, or a little credit and a warehouse,
and that means competition of the keenest character; so much so
that we lost, on the price of the war period, as an industry, some
thing like over $225,000.000.
Mr. FISHER. In giving the figures of the number of concerns in
the United States manufacturing fertilizer, have you any statistics
to show when they went in : have not some of them gone into bank
ruptcy since the war?
Mr. BRAND. The fertilizer picture is strewn with manufacturers
that have gone into bankruptcy since the war. I could very readily
present such facts.
Mr. FISHER. It is represented they make so much money
 MUSCLE SHOALS 253

Mr. BRAND. It is not true; that is all there is about it; it just is
not true, and this discloses what the price situation is.
Mr. STAFFORD. Your chart, which uses a basis of 100 in 1913,
shows the price of fertilizer reached its peak, up to 250 per coat, in
1918 and 1919.
Mr. BRAND. That is right.
Mr. STAFFORD. And it began to fall right immediately after that
and kept on falling until 1924; when, at that time, it has gained more
or less of an even rate of just slightly above 100—say, less than 125 ?
Mr. BRAND. That is correct.
Mr. WURZBACH. Now, the fertilizer manufacturers—that purchas
ing power of mixed fertilizer manufacturers, their products—does
not include all sorts of fertilizer manufacturers—those that merely
assemble the plant-food ingredients.
Mr. BRAND. Yes ; that includes the whole picture.
Mr. WURZRACH. Would that give a correct picture of it, as far as
this committee is concerned? Is it not possible that some of those
manufacturers, which are merely assemblers of the products, may
bring down the profit that is made ?
Mr. BRAND, Well, this is based on the prices secured, and we get
those prices from all sizes of places, from small companies and from
large companies, and, so far as we know, from efficient and ineffi
cient companies. So I feel it would be a fairly accurate reflection
of the whole situation. They are based on the figures that are fur
nished to us by the manufacturers.
Mr. WURZRACH. That is the selling price ?
Mr. BRAND. Yes. This represents the price at which we sell our
roods; this represents the price at which the dealer, over whom we
have very little control, sells his goods that he buys from us to the
farmer; that curve is based on the Department of Agriculture
figures; this one is based on our figures [indicating].
Now when the Muscle Shoals plants were built in 1919, this rep
resents the production of by-product ammonia in our coking plants
and gas plants and elsewhere in the United States. We were pro
ducing less than 60.000 tons of by-product nitrogen, and that was
quite inadequate for the existing needs. So it is not all surprising
mat Congress considered a plan at Muscle Shoals to increase pro-
'luction. But, in the interim, through this source of supply alone,
we have increased our production from 59.380 tons, in 1919, until.
in terms of pure nitrogen—now we are not speaking in terms of
sulphate of ammonia; we have reduced all these to pure nitrogen,
M> that they will be comparable—we manufactured, in the United
States, 187,600 tons of nitrogen through sulphate of ammonia, an
increase of 120,000 tons, or three times the proposed production at
Plant No. 2 at Muscle Shoals, from this single source, namely, sul
phate of ammonia from the by-product processes. I won't go in(;o
these others, but you see it is a continually rising curve and we may
expect it to continue to a rise, but at a retarded rate.
Mr. STAFFORD. How many plants are now engaged in the manu
facture of this 187,600 tons of pure nitrogen ?
Mr. BRAND. I can not tell you, offhand, how many plants are doing
t. At every little gas plant they have the possibility and many
them are simply finding it out. Practically every beehive oven
101229—30 17
254 MUSCLE SHOALS

has gone out, not every one, but most every one, and the by-product
oven has taken their place and, wherever there is a by-product oven,
this product is being produced.
Mr. STAFFORD. And generally distributed over the country?
Mr. BRAND. Very generally distributed over the country.
Mr. STAFFORD. And how are the by-products of those gas plants
brought into use for the production of fertilizer in the respective
localities ?
Mr. BRAND. They are sold to our manufacturers, by the manufac
turers of sulphate of ammonia.
Mr. STAFFORD. Where are the manufacturers generally distributed ;
are they localized in any one section of the country, or are the dis
tributed in all sections throughout the United States ?
Mr. BRAND. The heaviest distribution i.s in the southeastern United
States; the next heaviest is the Middle Atlantic and the New Eng
land StateSj and then Ohio, Indiana, Kentuckv, Tennessee and that
area; then it gets very thin when you reach Illinois, and the group
of States that reaches around to west Texas. East Texas is now
using considerable quantities of fertilizer. They are very generally
distributed over the map.
Mr. STAFFORD. Has it been charged at all there is any combination
to control prices ?
Mr. BRAND. It is one of the commonest statements you hear, when
fertilizer is discussed ; they simply rail at the Fertilizer Trust and tell
how they are robbing the farmer and all that sort of thing. I have
spent nearly all of my adult life in working for American agricul
ture; I have spent the last five years in the fertilizer industry. I am
a rather intelligent person, if I am compelled to say so myself.
[Laughter.] In those five years I have seen no evidence whatever of
any Fertilizer Trust, and I am relied upon by representatives in
the industry in that regard. I can say to you there is no such
animal and, if there were, it would have a very sorry time with 6,->0
competitors after it.
Mr. McSwAiN. I am sorry that the Fertilizer Trust, the poor, im
poverished Fertilizer Trust, was able to buy the superior intelligence
of the witness who has ceased working 1'or the people of the United
States. [Laughter.]
Mr. STAFFORD. Oh, I do not think I would say that.
Mr. McSwAiN. I am complimenting his intelligence.
Mr. STAFFORD. There may be an organization to collate the figures
and the like, which might have employed you, but is that a trust
that controls prices?
Mr. BRAND. Absolutely not. We deal absolutely under the Su
preme Court's decision on the maple flooring, cement, and other
cases.
Mr. STAFFORD. Has the fertilizer industry ever been under inves
tigation by the Federal Trade Commission?
Mr. BRAND. It has; in 1923 and once before that.
Mr. STAFFORD. AVhas was the result of that investigation?
Mr. BRAND. I should say the result was that the fertilizer indus
try was criticized as to certain things, all of which were changed to
the satisfaction of the commission ; the changes it requested were all
made. That antedated my connection with the matter; I was then
in the Department of Agriculture.
 MUSCLE SHOALS 255

Mr. STAFFORD. There has been no recent investigation as to

whether the manufacturers of fertilizer are in any trust?
Mr. BRAND. There was an investigation in 1924, and it came out
in this way. that certain manufacturers were fined costs, largely be
cause they were not willing to contend and litigate the case, because
they had lost so much money they thought they could do nothing
but lose more.
Mr. STAFFORD. What proportion of the product did those manu
facturers control ?
Mr. BRAND. That is rather hard to say, offhand.
Mr. STAFFORD. Generally speaking?
Mr. BRAND. I should say that group that was involved in that case
would represent fully 50 per cent of the industry; fully that.
Now, if I may, I will pass on, but I do not want to pass on in order
to get out of answering any question ; I only want to get along so as
not to detain you too long. Here again [indicating] we have a
most remarkable picture. ,
Mr. STAFFORD. How much capital, without water, is invested in
the fertilizer industry to-day?
Mr. BRAND. All ot the water is squeezed out; the capital invest
ment probably represents, at present values, about $250,000,000.
When I tell you that one of our largest companies has not paid a
dividend in nine years, even on its 7 per cent cumulative pre
ferred stock, you can realize what the situation is.
Mr. STAFFORD. Have there been any new plants established in the
last two or three years, as competitors to the old-established plants?
Mr. BRAND. No large and outstanding plants. Many small plants
have come into the field, particularly to serve local needs; but no
large and outstanding companies have been organized in recent years.
Mr. STAFFORD. Is the manufacture of fertilizer of such a character
that the small manufacturer can produce the fertilizer and enter into
competition with the established industry?
Mr. BRAND. You are from Wisconsin, are you not?
Mr. STAFFORD. Yes; I am from " Missouri."
Mr. BRAND. In the State of Wisconsin, very recently, within the
last two years, such a small company has been organized and. as I
understand it. is functioning successfully, and I know it is giving
excellent competition to our people, because our plants are suffering.
Mr. STAFFORD. So this new company is not in your group?
Mr. BRAND. No; other small companies in your State are, and
that company has applied for membership ; in fact, it applied before
it began the actual manufacture.
Mr. McSwAiN. When you say " small," what capitalization are you
talking about?
Mr. BRAND. I imagine that company has a capitalization of about
$25,000: I can not say definitely.
Mr. McSwAiN. Then that means they are mere mixers; they are
not able to establish acid phosphate chambers as part of the plant.
Mr. BRAND. No: they are mixers.
Mr. McSwAiN. He just buys phosphorus, buys potash and buys
nitrogen, and then mixes them together?
Mr. BRAND. He is a typical mixer there, as you know them in
the South.
256 MUSCLE SHOALS

Mr. McSwAiN. Exactly. Down South there are hundreds who

rent an abandoned warehouse and get an abandoned concrete mixer,
and buy the elements and stir them together, but they have to buy
the things themselves from the big fellows like you, who control the
ingredients and control the price.
Mr. BRAND. We have more small members than large members.
Mr. McSwAiN. Yes.
Mr. BRAND. Perhaps I ought to clarify that.
Mr. STAFFORD. I am inquiring as to some real manufacturers of
fertilizer that have been established. I want to get the picture as to
whether there is any competition, or whether there is an understand
ing in this group of all these manufacturers.
Mr. BRAND. No.
Mr. STAFFORD. Mr. McSwain has aided me in the information that
this plant that has recently been established in Wisconsin is just
merely a mixing concern.
Mr. BRAND. Yes.
Mr. STAFFORD* I am seeking to get the picture as to whether there
has any real competition been established by new plants in the last
couple of years or so.
Mr. BRAND. The losses which the industry has suffered since the
war has discouraged any building of large new plants, or any
organization of new companies. If I may say, because this is sug
gested by the reference to this mixing plant, there are several types
of manufacturers. One manufacturer may produce his own sul
phuric acid, his own phosphate rock, buy his potash and buy his
nitrogen and make a complete fertilizer. In other words, he is a
complete fertilizer manufacturer; he makes his sulphuric acid and
he either buys or mines the rock, gets his other stuffs, and makes the
combination.
Mr. WURZRACH. To be perfectly right, he is a manufacturer of
only one-third, at best, in tliis country.
Mr. BRAND. That is true.
Mr. WURZRACH. He is not a manufacturer that manufactures more
than one of the three essential elements.
Mr. BRAND. That is correct ; because even the nitrogen manufac
turers manufacture nitrogen, but do not manufacture phosphoric
acid. That picture is changing at this moment; some manufacturers
will, indeed are alreadv producing both phosphoric acid and nitro
gen; so the picture is changing.
Mr. STAFFORD. What percentage of the product is being produced
by factories producing now both phosphoric acid and nitrogen (
Mr. BRAND. There are about eighty ; there are not less than eighty
companies that acidulate the rock; in other words, manufacture
superphosphate.
Mr. STAFFORD. What percentage of the output to-day is beinj:
manufactured by manufacturers of two of the three ingredients?
Mr. BRAND. Oh, a very small fraction. I would hesitate to ap
proximate it; I would say not to exceed three or four per cent, if
that ; a very, very small percentage.
Now we come back, then, to this question of synthetic nitrogen
and the development of that industry in the United States. In 191O.
we did not make a pound of synthetic nitrogen ; in 1919, when the
 MUSCLE SHOALS 257

Muscle Shoals plants were built, a small plant at Niagara Falls

jiroduced 276 tons of synthetic nitrogen. This curve illustrates what
has happened in the ten years since 1919 and, in 1929. we produced
in the United States 84,000 tons.
Mr. FISHER. Actual production?
Mr. BRAND. Actual production.
Mr. FISHER. I notice, in so many figures that are given, they show
the capacity.
Mr. BRAND. I will show the capacity later. May I say to the com
mittee that of course statistics of a thoroughly dependable character
are not available, so we have worked—and Mr. Smalley has helped—-
with the Fixed Nitrogen Laboratory, with the nitrogen manufactur
ing laboratories where they are willing to cooperate, and with every
source of information we could contact, and this [indicating] rep
resents the best combined judgment of the actual production of
synthetic nitrogen in the United States in 1929, and I invite your
attention to the change from the preceding year, 1928, an increase,
I judge, of about 58,000 tons in one year.
Mr. HILL. Mr. Brand, are all of those 84.000 tons of fixed nitrogen
going into fertilizer?
Mr. BRAND. Very largely that is going into fertilizer.
Mr. HILL. Very largely; what do you mean by that?
Mr. BRAND. I will show you later, in another chart, the disposition
of the nitrogen to the various industries and the various uses.
Mr. HILL. Has that had any eft'ect in lowering the price of fer
tilizer?
Mr. BRAND. Decidedly. I will come to that with a curve that dis
closes that very clearly.
Mr. STAFFORD. What is the reason for the unusual jump from
26.000 to 84,000 from 1928 to 1929?
Mr. BRAND. The Allied Chemical and Dye Corporation plant at
Hopewell, Va., came into production in that period, and they
make 45.000 tons at that one plant.
Now, here we show by plants, to the very best of our ability and
from every source we could gain information, the change in the
picture from 1926 to 1929. In 1926, the plant at Hopewell was not
in existence,«which now produces that part of this column of total
production [indicating]. The Allied Chemical & Dye Corporation
owned the Syracuse Synthetic Nitrogen Corporation at Syracuse, and
it produced as little as it is in 1926 and advanced to that in 1929 [in
dicating]. These two [indicating] represent the combined produc
tion of the Allied Chemical & Dye Corporation at its two plants at
Hopewell and Syracuse. N. Y. The DuPont increased production
is shown in this column here and then the small companies down
here [indicating], and the total capacitv is something less than
140.000 tons at this time.
Mr. QUIN. You mean that is concentrated nitrogen?
Mr. BRAND. That is synthetic nitrogen by the various modifications
ff the Haber-Bosch process.
Mr. QUIN. Is that in a form ready to go on the soil?
Mr. BRAND. No; that is ammonium: for instance much of it. such
as anhydrous ammonia, shipped in tank cars to be used in hyper-
phosphates in order to be ammoniated.
258 MUSCLE SHOALS

Mr. QUIN. It must go to the factories?

Mr. BRAND. Yes ; it must fro to the factories.
Mr. GARRETT. In that picture, where does the American Cyanamid
Co. figure?
Mr. BRAND. The American Cyanamid Co. is a foreign corpora
tion. Its plant is located at Niagara Falls. Canada, and it does not
appear here. In the import figures its production appears in so far
as it conies into the United States; but it is a Canadian company
and its production is not in this.
Mr. DOUGLAS. Then, as I understand, neither on this chart or the
immediately preceding one is there indicated any of the production
of the American Cyanamid Co. ?
Mr. BRAND. That is correct.
Mr. DOUGLAS. Mr. Chairman, do you not think it would be ad
visable for these charts to be included in the record?
Mr. McSwAiN. You have them all here on the table; the Ferti
lizer Association has been sending them out to you.
Mr. STAFFORD. I do not recall having seen these charts.
Mr. BRAND. These were only finished yesterday.
Mr. McSwAiN. It has been inserted in the Congressional Record;
Senator Fess stuck it in the Congressional Record.
Mr. BRAND. These were never published; these were completed
within the last 24 hours, the most of them.
Mr. McSwAiN. They look mighty like those here that are supposed
to be by the Chamber of Commerce of the United States. Senator
Fess put them in the Congressional Record and somebody sent me
one here about a week ago called " Muscle Shoals."
Mr. BRAND. I must confess I assisted in the preparation of that,
but assure you that none of these plates could be there, because
we finished those two months ago and these were finished within the
last 24 hours.
Mr. McSwAiN. I noticed a very remarkable identity.
Mr. DOUGLAS. Would it be posible for you to furnish the charte
to this committee?
Mr. BRAND. Anticipating this request, I have prepared them in my
memorandum, but my memorandum is not quite complete. As I
explained at the outset, I am planning to furnish copies of these.
I tried to get them up so they would be useful to the committee. I
think the committee has been imposed upon for years by people tell
ing them all kinds of things without submitting the figures so that
they could be scrutinized and the facts determined. I have tried to
give the facts so that you can check them up; if I am wrong I want
to know it more than you do.
Mr. DOUGLAS. When will you be able to complete your data ?
Mr. BRAND. To-day.
Mr. DOUGLAS. Thank you very much.
Mr. McSwAiN. We admit you are equally as anxious to find out
the truth as we are; but I am not willing to admit you are more
anxious
Mr. BRAND. I withdraw my remark.
Mr. McSwAiN (continuing). Because we are not employed by
private interests, but are employed by the whole people, including
your people.
 MUSCLE SHOALs 259

Mr. BRAND. I withdraw that remark, because it has an inference

I did not intend it to have. I am very glad to withdraw it.
Mr. DOUGLAS. In order that all the information may be together
in the hearings. I make a unanimous consent request that these
charts, when they are completed by Mr. Brand, be submitted for the
purpose of inclusion in the hearings.
Mr. RANSLEY. I think they should be. I am satisfied there would
be no objection to that.
Mr. McSwAiN. I understand the witness is going to furnish one
copy to each member of the committee ; I do not think it is necessary
to print the charts.
Mr. DOUGLAS. I think it should be in the hearing itself.
Mr. HILL. Suppose we get the data which Mr. Brand is going to
submit to us and then each member will have his own copy and can
look it over and determine whether we want to put it all in, or a
part of it in, or what to do.
Mr. STAFFORD. So far, I think everything that has been produced
has been of a very informative character and should be available
for use not only to members of the committee, but for the House.
Mr. DOUGLAS. It seems to me at least it is relevant and important
information. With respect to its accuracy, I do not know; but I
have no reason, so far, to doubt it.
Mr. BRAND. It certainly is the best we have been able to get from
every source we could reach.
To continue the picture, our consumption of nitrate of soda is
determined by our production, plus our imports, minus our exports.
Xow it happens the picture is not complete, because we do not im
port a net quantity, but we export a net quantity and from 1919.
when we exported 104 tons, we have risen to an export, in terms of
pure nitrogen, of 42,000 tons in the case of nitrogen. That is equiva
lent, roughly, to 200.000 tons of sulphate of ammonia. So that we
are on an export surplus basis with respect to nitrogen at this
moment, of certain kinds.
Mr. WURZRACH. About how much of that export surplus is repre
sented by the production of the Cyanamid Co. ?
Mr. BRAND. Their stuff is none of it included in this chart.
Mr. McSwAiN. The exports from their plant at Warners, X. J.,
which is in the United States, are not included in your figures?
Mr. BRAND. No; because we use the net figure. That is just re-
exported, and it does not occur in our figures ; it should not occur in
our figures. It goes on to Japan and somewhere else, and what has
it to do with the exports from the United States?
Mr. McSwAiN. But you are dealing with exports from the United
States now.
Mr. BRAND. But it is Canadian goods. For instance, the Minne*
apolis millers are not going to report bonded stuff, milled in bond,
as United States materials.
Mr. WURZRACH. But it is produced in this country, although the
company is incorporated under the laws of Canada:; is that right?
Mr. BRAND. No; it is produced at Niagara Falls, Canada.
Mr. STAFFORD. The company is incorporated under the laws of
Maine.
Mr. RANSLEY. It is produced on the Canadian side of Niagara
Falls.
260 MUSCLE SHOALS

Mr. WURZRACH. How about the plant in New Jersey 1

Mr. BRAND. They import phosphoric acid, we will say? from
Florida, or phosphate rock and treat it. They bring their nitrogen
compounds from Niagara Falls and combine them at Warners and
produce both for the United States market and for reexport, and
the reexport part does not appear in our figures.
Air. GARRETT. What is the price of your fixed nitrogen in the
United States?
Mr. BRAND. At the moment, you can buy fixed nitrogen as low as
7 cents a pound, delivered at your factory.
Mr. GARRETT. Seven cents a pound?
Mr. BRAND. Yes.
Mr. GARRETT. Where do you export this 42,000 tons of nitrogen!
Mr. BRAND. Where is it shipped?
Mr. GARRETT. Yes.
Mr. BRAND. Japan is a very large purchaser; Cuba takes some.
It is distributed in relatively small quantities over a wide variety
of foreign markets.
Mr. GARRETT. What do you get for it abroad as compared with the
home market?
Mr. BRAND. I can not tell you that; but I can say to you within
the last 60 days quantities that had been exported were shipped
back here at lower prices, and at the cost of having been exported
and brought back. But you can not tell the export prices.
Mr. GARRETT. You mean quantities of the same stuff?
Mr. BRAND. Yes.
Mr. HILL. We are exporting, yet importing, too ?
Mr. BRAND. In the last 12 months a big plant at Billingham,
England, came in, making 2,400 tons a day, and naturally our for
eign market there has been closed up.
Mr. McSwAiN. So far as the manufacturers such as you are con
cerned, you smile and are happy; every time you can buy nitrogen
cheaper, you are glad you can get it cheaper, because you do not
manufacture it?
Mr. BRAND. Within reason, that is true, because we are purchasers.
Mr. McSwAiN. And the cheaper it is, the happier you are.
Mr. BRAND. Within reason.
Mr. McSwAiN. So that there is no reason you should be grieving
about the .manufacture of fixed nitrogen.
Mr. BRAND. It happens that some of those manufacturers are mem
bers of our association, and I try to represent their interests as
honestly and fairly as I do anyone else.
Mr. McSwAiN. I see.
Mr. BRAND. Yes. On the question raised a few moments ago, I
think by Mr. Hill, as to the disposal of chemical nitrogen in the
United States, into what industries, where does it go, this chart I
have had prepared to show where it goes, and this is the picture from
1899 to 1914, and then to 1928, the last year for which we could
conveniently collect data. You can see the growth of the fertilizer
nitrogen in that period very clearly. The details in here we are not
wholly sure of, but we are quite sure of the total picture and we
think this is a fair representation of what goes into fertilizer, ex
plosives, chemicals and acids, miscellaneous industries, and refrigera
tion.
 MUSCLE SHOALS 261

Mr. DOUGLAS. How much of that nitrogen, as indicated by that

chart, which is used in the production of fertilizer, is produced by
any one of the many synthetic processes ? As I understand it, that
chart represents the amount of fixed nitrogen.
Mr. BRAND. Yes; these are all in terms of nitrogen.
Mr. DOUGLAS. They are all in terms of nitrogen and not in terms
cf the ultimate compound?
Mr. BRAND. No. I can not answer that question precisely, but I
can give you the picture. We used for fertilizer 301,000 tons in
3928.
Mr. DOUOLAS. Tons of nitrogen ?
Mr. BRAND. Tons of nitrogen, Now, approximately, 84,000 tons
of that was synthetic nitrogen.
Mr. DOUGLAS. Eighty-four thousand tons was synthetic?
Mr. BRAND. That is right.
Mr. DOUGLAS. That would leave 217,000.
Mr. BRAND. From sulphate of ammonia, from organics. Chilean
nitrate and other sources.
Mr. DOUGLAS. That is my next question—Chilean nitrates.
Mr. BRAND. If I may, I will take that up when I get to the Chilean
nitrate table. Are there any further questions on that particular
table showing how the nitrogen is distributed as between the various
industries?
Mr. DotrOLAS. Just before you leave that, have you any chart
which indicates the origin of the 301.000 tons of nitrogen?
Mr. BRAND. Yes, I have, and in my memorandum I am showing
the actual tonnage by origin ; that is, how much is by-product from
the coke ovens, how much comes from the gas houses, and how
much from here and from there.
Mr. GARRETT. What is the annual output of fertilizer in the United
States?
Mr. BRAND. Seven million nine hundred thousand tons last year.
Mr. GARRETT. You say you produced 301.000 tons of nitrogen?
Mr. BRAND. That is the total production of nitrogen in the United
States for that year.
Mr. GARRETT. That went into fertilizer?
Mr. BRAND. Yes. that is the part of the column that went into
fertilizer—301.000 tons.
Mr. GARRETT. Three hundred and one thousand tons makes how
many millions of tons of fertilizer on the basis of 2 per cent?
Mr. BRAND. I brought out the percentages before you came in
and stated the average content was about 4 per cent in that
7.900,000. That is a very rough approximation, because we have
no means absolutely of determining it, but think that is quite
correct.
Mr. GARRETT. You mean there is 4 per cent of nitrogen in the
general fertilizers throughout the country?
Mr. BRAND. That is correct. That is an increase of 2 per cent
in the last few years. With the lowering price we have had a con
stantly rising nitrogen content. It is still unsatisfactory, but it is
what we have achieved with a great deal of effort.
Mr. GARRETT. What is the formula? of the fertilizer used by the
average farmers in the United States?
Mr. BRAND. 4-10-3, roughly.
262 MUSCLE SHOALS

Mr. GARRETT. Is it not a fact there is more 8-2-2 goods used

Mr. BRAND. Yes; a blamed sight more used than there ought to be
for the good of the farmers.
Mr. GARRETT. I am trying to get down to the nitrogen content
now. It makes a good deal of difference in a number of tons of
fertilizer if there is 4 per cent of nitrogen in all of it, than if
there is 2 per cent in half of it. in your figures.
Mr. BRAND. Yes. The analysis you mention is chosen, but the
one of which the largest quantity^ is used in the United States is an
8-3-3. But that is changing; we are going to a 4-12-4. We are
working up on it and that is an economic advantage to the user.
But you are quite right that in the range you speak of, that is one
of the most popular ones, although it is not economic when it is
thoroughly considered.
Mr. WURZRACH. Which is the most expensive part of these three -
ingredients ?
Mr. BRAND. Nitrogen; by far the most expensive. The cost of a
unit of phosphoric acid is perhaps around 70 cents; 70 to 90 cents.
Mr. QUIN. You mean per hundred ?
Mr. BRAND. No; per unit. A unit is 20 pounds. The cost per
unit of nitrogen, in the form of sulphate of ammonia, at the moment,
is about $1.92; in the form of nitrate of soda, it is about $2.70, or
something of that sort.
This is a chart [exhibiting] that was worked up to show the esti
mated consumption in the United States for industries in the green
color at the bottom, and for fertilizers in the whole area including
the red and the blue above the green. This is the industrial use ; this
is all the agricultural use [indicating]. The red is from organic
sources; the blue is from chemical sources, and you can see what
has happened. Look at that enormous spread that has taken place
in recent years, and you can see what is happening to organic*.
They are disappearing from the picture, for the reason they are
going into feeds, where they are more valuable.
Mr. McSwAiN. Automobiles have displaced horses and other
animals.
Mr. BRAND. This does not apply to manure, of course ; this applies
only to organics used in factories—tankage and things of that sort.
Mr. McSwAiN. Oh, you mean tankage.
Mr. BRAND. Cottonseed, also.
Mr. STAFFORD. I was getting the picture as to what you include
in organics, which is diminishing for use in fertilizer, in general.
Mr. BRAND. In this organics is included all forms of nitrogenous
matter—leather scrap, fish scrap, bone meal, tankage of all kinds,
castor pomace, and all that class of organic materials.
Mr. DOUGLAS. Is there a discrepancy between that figure of 4:00.000
and. roughly, 500.000 tons of nitrogen consumed?
Mr. BRAND. No; this is the first time the combined figures have
had organics.
On the question of nitrogen prices, in 1923 sulphate of ammonia
was selling as high as $3.88 per 20 pounds, or over 19 cents a pound.
As I said a moment ago, to-day you can buy synthetic, in the form
of anhydrous, for 7 cents, delivered at the factory—12 cents below
the price of 1923 high. You can see the course of the prices. This
is the sulphate of ammonia curve [indicating] which has now got
 MUSCLE SHOALS 263

ten down to $1.92; this is the nitrate of soda curve, for which the
quotation is $1.79. If you will divide by 20, you will get the price
per pound of each figure, and if you will multiply by the nitrogen
content, sulphate of ammonia, and potash you will get the price
per ton. In other words, the content here is a little over 20—about
41.5—per cent ; so if you will multiply by 20, you will get it roughly.
That would be $39 a ton for sulphate of ammonia. When Muscle
Shoals was started the price for that year averaged sixty to ninety
dollars; so that you can see the picture now is a totally different
picture, and when our friends write stories for Senator Capper to
distribute, for instance, that say fertilizer prices can be shaved 43
per cent by putting Muscle Shoals into operation, you just know it
can not be true ; it just is not in the cards.
Mr. STAFFORD. What part of those two ingredients, sulphate of
ammonia and nitrate of soda, are component parts of fertilizer?
Mr. BRAND. Those are the most important of nitrogen carriers in
commercial fertilizers, in which ammonia is far and away the most
important of all. Nitrate of soda is not used (I have figures in my
memorandum showing the processes) nearly as largely as it formerly
was in mixed fertilizers. Its preferred use is for top and side dress
ing, used alone after the plant has come out of the ground ; and, of
course, with a price of $2.79 compared to $1.92, the economic stress
to purchase the cheaper one is inevitable.
Mr. GAKRETT. How many pounds of sulphate of ammonia are there
in a ton of fertilizer on an 8-2-2 basis?
Mr. BRAND. I can not answer that offhand. I gave an illustration
before you came in and took a 5-8-7, of which great tonnages are
used and, in that particular analysis, 240 pounds were used.
Mr. GARRETT. \\ell, if it is 2 per cent sulphate of ammonia, it is
40 pounds; if it is 4 per cent, it is 160 pounds, is it not?
Mr. BRAND. That is right.
Mr. GARRETT. Now, what does it cost per ton ?
Mr. BRAND. Well, dividing by 20—what is that, Mr. Smalley?
Mr. SMALLEY. Between 9 and 10 cents a pound.
Mr. BRAND. It is between 9 and 10 cents a pound.
Mr. GARRETT. That is $3.60 for the ammonia that is in a ton of
fertilizer, according to that. How much does the phosphoric acid
i-ost, or phosphate ' .
Mr. BRAND. I do not have the quotations with me. I should say
somewhere between 70 and and 90 cents a unit.
Mr. GARRETT. I mean a pound ; 1 do not know anything about a
unit. How much per pound?
Mr. BRAND. Roughly, 4 cents a pound.
Mr. GARRETT. Four cents per pound, and 160 pounds of that in a
ton?
Mr. BRAND. $6.40. Your first figure on nitrogen—I wonder if that
is correct? Your multiply $1.92 by 4 for the average analvsis of
4-10-3.
Mr. GARRETT. We have phosphoric acid now $6.40: the nitrogen
is $3.90.
Mr. BRAND. No ; that is $7.68.
Mrs. KAHN. That is $7.68. Mr. Garrett.
Mr. BRAND. Not $3.90. Let us not figure 8-2-2. which is prac
ticallv off of the market now.
264 MUSCLE SHOALS

Mr. HILL. It is outlawed by some States.

Mr. BRAND. Absolutely. The State of Alabama does not permit
it to be sold, and the State of Mississippi does not permit it to be
sold.
Mr. GARRETT. I want to find out what is the cost of the ingredients,
and I will take an 8 1 1, a 4—8—i, or a 4-12-4. What is the most
popular fertilizer that the farmer uses on tobacco, corn, and wheat*
Mr. BRAND. I took the most popular one for potatoes and truck
crops, because it is widely used, and I took a 5-8-7 and worked that
all out, and you will find it in the record. You know, you may
want nitrate of soda, I may want sulphate of ammonia, and Mr.
McSwain might want cottonseed meal. That results in your nitro
gen coming from different carriers.
Mr. GARRETT. I am talking about a fertilizer that is sold generally
all over the country.
Mr. BRAND. That is what I am talking about, but there is no fixity
in the source of the nitrogen that is put in the particular analysis.
I prefer it from three sources, I prefer it from sulphate of ammonia,
nitrate of soda and some organic tankage and I have a preference,
for one crop, of more tankage, or more ammonia; for another crop,
where I want to get quicker results. I want nitrate of soda; for
another crop, I want sulphate of ammonia. It depends on the use.
Mr. GARRETT. That is very true, but that is not the way it comes
out of the factories.
Mr. BRAND. Yes.
Mr. GARRETT. It comes out of the factories in a certain formulae.
How many different formulaes have you?
Mr. BRAND. I have no interest in any factory; I do the common
work of the industry and have not any interest in any factory. I
do not sell a pound of anything.
Mr. GARRETT. What is the usual formulae of tobacco fertilizer.
Mr. BRAND. In the case of tobacco, about one-third of the nitrogen
comes from nitrate of soda.
Mr. GARRETT. I am not talking about where it comes from: I am
asking you what the formula is on the bag of fertilizer to put on
the farmer's tobacco, as it is required to be put on there by the
Department of Agriculture of every State of the Union?
Mr. BRAND. What is the most popular tobacco fertilizer?
Mr. SMALLEY. There is a good deal of 8-3-3, 8-3-5, 8—1—6, and
half a dozen makes.
Mr. GARRETT. Take any one.
Mr. BRAND. There is not any such common preference: North
Carolina prefers one; Kentucky prefers another; the Connecticut
valley prefers a much higher analysis. There is no such thing as a
common one.
Mrs. KAHN. I think what you want to get at. Mr. Garrett, is what
the average cost is per ton of average fertilizer.
Mr. GARRETT. I know what I want to get at, but he is not getting
at what I want him to get at. I know the fertilizer is distributed all
over the country from various factories and they are required, under
the laws of the various States, by the departments of agriculture of
those States, to put the formula on the bag. I want to know what
the formula is for tobacco, corn, wheat, cotton, and oats.
 MUSCLE SHOALS 265

Mr. McSwAiN. The gentleman from Texas is making a personal

experience hearing out of this. I want to say as a little boy, I used
to swing a sack of guano out of the barn and take a little horn in my
hand and go to sprinkling it around as though it were as precious
as sugar, and I was shocked when I found out it is all sand.
[Laughter.]
Mr. BRAND. This will answer your question in part : In your ter
ritory, in the Southwest, the most popular one is a 12-10-2 analysis.
In 1919. for 12-10-2, the average price was $48.14.
Mr. GARRETT. Is that a ton ?
Mr. BRAND. That is a ton.
Mr. GARRETT. What is it now?
Mr. BRAND. $24.78.
Mr. GARRETT. You mean that is the cost of the raw material?
Mr. BRAND. No, that is the wholesale price at which our manu
facturers sell to the dealers in your various towns in Texas.
Mr. GARRETT. It is $24 that it is selling for now?
Mr. BRAND. Yes.
Mr. GARRETT. That is what I want.
Mr. BRAND. I am trying to answer what you want.
Mr. GARRETT. I want to find out what it is selling for; then I want
to find out what the raw materials costs, in order that I may ascer
tain the profit the fellow is making who is selling fertilizer.
Mr. BRAND. That varies according to the efficiency of every man
ufacturer.
Mr. GARRETT. You see what I am getting at. We are investigating
the question of Muscle Shoals,—whether or not you can make
cheaper fertilizer there than you can under the old conditions, or
B'esent conditions, or any oiher conditions. The only way the
nited States Congress is ever going to know that is to know the
cost of the raw material right now, the amount that goes into fer
tilizer, what it costs to manufacture it into fertilizer, what the
freight costs, and everything else. Then we will know whether we
want a finished product or in concentrated form.
Mr. BRAND. This chart, of course, shows the prices of two of the
most important carriers, and sulphate of ammonia particularly can
probably never be manufactured as cheaply at Muscle Shoals as it is
in the present by-product plants. In fact, it is a by-product and
will be made and sold in spite of anything else.
Mr. GARKETT. As the gentleman from South Carolina says, every
body knows in putting on a ton of fertilizer he is putting on about
1,700 pounds of nothing.
Mr. BRAND. No ; I can not agree with that.
Mr. GARRETT. It is just the difference between the amount of plant
food that is in it and the other stuff.
Mr. BRAND. We had a lengthy discussion of that matter when
General Speaks was here, and I think the committee must agree
Mr. GARRETT. You are a fertilizer man and it won't take me a
minute to dispose of it with you, on a 12-8-4 basis, or an 8-4-4, or
whatever basis you want. You name the basis and. then I will pro
pound my question.
Mr. BRAND. Speaking of that particular territory, 12-10-2 is the
most popular.
266 MUSCLE SHOALS

Mr. GAKRETT. All right, 12-10-2 : How much plant food is in a ton
of 12-10-2?
Mr. BRAND. One hundred pounds of nitrogen, 200 pounds of phos
phoric acid, and 100 pounds of potash.
Mr. GARRETT. That is 400 pounds of plant food ?
Mr. BRAND. That is right.
Mr. GARRETT. Is there any more plant food in it than that?
Mr. BRAND. No. sir.
Mr. GARRETT. The balance of it is dead matter, is it not?
Mr. BRAND. The balance is the concomitant material that goes
with nitrogen when it is tied up with salts in compound.
Mr. GARRETT. I am talking about when you put it on the land, it
is not anything that will make plants grow?
Mr. BRAND. These fertilizer industries feel that is God's fault:
that he made it that way.
Mr. GARRETT. I am not talking about God or anybody else; I am
talking about what the farmer pays freight on. On that ton of
fertilizer, he pays freight on 1,600 pounds of filler, does he not?
Mr. BRAND. No. he does not; he certainly does not.
Mr. GARRETT. What does he do?
Mr. BRAND. He pays on the materials that carry these plant foods
and nature determines what those materials contain. Nitrate of
soda—nature makes it; we do not, except in the svnthetic plants
now they are making it. We are making perhaps fifty to one hun
dred thousand tons in this country right now.
Mr. GARRETT. You just stated there were 400 pounds of plant food
in that ton.
Mr. BRAND. What are you going to do with the nitrogen? We
have 3.900 tons of nitrogen above every acre of ground that sur
rounds it. Why don't you put it in the soil? It is because it has
to be tied up in these carriers.
Mr. GARRETT. I understand that, but then the plant food is only
400 pounds, and you mix that with something so that it can be
spread out.
Mr. BRAND. No : we do not.
Mr. GARRETT. I mean the fertilizer man who finishes it up.
Mr. BRAND. No; he does not. He takes sulphate of ammonia a>
is. That contains 20.5 per cent of nitrogen, but it is all sulphate of
ammonia ; he does not sophisticate it in any way. We take super
phosphates. As I pointed out a while ago. a ton of it contains a
thousand pounds of gypsum. It is not our fault; the geological
forces made the phosphate beds of the world and they contain that
much. It ends up as land plaster.
Mr. GARRETT. I will ask you this question to get away from your
idea of God having done it : Can you get 100 pounds ot nitrogen in
compact form for mixture with anything else, can that be made?
Mr. BRAND. Yes, surely; there are 100 plants that are using anhy
drous ammonia right now.
Mr. GARRETT. Can you get 200 pounds of the other ingredients in
compact form?
Mr. BRAND. AVhen you say " in compact form." for what purpose?
Mr. GARRETT. I mean in concentrated form, for any purpose,
so it is there.
 MUSCLE SHOALS 267

Mr. BRAND. You would have to ship it around under pressure in

tanks such as the cylinders they use for soda fountains. You could
not apply it from the tanks ; you have to have a carrier.
Mr. GARRETT. What carrier?
Mr. BRAND. Anhydrous ammonia, and then you are applying super
phosphates which acts as a carrier of that gas and as a sop to the
soil. I do not want to appear too earnest about this, but I just get
interested in it.
Mr. DOUGLAS. Is not this the correct situation on fertilizer, that
the nitrogen contained in this 12-10-2 fertilizer is bound up neces
sarily with certain chemical compounds, of which nitrogen is a part?
Mr. BRAND. Correct.
Mr. DOUGLAS. Such as sodium nitrate, or sodium sulphate.
Mr. BRAND. Correct.
Mr. DOUGLAS. Now that nitrogen could be refined and liquified to
pure nitrogen, if anybody chose to do so.
Mr. BRAND. Yes.
Mr. DOUGLAS. The phosphorus that is contained in that fertilizer
is in the form of calcium phosphate.
Mr. BRAND. Or moncalcium phosphate, or tricalcium phosphate,
or dicalcium phosphate.
Mr. DOUGLAS. Or one of the complicated compounds.
Mr. BRAND. Yes.
Mr. DOUGLAS. The phosphorus in that compound could likewise
be reduced ?
Mr. BRAND. Yes.
Mr. DOUGLAS. If the farmer chose, and the same thing applies to
potassium, or potash.
Mr. BRAND. Yes.
Mr. DOUGLAS. Potash is potassium carbide.
Mr. BRAND. In its various forms.
Mr. DOUGLAS. That potassium could be reduced and refined to
potassium and, if the farmer chose to do so, he could probably, with
the exception of the liquid ammonia, buy pure phosphorus, pure
potassium, pure nitrogen, and himself mix them and so reduce all
of those other chemical elements with which those elements have
been compounded, and combine those elements with whatever chemi
cal elements he might choose to combine them ; but, should he choose
to do that, he would have to pay a great many times what he now
pays for a practical material.
Mr. GARRETT. That has been demonstrated here before the com
mittee time and time again, that you can get fertilizer in concen
trated form and ship it out to the farmer and he can mix it with
sand and put it on the farm.
Mr. DOUGLAS. Not phosphorus, not potassium, not pure nitrogen.
Mr. McSwAiN. The Secretary of Agriculture, in his report for
1928, reports that they have ascertained a concentrated form of fer
tilizer where these three things are made mutual carriers. Where
you have the phosphorus in itself chemically pure, it would be im
possible to handle it under ordinary conditions; it would burn too
quickly. Anv of us who remember our elementary chemistry re
member all those things; but they can be made mutual carriers, so
that you can get practically 85 per cent of plant-food product of
these three essential plant foods, but no one by itself.
 268 MUSCLE SHOALS

Mr. DOUGLAS. Do you know what that compound is ?

Mr. BRAND. You can not get any one to pay for it. They are will
ing to pay, as Mr. Garrett indicated, for an 8-3-3, or a 2-12-2, or
something like that; but they won't pay for these higher concen
trations and. even if they did, our present fertilizer-distributing ma
chinery is not perfect enough to distribute such minute quantities.
Mr. GAKRETT. But you can take the minute quantities and mix
them with any kind of filler that will go through the drill.
Mr. BRAND. That would not do at all. because it has to be prop
erly compounded, in order to get the proper distribution over the
field, or you will have a spotted field—one plant getting a whole lot
of plant food and another getting none. That is the purpose of the
industry in mixing it, to get an even distribution.
Mr. GARRETT. I am the originator of mixing that type of phos
phate fertilizer and bone meal in Robinson County. Tex., '20 years
ago, and made a success of it, and they all got to buving it and mix
ing it the same way, and I mixed it in my own barn, just using
either a shovel or a spade and throwing it over from one side to the
other, and then putting it in the drill, and it made a better fertilizer
than anybody could buy.
Mr. DOUGLAS. But no matter what the formula of the concentra
tion in fertilizer of these chemical elements—nitrogen, phosphorus,
and potassium, the three plant foods—chemistry has compounded
them with other elements.
Mr. BRAND. Absolutely. It is just a matter of practical distribu
tion. I do not know how else you would get them, how else you
would capture them and confine them where you want them. The
whole nitrogen picture of the United States is, of course, incom
plete without a showing of the situation concerning the nitrate of
soda from Chile. Now may I say we are manufacturing possibly
as much as at the rate of 150.000 tons of synthetic nitrogen used
in the United States? \Ve are unable to get precise facts about pro
duction, but it has grown very large—we hear from six to seven
hundred tons per day—and that, of course, is having its effect upon
the importation of Chilean nitrate of soda, as is indicated by the
synthetic curve and the curve of by-product of ammonia production.
There is no use of using 1919 figures, because we carried over such
heavy war stocks. Some of you may remember I was Federal ni
trate distributor during the war. Our importations were very low,
so it is not a typical year. But you can see, generally speaking,
that Chilean nitrate of soda is not increasing at its old rate of con
sumption in the United States and, necessarily so, because of the
competition of products that are now available, practically all of
them, at cheaper prices.
Mr. STAFFORD. In what particular have the prices compared with
the drop in the amount of consumption of Chilean nitrates; has
there been any variation in prices?
Mr. BRAND. Yes.
Mr. STAFFORD. By reason of the lower demand and use of Chilean
nitrates ?
Mr. BRAND. In spite of a rather constant declining trend in prices
of Chilean nitrate of soda consumption is not stimulated thereby.
Mr. STAFFORD. The chart you have just previously exhibited was
the price of Chilean nitrate of soda ?
 MUSCLE SHOALS 269

Mr. BRAND. These are the nitrate of soda prices [indicating].

Mr. STAFFORD. That represents Chilean nitrate ?
Mr. BRAND. Yes; at American ports.
Mr. McSwAiN. While you are on that Chilean nitrate, Mr. Brand,
of course, as you have stated, the farmer certainly, when he is using
nitrogen by itself, prefers the Chilean nitrate of soda.
Mr. BRAND. That is true ; with a constantly growing demand for
sulphate of ammonia at the same time.
Mr. McSwAiN. Yes.
Mr. BRAND. And calcium nitrate, also.
Mr. McSwAiN. Yes. Now, Mr. Brand, the export duty imposed
by the Government of Chile upon every ton of Chilean nitrate that
comes to the United States, or goes to any other country, is about
$12.54 a ton, is it not ?
Mr. BRAND. That is correct.
Mr. McSwAiN. Now, if the Chilean Government were to take that
export duty off, of course the price of Chilean nitrate would drop,
freight on board, or freight on ship here in our ports, $12.50 a ton,
would it not ?
Mr. BRAND. That would depend, of course, on the nitrate associa
tion that sells the nitrate, whether they made the full reduction.
Mr. McSwAiN. Assuming the monopoly, the private interests
which own the Chilean nitrate deposit beds in Chile, would not com
bine and put up the price of the product which they monopolize, so
as to make up the reduction in the export duty, the price would drop,
would it not?
Mr. BRAND. To some extent.
Mr. McSwAiN. Whv would it not drop to the extent of the export
duty?
Mr. BRAND. Because sulphate of ammonia is a more important
pricing factor than nitrate of soda. There will be the tendency,
undoubtedly, that you mention; but I do not think it would carrv
it down to that amount, because Chilean nitrate has become so much
less important in the total picture.
Mr. McSwAiN. But when the shipload of stuff came to Charleston
or Savannah, of Chilean nitrate, why it would be priced $12.50 less
than it now is. would it not?
Mr. BRAND. I would not say it would be priced as much as that
less; but certainly it would be priced definitely less.
Mr. McSwAiN. Now that would be a great boon for the farmer
of the country, would it not?
Mr. BRAND. Certainly.
Mr. MoSwAiN. That would be a reduction of 881/3 per cent, would
it not?
Mr. BRAND. Certainly; anything that would make the cost of
nitrogen cheaper is helpful.
Mr. McSwAiN. Exactly. It would also be a boon for the fertilizer
manufacturers (
Mr. BRAND. Nitrate of soda is so much less used in the fertilizer
manufacture that it is not so important.
Mr. McSwAiN. Just forget these people you represent, who are
the big sources of nitrogen, like the Hopewell people and the Belle,
West Virginia, people; just think of the fertilizer people alone, the
101226—30 18
270 MUSCLE SHOALS

fertilizer manufacturers who do not manufacture nitrogen at all.

Would not thev be glad to get cheaper nitrates?
Mr. BRAND. Yes.
Mr. McSwAiN. They would be glad to get cheaper potash, would
they not ?
Mr. BRAND. Surely.
Mr. McSwAiN. Exactly. Of course, they can not get cheaper phos
phoric acid, because they manufacture that, and the United States has
the principal phosphate beds of the world, has it not?
Mr. BRAND. That is not true any more; but it has very sufficient
and very great beds.
Mr. McSwAiN. But we farmers can not hope to look for any sub
stantial reduction in the price of phosphoric acid, can we?
Mr. BRAND. Not very much, except we have an increasing effi
ciency
Mr. McSwAiN. Of production?
Mr. BRAND. Yes.
Mr. McSwAiN. We might, with the use of the electric furnace, dis
cover a cheaper process of production than the present wet process,
might we not ?
Mr. BRAND. That is highly possible, because sulphuric acid is so
cheaply produced.
Mr. McSwAiN. The most of our potash, our potassium, conies from
Germany and France, does it not?
Mr. BRAND. Yes.
Mr. McSwAiN. And that supply there is controlled by the potash
combine, is it not?
Mr. BRAND. Yes.
Mr. MoSwAiN. And we can not look, in this country, for any
reduction in the price of potash, can we ?
Mr. BRAND. Well, the prices of potash have shown a continual
course downward until muriate is now about $37 a ton, a drop from
almost $400 in the peak of the war. The price of muriate is below
the pre-war parity right now.
Mr. McSwAiN. Do you know of any substantial deposits of potash
in the United States ?
Mr. BRAND. Yes; we are producing between 16 and 18 per cent of
our own potash in this country.
Mr. McSwAiN. At this moment?
Mr. BRAND. Yes.
Mr. McSwAiN. But the price depends for the American product
on the price of the imports from Germany?
Mr. BRAND. No; at prices which must meet foreign competition.
Mr. McSwAiN. So that the price you pay for the foreign potash
fixes the price of the domestic products?
Mr. BRAND. Correct.
Mr. McSwAiN. So that the price you pay for the imported nitrate
of soda from Chile fixes the price of the domestic supply?
Mr. BRAND. No; because it is the minor supply and the minor
does not control the price of the major. The synthetic now controls
the price market, because it is so much more in quantity.
Mr. McSwAiN. Just one more question : Would not you, as an
American citizen and a man who loves the farmer, for whom you
 MUSCLE SHOALS 271

worked a great many years, who gave you your start in the world,
you might say, by employing you here in the Department of Agri
culture
Mr. BRAND. I am a farm boy myself.
Mr. McSwAiN. Exactly; that is right—and your Government hired
you down here and, through your experience down here, you got your
education ?
Mr. BRAND. It certainly added a lot to it.
Mr. McSwAiN. Exactly, and that enabled you to command the
salary you now draw, and would you not lite to see the farmers
of this country get cheaper fertilizer, if they can ?
Mr. BRAND. I certainly would.
Mr. McSwAiN. And their only hope is through cheaper nitrates.
Mr. BRAND. They are becoming cheaper every day.
Mr. McSwAiN. And if we can choke the life out of this Chilean
trust so that the farmers of the United States won't have to pay
twelve or thirteen million dollars a year taxes for the Chilean Gov
ernment, and free us from the monopoly of these Chilean nitrate
producers, then it will be a godsend for the people of this country,
will it not?
Mr. BRAND. Mr. McSwain, I could not go that far.
Mr. McSwAiN. Go just half that far, won't you?
Mr. BRAND. I could not go that far. The Chileans have had :i
natural monopoly over a period of many years ; they first started to
export in 1830, and they developed their country largely on the basis
of the income from these exports.
Mr. McSwAiN. And they have exploited this country, too.
Mr. BRAND. It is their country, and their nitrates to use, and I do
not think we ought to be too hard on them.
Mr. McSwAiN. I do not care about their country; I am caring
about the United States.
Mr. BRAND. The economic forces are going to take care of that
just as they did in Germany. I present here [indicating] what
happened in Germany. From the greatest user of nitrogen of the
world, using close to a million tons before the war, Germany dropped
down to where, in 1928. she used only 28.000 tons of nitrate of
soda. Synthetics have taken the market and Chilean nitrate is hav
ing the fight of its life to survive. They are working to increase
the efficiency of the industry, and they are clinging to the export
tax. naturally. I do not feel like criticizing them too severely.
Mr. McSwAiN. My interest is in hastening the fight and bringing
about a victory for the American farmer.
Mr. BKAND. We are producing about 100.000 tons of synthetic
nitrate of soda in the United States now. Is not that the answer?
Mr. McSwAiN. And we are not producing in this country but
about one-half of our total consumption of nitrates, are we?
Mr. BRAND. Oh, my, yes ; very much more.
Mr. McSwAiN. Here are your figures, which you furnished to the
Chamber of Commerce of the United States.
Mr. BRAND. Yes.
Mr. McSwAiN. We are consuming in the United States, in agri
culture and in industry, according to your figures, a total of 468.000
tons in 1929, are we not?
272 MUSCLE SHOALS

Mr. BRAND. Yes.

Mr. MC-SWAIN. And we had to import of that 195,400 tons? That
is on page 23.
Mr. BRAND. Then we exported quite a number of thousands of
tons.
Mr. McSwAiN. Exactly, but that is the net result; this is your
net; this is your consumption and production compared on page 23.
Mr. BRAND. Yes; I think that is right.
Mr. McSwAiN. In other words, then, we are, in the United States,
producing just a little bit more than half of all the nitrates we
consume.
Mr. BRAND. Oh, no.
Mr. McSwAiN. For fertilizer and all combined.
Mr. BRAND. No; that is correct.
Mr. McSwAiN. Then, I misinterpreted the figures you furnished.
Mr. DOUGLAS. Are you referring to nitrates, Mr. McSwain, or
nitrogen ?
Mr. McSwAiN. I mean nitrogen, of course.
Mr. DOUGLAS. Fixed nitrogen?
Mr. McSWAIN. Yes; nitrogen in all its compounds that is useful
for industry and agriculture-.
Mr. DOUGLAS. As I understand it, in 1929 we used 158,000 tons of
Chilean nitrate.
Mr. BRAND. That is right.
Mr. DOUGLAS. That is sodium nitrate.
Mr. BRAND. That is sodium nitrate.
Mr. DOUGLAS. That would be, roughly, equivalent—that is, short
tons of nitrogen?
Mr. BRAND. Yes.
Mr. McSwAiN. Pure nitrogen. We use over a million tons of
nitrogen in its natural form.
Mr. BRAND. About 900,000.
Mr. QUIN. How much of that Chilean nitrate did we use last year?
Mr. BRAND. Of our total use, 158,000 tons in terms of pure nitro
gen, which is roughly approximately 900,000 tons of nitrate of soda.
Mr. DOUGLAS. Did that previous chart show we were using 460.000-
or 470.000 tons of nitrogen in this country—roughly, 500.000 tons?
Mr. BRAND. Our chart has some organics in it, so it would be some
thing over 400,000 tons.
Mr. SMALLEY. 440.000 tons is the correct figure of chemical
nitrogen.
Mr. BRAND. And our capacity, as figured here, is something in
excess of 328,000.
Mr. DOUGLAS. So, on the basis of the figures you have presented
this morning. Chilean imports into this country are about one-third
of the total nitrogen consumed in the United States ; is that it ?
Mr. BRAND. Approximately that.
Mr. DOUGLAS. Koughly?
Mr. BRAND. Approximately that.
Mr. STAFFORD. Have you any data as to what the total production
of Chilean nitrate is and as to the amount that is consumed by other
nonproducing countries?
Mr. BRAND. I did not bring them with me this morning. Of
course, I have all this data for every country, in total; but I would be
 MUSCLE SHOALS 273

very glad to send you a memorandum showing that. It would be no

great amount of trouble.
Now, Mr. Chairman. I have only two more charts I want to ex
hibit to the committee. This one shows the world situation as to
the production and consumption of nitrogen and there is one other,
and it is not necessary to go into a great amount of detail. In the
six years—and these are years that end June 30, because that is the
way the figures are collected—the figures show in terms of tons of
nitrogen, since 1923—24. that we have seen an increase in production
from approximately 1.250.000 tons of nitrogen to 2,300.000 tons of
nitrogen. The column at the left in each case is the production
column, and the column at the right is the consumption column,
and we have reached a position, where, in 1928-29. we had a world
excess of production of over 250,000 tons of pure nitrogen that it
has not been possible to dispose of. During the past summer I
visited some of the largest nitrogen plants in Europe and found
them laying off thousands of men because of that situation.
Mr. DOUGLAS. Is that responsible for the reduction in price?
Mr. BRAND. Unquestionably. Now, if I may, I will
Mr. STAFFORD. Just one minute. As I read that chart of world
production and consumption, it rather answers my question. It
shows the blue, which represents Chilean nitrates, is in the world's
consumption slightly greater in 1928 than in 1929.
Mr. BRAND. Yes.
Mr. STAFFORD. That world production and use of Chilean nitrate
is somewhat greater in 1928 and 1929 than in prior years.
Mr. BRAND. I do not think that is true as to any prior year. I
think if you went back to the earlier years, it is not true.
Mr. STAFFORD. The production of synthetic ammonia is larger in
I928 than any other year.
Mr. BRAND. Yes.
Mr. STAFFORD. And the manufacture of nitrogen.
Mr. BRAND. Yes. You see, we also have a slight overproduction
of Chilean nitrate.
Mr. DOUGLAS. In terms of percentages, however, the consumption
'jf Chilean nitrate is very much less.
Mr. BRAND. Oh, my, tremendously less. The situation, in a word,
is this: That where 50 years ago practically 100 per cent of our
nitrogen came from Chile, it is now fading out of the picture and rep
resents only about 23 per cent of the total world use of nitrogen.
Now, just a word as to the process trend. Your committee, of
course, has given great consideration to various bills, including the
Wright bill, which represents the cyanamide process. I thought I
ought to call your attention to the trend as to processes. The arc
process is practically static; the only big plant is at Rucon that now
manufactures it.
Mr. STAFFORD. Is the arc process in use at either plant of Muscle
Shoals?
Mr. BRAND. No. The direct synthetic plant is No. 1, and the
cyanamide plant is No. 2, and the only arc process of which I have
knowledge in the world is the one at Rucon, which I visited last
Year. They are producing about 31.000 tons of nitrogen a year.
That line is static. The cyanamide process, which came into the
market in worth-while quantities in 1913, when, I think, there were
274 MUSCLE SHOALS

seven plants in operation, has shown the greatest increase, as indi

cated by this blue curve, and there are now, I think, some 28
cyanamide plants in the world, and no new ones have been built for
several years, although existing plants have been made more effi
cient. The cyanamide process has been improved in recent years and
the American Cyanamid Co. is one of those that has led in that
improvement.
Then we come to the marvelous change in the picture as to direct
synthesis of nitrogen, and nitrogen in the form of ammonia, which
is represented by the red curve, which has risen* to a point where
we now have, in 1928-29, out of a total of 2,300,000 tons of pure
nitrogen, 936,000 tons are manufactured by the synthetic process,
about 231,000 by the cyanamide process, 149,000 tons as nitrate of
lime, 540,000 tons of Chilean nitrate, 470,000 tons by-product sul
phate of ammonia, and the synthetic, direct synthetic, representing
more than twice as much as the by-product of ammonia, and almost
twice as much as nitrate of soda.
Mr. DOUGLAS. And also twice as much as Chilean nitrate.
Mr. BRAND. And also twice as much as Chilean nitrate.
That, Mr. Chairman, represents the presentation I wished to give.
I thank you.
(The committee thereupon adjourned until to-morrow, Friday,
April 11, 1930, at 10.30 o'clock a. m.)
 MUSCLE SHOALS

FHIDAY, APKIL 11, 1930

HOUSE OF REPRESENTATIVES,
CoMMITTEE ON MILITARY AFFAIRS.
Washington, I>. C.
The committee met at 10.30 o'clock a. m., Hon. Harry C. Ransley
presiding.
Mr. RANSLEY. On yesterday, the committee requested the Secre
tary of Agriculture to appear. This being a day for the Cabinet
to meet, the Secretary, of course, can not be present ; but we have
with us Dr. A. F. Woods, Director of Scientific Work, Department
of Agriculture ; Dr. H. G. Knight. Chief of the Bureau of Chemistry
and Soils; also Dr. F. G. Cottrell, whom you all know, Chief of
Fertilizer and Fixed Nitrogen Investigations, and Dr. P. E. Howard,
the chemical engineer familiar with the details of the Muscle Shoals
plants. The first witness will be Doctor Knight. Now, Doctor, you
are familiar—in fact, you are in general charge of the fertilizer and
chemical research investigations, are you not?
STATEMENT OF DR. H. G. KNIGHT, CHIEF BUREAU OF CHEMISTRY
AND SOILS, DEPARTMENT OF AGRICULTURE
Doctor KNIGHT. Yes, sir.
Mr. RANSLEY. Have you any statement you would like to make,
Doctor?
Doctor KNIGHT. I do not know that I have any statement, I
would be willing to answer certain questions, or to refer them to
others we have brought from the Department of Agriculture this
morning.
Mr. RANSLEY. Have you any questions, Mr. Wurzbach ?
Mr. WURZRACH. I do not know just what the Doctor wants to tell
us. Does he want to testify with reference to the feasibility of any
of this legislation that is before the committee, that is, the feasibility,
for instance, of Resolution No. 49, known as the Norris bill, or just
what is the purpose? I do not know how to direct my questions,
unless I know what the purpose of the Agricultural Department's
presence is.
Mr. RANSLEY. He was requested by the committee to appear here.
Doctor WOODS. As Director of Scientific Work, representing the
Secretary of Agriculture, the Secretary was very sorry he had to go
to a Cabinet meeting to-day and could not be here. He asked me to
ask Doctor Knight, Doctor Cottrell, and Doctor Howard, the three
men who are familiar with all of the matters connected with Muscle
Shoals, so far as our department is interested, to be here and ready
to answer any questions regarding that plant, or the practicability
275
276 MUSCLE SHOALS

of its operation, that the committee might desire to ask. The De

partment did not wish to express any particular opinion regarding
any of these measures at the present time. We have, I think, four
bills referred to us for report, which are now under consideration;
but we came this morning at the invitation of the committee to
answer any questions regarding the chemical engineering details or
other matters connected with that plant, and we have men here who
know those details—Doctor Knight in general charge; Doctor Cot-
trell. a specialist in fixed nitrogen, and Doctor Howard, who knows
all the statistical data regarding the Muscle Shoals plant.
Mr. GARRETT. Mr. Chairman. I think the Secretary was invited
down here at the instance of the gentleman from Wisconsin [Mr.
Stafford] on the question of fertilizer, and I think the chances are
he would want to hear Doctor Cottrell first.
Mr. RANSLEY. He undoubtedly will and soon will be reached, and
will ask the questions.
Doctor KNIGHT. Allow me to state, I believe, possibly, the com
mittee would prefer to start with Doctor Cottrell. and I should be
glad to come in at any time when any matters come up that would
be really outside of his field.
Mr. RANSLEY. Doctor, the committee has heard Doctor Cottrell
frequently and from the mere fact you are in charge of fertilizer
and chemical research. I would naturally jump to the conclusion the
members of this committee desire to ask you as to the value of
Muscle Shoals to produce fertilizer now, in comparison with what
it was five or more years ago; again, after the developments that
we all know something about, in reference to the production of
fertilizer in many places throughout this country, whether the
Shoals to-day represent an important feature or could represent an
important feature in the production of fertilizer.
Doctor KNIGHT. Considering the very rapid advances which have
been made in the production of fixed nitrogen by commercial inter
ests in the United States, the importance of Muscle Shoals is not as
great as it was a few years ago, in the fertilizer picture.
Mr. SPEAKS. Because of obsolete methods; is that the reason?
Doctor KNIGHT. Partially because of obsolete methods: yes.
Mr. WUKZRACH. You say it is not as great. Doctor. Is there a
very great difference in the importance of the use of Muscle Shoals
for fertilizer manufacture now as compared with its importance 5
or 10 years ago? You say it is not as important, but that may mean
just 1 per cent less important, or 50 per cent less important, or
75 per cent. Give us an idea of just how much less important it is
now than it was then.
Doctor KNKiHT. Well, 5 or 10 years ago there was comparatively
little production of fixed nitrogen in the United States. At the
present time there is a rather substantial production. On January
1, 1930. there was a total capacity of 172.700 tons.
Mr. WUKZRACH. There was what? I did not get that.
Doctor KNIGHT. One hundred and seventy-two thousand and seven
hundred tons—a total capacity of 172,700 tons for the production
of synthetic ammonia in the United States. Of this, 40000 repre
sents the possible production of Muscle Shoals; so that, outside of
the possible production from plant No. 2 at Muscle Shoals of 40,000
tons, there is actually a capacity in the United States of 142.500 tons.
 MUSCLE SHOALS 277

Mr. WURZRACH. What do you mean by there is a capacity in

the United States ?
Doctor KNIGHT. A capacity to produce.
Mr. WrRZRACH. That is, in other industries?
Doctor KNIGHT. Yes: bv -other plants.
Mr. WIrRZRACH. More or less as by-products of those plants or
direct manufacture 1
Doctor KNIGHT. These are all plants for the production of nitro
gen direct.
Mr. WURZBACH. So that, expressed in terms of per cent, the im
portance of Muscle Shoals in nitrate manufacture for fertilizer, as
compared with what year, did you give
Doctor KNIGHT. This was January, 1930.
Mr. WURZRACH. As against what other year?
Doctor KNIGHT. In 1923, going back seven years, there was an air
production of 5,900 ton's.
Mr. WFRZRACH. What you say of the relative importance of
Muscle Shoals in the manufacture of nitrates for fertilizer, is that
also true relative to the importance now, as against six or seven years
ugo, with reference to the manufacture of nitrates for explosives?
Doctor KNIGHT. I do not believe I am qualified to answer that
question. I think that should be answered by the War Department.
Mr. SPEAKS. Doctor, are you familiar with the present condition
of Muscle Shoals, with reference to its being operated successfully?
Doctor KNIGHT. If you refer to the condition of plant No. 2——
Mr. SPEAKS. Yes.
Doctor KNIGHT. I will state that I made one trip down there and,
as far as could be determined, plant No. 2 has been kept in very
good shape.
Mr. SPEAKS. Do you think it could be operated economically?
Doctor KNIGHT. There is some question about that.
Mr. STEAKS. Doctor, frankly, have yoii an attitude of mind on the
question of public versus private operation?
Doctor KNIGHT. I have : yes, sir.
Mr. SPEAKS. You are not favorable to the Government operating
Muscle Shoals?
Doctor KNIGHT. I am not especially favorable to the Government
going into any commercial operations.
Mr. SPEAKS. That is not founded on a believe the Government
operation would be less efficient than private ?
Doctor KNIGHT. Well, I have a feeling that is not necessarily a
function of Government.
Mr. SPEAKS. You are familiar with the law under which Muscle
Shoals was constructed?
Doctor KNIGHT. Yes, sir,
Mr. SPEAKS. It was designed and intended to be a publicly owned
and publicly operated institution; do you recall that?
Doctor KNIGHT. I recall something to that effect; yes.
Mr. SPEAKS. Well, the law states in specific language that it
shall be.
Doctor KNIGHT. Yes.
Mr. SPEAKS. Operated by the public and not in connection with
any private enterprise.
278 MUSCLE SHOALS

Doctor KNIGHT. Yes, sir.

Mr. SPEAKS. It was conceived in that spirit; it was the clear,
definite, intention of the law and the will of Congiess.
Mr. GARRETT. In your comparison of the production of ammonia,
when you say the production is now 172,700 tons of synthetic am
monia in the United States, what is that in terms of fixed nitrogen
for the manufacture of fertilizer ?
Doctor KNIGHT. I have not those figures here ; I can get them.
Mr. GARRETT. You make a comparison there as of 142,000, that
being the amount after deducting the amount produced at Muscle
Shoals, as compared with 5,000 tons—of what did you say, air pro
duction ?
Doctor KNIGHT. Yes; air production of nitrogen.
Mr. GARRETT. In 1923. Was that all of the ammonia produced in
the United States at that time ?
Doctor KNIGHT. There was also at that time nitrogen from by
product plants of 123,500 tons and, in 1929. there was from by
product plants 187,600 tons. The total production of nitrogen from
by-product plants and from air fixation, plus imports, for 1923. was
306,400 tons and. for 1929, 500.761 tons. There was exported, in
1923, 40,000 tons and, in 1929, 55,500 tons—leaving an apparent con
sumption in the United States, in 1923, of 266.400 tons, and, in 1929,
455,261 tons. In 1923, we were producing approximately 49.5 per
cent of the domestic supplies and, in 1929, 61 per cent.
Mr. GARRETT. Where do you get those figures?
Doctor KNIGHT. These figures are worked up in the bureau.
Mr. GAGGETT. Did your bureau furnish those same figures to Mr.
Brand, of the manufacturers association, or whatever he represents?
Doctor KNIGHT. These were based upon a tabulation from the
Department of Commerce statistics.
Mr. GARRETT. Well, you both got the same statistics from the same
source?
Doctor KNIGHT. We have the same statistics from the same source.
Mr. GARRETT. What is the cost of the production of fertilizer now.
according to the investigations of the Department of Agriculture,
per ton ?
Doctor KNIGHT. Congressman, I would prefer that that be an
swered by my colleagues in the bureau, if you will permit.
Mr. GARRETT. Certainly. In answer to Congressman Speaks, you
say you adhere to the general principle that the Government should
not engage in private enterprise. That is usually fundamental with
most men; but do you carry that to the extent of national defense:
do you carry that doctrine to the extent of providing for the national
defense?
Doctor KNIGHT. I do not. and I think it should be understood
here that, regardless of my personal feelings as to what is done, that
would have no effect upon my action.
Mr. GARRETT. Then I want to ask you this question : Do not you
believe the Government should protect its own property in the in
terest of national defense and operate it, if it becomes necessary?
Doctor KNIGHT. I should believe so ; yes. sir.
Mr. GARRETT. Now, then, we have had some experience in the
recent past about the manufacture of the munitions of war by pri
vate industry : You do not believe for a moment the Government of
 MUSCLE SHOALS 279

the United States ought to abandon its arsenals and turn over the
manufacture of munitions of war, guns, rifles, and cannons, to pri
vate interests, do you?
Doctor KNIGHT. "Congressman, I have never given any thought to
that question, so I do not believe I am qualified to answer it.
Mr. GARRETT. Wrapped up in this proposition are two proposi
tions, I am trying to get at. I am trying to get the attitude of your
department toward this, if I may. I am as much opposed to the
Government, generally, entering into private enterprise as any man
who has ever testified before this committee; but, at the same time,
I realize there are certain things the Government must do when
they are thwarted at every step of the way by selfish interests that
want to get their hands on the property of the Government itself.
And when the time comes that I have got to decide on Muscle Shoals,
as to whether or not I will let the power interests and the combined
fertilizer interests of the country, through their interlocking in
terests, take over Muscle Shoals as against the Government taking it
over and operating it as best it may, then I have to vote in favor
of Government operation. But I do not want to be driven to that
extremity and we have been trying to work out something beside
that. Now, then, in your study of Muscle Shoals, can nitrates and
ammonia, and the ingredients of fertilizer, be manufactured there
as cheaply as at other places in the country, if it were in the hands
of competent men ?
Doctor KNIGHT. I will state again I would prefer to have that
answered by my colleagues.
Mr. GARRETT. That is all.
Mr. COCHRAN. Doctor, if the Government facilities at Muscle
Shoals were operated for the production of fertilizer, or its ingre
dients, would it result in cheaper fertilizer to the American farmer?
Doctor KNIGHT. I think that is a debatable question, as to whether
it would result in a cheaper fertilizer to the farmer.
Mr. CoCHRAN. That is all.
Mr. STAFFORD. Prior to your coming with the Department of
Agriculture, did you have any connection with business concerns?
Doctor KNIGHT. I did not.
Mr. STAFFORD. Are you qualified to state as to what equipment
would be necessary to equip nitrate plant No. 2 with the concomitant
facilities there for the manufacture of fertilizer^
Doctor KNIGHT. I do not believe I am fully qualified to do that;
no, sir.
Mr. STAFFORD. Are you expert sufficiently to testify as to the use
of fertilizers by farmers in the production of their Various crops '(
Doctor KNIGHT. I think so; yes, sir.
Mr. STAFFORD. Will you just state generally, then, as to what kind
of fertilizer is used by farmers generallv and whether that produced
by additional equipment at Muscle Shoals would be particularly
serviceable to the farming class of the country ? I am seeking, par
ticularly, as an urban resident, to get some idea as to how generally
fertilizer is used and how generallv it should be used for better
production by the agricultural interests of the country.
Doctor KNIGHT. The fertilizer consumed in the United States,
from the best figures we were able to obtain (this includes Porto
Rico and Hawaii), showed a total of 345.000 tons of nitrogen,
280 MUSCLE SHOALS

800.000 tons of phosphoric acid as PXO&, and 343.000 tons of potash,

that is, potassium oxide. Now. there could be produced in plant
No. 2, at Muscle Shoals, a maximum, so it has been estimated, of
40,000 tons of nitrogen a year.
Mr. STAFFORD. Let me ask this question, because you do not seem
to grasp what I am seeking: How generally throughout the coun
try, taking the farmers by classes, the South engaged in the produc
tion of cotton and partly tobacco and the Northwest in wheat
cereals—how generally is fertilizer used as compared to what you
think should be used for the fullest productivity of the soil ?
Doctor KNIGHT. The fertilizers are used very largely upon tobacco,
upon cotton, upon truck, and upon other crops. Now, the extent to
which farmers can afford to use fertilizers is an economic question
and depends upon the yield and price of fertilizer upon the one
hand, and the value of the crops, upon the other, and I am not
prepared to state, except upon a specific case, as to the possibility
or how much fertilizer the man may economically use.
Mr. STAFFORD. You can not state, generally, what proportion of
the cotton planters of the South use fertilizer in the production of
cotton and how many of the tobacco growers use fertilizer; and. in
the western prairie country, how large a proportion of the farmers
use fertilizer in the production of cereals?
Doctor KNIGHT. I have not that information here, except a gen
eral statement may be made that most of the cotton producers
throughout the Southeast use fertilizers and the tobacco producers
use fertilizers. As you go farther west and where you are growing
more extensive crops, less fertilizers are vised. I think the ferti
lizer companies have very good statistics upon that matter, by
States primarily.
Mr. STAFFORD. Can you state, from your knowledge, as to whether
the cotton crop is virtually dependent upon the use of fertilizer?
Doctor KNIGHT. I think there is no question but what the cotton
crop throughout the Southeast is dependent upon the use of fertilizer.
Mr. STAFFORD. What have you to say, so far as the tobacvo crop
is concerned, with respect to grades grown in different parts of
the country—Connecticut, Kentucky, Wisconsin. Pennsylvania, and
the like? Are you qualified to speak as to the generality of use of
fertilizer on tobacco crops in those sections?
Doctor KNIGHT. Fertilizer is quite generally used and seems to he
essential if we are going to get the best quality of tobacco and satis
factory character of crop.
Mr. STAFFORD. As to truck crops, what would you say as to the use
of fertilizer on that crop ?
Doctor KNIGHT. Fertilizers are generally used in truck crop prac
tice and, to get the most satisfactory crops, fertilizers of some sort
are necessary.
Mr. STAFFORD. Although I have no first-hand information, I am
under the impression the truck gardeners in my country, around
Chicago and Milwaukee, do not use fertilizers.
Doctor KNIGHT. They do use some sort of fertilizer.
Mr. STAFFORD. Well, natural fertilizer.
Mr. GARRETT. Natural and artificial too.
 MUSCLE SHOALS 281

Doctor KNIGHT. They have it available there from the stockyards.

Mr. STAFFORD. Are you qualified to speak of the different pro
cesses of manufacture of fertilizer?
Doctor KNIGHT. Only in a general way.
Mr. STAFFORD. Well have the processes changed in the last 10
years ?
Doctor KNIGHT. Yes.
Mr. STAFFORD. As to efficiency and cheapness of manufacture ?
Doctor KNIGHT. Yes. The processes have become more efficient
and the cost of production has been decreased.
Mr. STAFFORD. Have you any reliable figures as to the cost to the
farmer of the respective kinds of fertilizer during the past 10 years,
by years?
Doctor KNIGHT. I have not those figures with me; I can get them,
if you desire them.
Sir. STAFFORD. Well has the price gone up or gone down?
Doctor KNIGHT. I could not state offhand, whether it has gone up
or gone down. I think it has gone down some.
Mr. STAFFORD. Are you qualified to state as to whether there are
competitive conditions in the manufacture of fertilizer, whereby the
price responds to the conditions of supply and demand?
Doctor KNIGHT. I have no information on that.
Mr. GAKRETT. Would you permit me to suggest, in putting in the
figures, if you will take the period known as the pre-war period, 10
years before the war, the peak during the war, and since the war,
and put in those figures of the rise and decline, you will give the
gentleman from Wisconsin, I think, just what he is asking for.
Doctor KNIGHT. I have not those figures here, Congressman.
Mr. GARRETT. They are ascertainable, though.
Doctor KNIGHT. They are ascertainable.
Mr. GARRETT. I mean the general average. I know of my own
personal knowledge, but I do not know the figures so as to put them
in the record.
Doctor KNIGHT. Answering your question directly, I will state I
have made no investigation as to the competitive conditions in the
trade.
Mr. STAFFORD. What is the occasion for fertilizer being more gen
erally used in the cotton States and in the growing of tobacco, than
its use in the production of cereals?
Doctor KNIGHT. Throughout the older States and particularly the
older cotton States, the land has been farmed for a great many years
and the natural fertility of the soil has either been withdrawn by
crops in part, or, by erosion, has been carried off with the top soil,
*o that the natural fertility of the soil is not there to the extent it
was before. That is one reason why fertilizer is necessary, but not
the only reason why it is necessary, if we expect to maintain yields
-of crops.
Mr. STAFFORD. Have you any expert opinion as to the value of
fertilizer in the growth of cereals?
Doctor KNIGHT. I do not know that I can answer your question
they way it is put to me.
Jftr. STAFFORD. I have a vague impression Mr. Bell stated (and I
hesitate to refer to it, because the fertilizer proposition is entirely
282 MUSCLE SHOALS

new to me), that fertilizer could only be utilized generally, as in the

case of cotton, where moisture is available to mix it with the soil.
Now, I personally have a slight acquaintance with the conditions up
in North Dakota, where in the nineties the farmers, for 10 or 12
years, had a continuous succession of crops of wheat, until the grade
of durum wheat was not of the grade of No. 1 wheat. Now, those
farmers have not since used fertilizer to produce a higher grade of
wheat, hard cereal No. 1. What is the reason they do not use fer:
tilizer? They have gone to diversified crops. If somebody else
here from your department can testify as to that, I would like to
have you give way.
Doctor KNIGHT. The statement that fertilizers will not increase
the quality of wheat I think may be questioned. Some investiga
tions, which we have made in the Bureau of Chemistry and Soils,
indicate that we can actually increase the protein content of wheat
very materially bythe proper use of nitrogenous fertilizer.
Mr. STAFFORD. Why has not it been used then, commercially, by
the farmers of the Northwest ?
Doctor KNIGHT. We must take into consideration, in attempting to
answer a question of that sort, the economic situation. As I have
already stated here, the amount of fertilizer which may be used
depends upon the value of the fertilizer and the value of the in
creased yield of the crop, and also the amount of fertilizer which
must be used must be considered in connection with the soil and with
the climatic conditions.
Mr. STAFFORD. Can you put in the record any figures showing the
extent and the amount of fertilizer that is used in the production of
corn, wheat, barley, rye, and the generally accepted cereal crops that
our farmers of the West and Northwest are engaged in raising?
Doctor KNIGHT. I have not those figures here ; I presume they can
be obtained—that is, estimates; not actual determinations, but esti
mates of what are used.
Mr. STAFFORD. Well you have field agents all around throughout
the country in those States, do you not ?
Doctor KNIGHT. The Bureau of Chemistry and Soils does not; of
course, the Department of Agriculture does have.
Mr. STAFFORD. Do not those field agents acquire this knowledge,
so that we may have some authoritative statements as to whether
fertilizer is used in the Western Prairie States and the Middle
Western States?
Doctor KNIGHT. I am not qualified to answer that question.
'Mr. STAFFORD. Mr. Chairman, I think that is a very important
question. I can see the value of fertilizer for the production of
cotton and tobacco, and I would like to have some official information
as to whether it is useful for the production of grain crops.
Mr. KANSLEY. If it is possible for you to get that information, will
you reduce it to writing and file it with the committee.
Doctor KNIGHT. I will be glad to answer it in the record.
Mrs. KAHN. I do not believe any is used in California.
Doctor KNIGIIT. There is some used in California.
Mr. GAKRETT. Following up Mr. Stafford's question, is it not true
that the older States that have to use fertilizer for cotton and to
bacco and truck farming, where they grow grain at all. must use fer
tilizer in the same proportion on their grain crops for the same rea
 MUSCLE SHOALS 283

son they have to use it on the other crops? Is not that generally
true, because of the worn-out condition of the soil?
Doctor KNIGHT. If they wish the yield of crops, it is necessary to
use some fertilizer.
Mr. GAKRETT. Surely. I might also ask if it is not true, in most
of the older States, where they sow oats, wheat, rye, and barley on
uplands, if they do not use fertilizer they might almost as well not
sow any grain? Is not that the report that comes to your depart
ment?
Doctor KNIGHT. I understand the yields where they do not use
fertilizer are rather small.
Mr. REECE. Fertilizer is almost an essential.
Doctor KNIGHT. Under those conditions, yes.
Mr. GAHRETT. Now, is it not true, in the growing of these grain
crops, that the nitrogen, in growing cereals, is the one essential or
the big essential in the fertilizer ?
Doctor KNIGHT. It is one of the essentials. There are three essen
tials, as we consider them—potash, phosphorus, and nitrogen. It
depends on the soil as to which is the most essential—if you want
me to answer in that way.
Mr. HILL. It is a fact that, in spite of the fertilizer we are utiliz
ing to-day, we are seriously depleting our soil fertility ; is not that
true?
Doctor KNIGHT. For the Nation as a whole, we are taking out more
fertility than we are putting back.
Mr. HILL. Every year ?
Doctor KNIGHT. Yes.
Mr. HILL. Have you that acreage? It has been reduced to acre
age ; Mr. Coolidge used it in one of his messages.
Doctor KNIGHT. I have not that information here ; no.
Mr. RANSLEY. If there are no further questions, thank you, Doctor,
and we will now ask Doctor Howard to take the stand.
STATEMENT OF DR. P. E. HOWARD, CHEMICAL ENGINEER, FIXED
NITROGEN RESEARCH LABORATORY, BUREAU OF CHEMISTRY
AND SOILS, DEPARTMENT OF AGRICULTURE
Mr. RANSLEY. You are the chemical engineer of the fixed nitro
gen research laboratory of the Bureau of Chemistry and Soils, and
also are familiar with the details of the Muscle Shoals plants; is
that true?
Doctor HOWARD. Yes, sir; that is true.
Mr. RANSLEY. Is there anv statement you would like to make, or
fire you here principally to answer questions?
Doctor HOWARD. I would just prefer to answer questions.
Mr. RANSLEY. I will propound to you the same question that I
asked Doctor Knight, as to the value of Muscle Shoals for producing
fertilizer now, in comparison with what it was five or more years
ago; again, whether, after the development that we all know some
thing about, in reference to the production of fertilizer in many
places throughout the country, whether the shoals to-day represent
an important feature or could represent an important feature in the
production of fertilizer.
284 MUSCLE SHOALS

Doctor HOWARD. It is my opinion that nitrate plant No. 2 at

Muscle Shoals has dropped to a very low place in the fertilizer pro
gram of the country. I think if you would go back five years ago,
we had no capacity, practically, for the fixation of atmospheric
nitrogen. To-day, we have eight plants in this country producing
ammonia from the air and one of those plants is double in size,
practically, that of plant No. 2, and uses thoroughly up-to-date
processes, and the same statement would apply to some of the other
synthetic ammonia plants; in fact, most of them that are in opera
tion. Those plants produce, I believe, very cheaply. It is a new
process and the largest plant in the country has been producing for
only one year and naturally we can not say exactly what it is cost
ing; but it is a classical process, it is an excellent process and is
capable of great development; it is doing good now and will do
better in the future. So I think that is the road, perhaps, to cheap
fertilizer in the country, rather than Muscle Shoals. That is my
opinion.
Mr. EANSLEY. Doctor, are you familiar with the methods of pro
duction in Germany?
Doctor HOWARD. Yes, sir.
Mr. RANSLEY. Have I the correct information when I say that
some five years ago, while in Germany my understanding was the
method had been abandoned owing to the fact that some necessary
ingredient was really absent and they found the ground was grad
ually becoming impoverished, and they changed their method to
correct the wrong that they had done the ground for some years.
Are you familiar with that?
Doctor HOWARD. Yes; I can explain, I think, the point you have
in mind. Before the war, phosphoric acid was a main item in
Germany's consumption, as it is here in this country at the present
time. During the war they developed their nitrogen capacity to a
considerable extent and after the war the tendency was to use nitro
gen to the exclusion of phosphoric acid ; that is, the phosphoric acid
dropped off while the nitrogen increased very rapidly, because of
their producing it themselves; they did not have to import it. They
had to import some of the materials for making their phosphoric
acid compounds. So the tendency was to neglect phosphoric acid
and increase the nitrogen and they have realized that was a mistake
and are correcting it to some extent; although still the tendency is
to use a large percentage of nitrogen to the exclusion of phosphoric
acid, because in that particular country it is cheaper. I think the
ratios of use in the two countries would give an idea. Germanv in
1928 used about 450,000 tons of nitrogen, about 566,000 tons of
P2O0, and 818.000 tons of potash. Now you notice they produce
their potash and they use a lot of it; it is still very cheap there. In
the same way they produce their own nitrogen and the tendency is
to use as much as they can. In this country we use about 350.000
tons each of potash and nitrogen and about 800,000 tons of P20i,
because we have our own rock, our own raw materials for phosphoric-
acid manufacture, and the tendency is to use plenty of that material.
It is cheap comparatively. I think Germany is coming back to a
realization that they have to use more phosphoric acid than they
have been to keep up with nitrogen and potash, to keep their ratios
reasonably correct.
 MUSCLE SHOALS 285

Mr. WURZBACH. Does the phosphoric acid furnish the foliage to

the plants and nitrogen the grain, or what is that?
Doctor HOWARD. I am not an agronomist, but my understanding is
nitrogen tends to increase the leaf surface; the phosphoric acid rather
tends to increase the seed.
Mr. WUKZRACH. You do not mean to say, if fertilizer could be
manufactured and sold a great deal cheaper than it is now, there
would not be a sufficient demand to take up a largely increased pro
duction, do you ?
Doctor HOWARD. Oh, I think the consumption would increase
greatly with the lowering of costs.
Mr. WTJRZRACH. Practically there would be no limit?
Doctor HOWARD. No; there is no limit. A few dollars reduction
in the cost of a ton may increase the consumption greatly.
Mr. WURZRACH. The use of fertilizer on soil, almost virgin soil,
is profitable under certain conditions?
Doctor HOWARD. Yes.
Mr. WURZRACH. And would prevent the improvement of the soil,
would it not, to a large extent ?
Doctor HOWARD. Yes.
Mr. WURZRACH. Assuming, of course, the right amount of humus
was kept in the soil ?
Doctor HOWARD. Yes. sir; that is true. It is entirely possible, I
think, to build up soil into a better^condition, more productive, than
it was in its virgin state.
Mr. WURZRACH. But you do not think Muscle Shoals is nearly »s
important now as it was five or 10 years ago?
Doctor HOWARD. No.
Mr. WURZRACH. So far as a possible reduction in the price of
fertilizer would result, even if it was run in the very best, most
businesslike way?
Doctor HOWARD. No. sir. Forty thousand tons is not as large a
proportion as it was.
Mr. WURZRACH. What proportion is that now ?
Doctor HOWARD. It would be a little less than 10 per cent of the
total consumption of nitrogen in the country. You see the country
practically consumes 135,000 tons of nitrogen in industries. That
iontinues in about the same rate and the rest of it goes into fertilizer.
Mr. WURZRACH. Do you think, then, if the increase in the nitrogen
manufacture would continue as it has in the last few years, that the
10 per cent, or a little less than 10 per cent, would be even less in the
course of a few years?
Doctor HOWARD. That is true. It has been announced in the last
few weeks that the plant 100 miles south of here, the largest plant
in the country, will double in size immediately.
Mrs. KAHK. At Hopewell?
Doctor HOWARD. At Hopewell, Va. That means an addition of
$20,000,000 in that plant will produce practically double the capacity
of nitrate plant No. 2 and has a proportional bearing on the whole
situation in the country.
Mr. WURZRACH. Of course, in 10 years from now it is possible,
perhaps even probable, that the Muscle Shoals project might dwindle
down to 2 per cent out of the total production of nitrogen?
101229—30 19
286 MUSCLE SHOALS

Doctor HOWARD. Yes ; that is true.

Mr. FISHEK. Can you give the amount of nitrates that we imported
from Germany—the synthetic nitrogen that we imported from Ger
many—in 1929?
Doctor HOWARD. I can approximately; yes, sir. I will just read
off these items to give you an idea. We were importing ammonium
sulphate in an amount of about 18,000 tons. There are two or three
items here which I think you would like to have, showing the items
that are imported. These are the main items that come from Ger
many—about 18,000 tons of ammonium sulphate; about 35,000 tons
of calcium nitrate. Part of that comes from Norway, but quite a
portion of it comes from Germany.
Mr. FISHER. Did we import any other materials that are used
and are necessary in the manufacture of chemical fertilizer from
Germany ?
Doctor HOWARD. Yes, sir; small quantities.
Mr. FISHER. Can you give us those offhand ?
Doctor HOWARD. I can not give you those offhand. Ureau was
brought in, and calurea. Those are synthetic nitrates of potash.
Mr. FISHER. Were those things produced in large quantities; were
they imported into this country in large quantity ?
Doctor HOWARD. Not very large, no; they were just measured in
a few thousand tons a year.
Mr. FISHER. Are you advised as to how much exports of nitrates
from Germany were sent in 1929 to South America ?
Doctor HOWARD. No, sir ; I could not tell you that.
Mr. FISHER. You are not advised as to whether or not they shipped
any fertilizer to places like Bolivia ?
Doctor HOWARD. I know they ship there to some extent, but I
could not tell you the tonnage.
Mr. FISHER. Is it not a question now throughout the world as to
what is to be done with the surplus nitrogen made in Germany?
Doctor HOWARD. Well, that is discussed; it has been discussed in
the same way for several years, but they seem to be able to market it.
Mr. FISHER. Have not the people who control the Chilean sup
ply had conferences as to what was to be done to counteract the
cheaper nitrogen that is coming from Germany?
Doctor HOWARD. Yes, sir ; it is so reported.
Mr. FISCHER. Can you state whether or not the cyanamide process
is considered obsolete or not?
Doctor HOWARD. I would not consider it obsolete ; it will continue.
It is my personal opinion it will continue to be used indefinitely.
Mr. FISHER. Do they make improvements from time to time?
Doctor HOWARD. Yes, sir. It has dropped away behind the direct
synthetic process; that is, the new plants that have gone in, in the
last few years, have practically all been direct synthetic ammonia
plants. That is. at the end of the war, there were only two direct
synthetic ammonia plants operating in the world and those two
were in Germany, and now there are some 75 plants operating in
the world. In that time there has been very little increase of cyan-
amide. Some of the larger cyanamide plants which are more success
ful, as the one at Niagara Falls, have enlarged considerably since
that time, and there is one very successful plant in Germany. Per
 MUSCLE SHOALS 287

haps the two most successful, I would say, are the Niagara Falls
plant in Canada and one of the German plants.
Mr. FISHER. Are you familiar with the fact that some of the large
fertilizer concerns, or companies, that sold fertilizer were in straits,
and many of them became bankrupt in the last few years ?
Doctor HOWARD. Yes, sir ; that has been reported.
Mr. FISHER. How do you account for that? Is it because of the
excessive price of the raw materials that they need or poor business
management ? Can you give us an idea of what is the cause of such
a condition as that?
Doctor HOWARD. I think they have simply shared the agricultural
depression, that is my opinion, in recent years; new agricultural
land, because of the automobile and better transportation, has been
opened up for agricultural production, sections of the world that
were not used before, and the result has been an overproduction, as I
see it, and American agriculture has suffered and the fertilizer pro
ducers have suffered along with agriculture. That is the way I look
at it. I do not know that is correct ; I, perhaps, am not qualified to
testify on such a point.
Mr. FISHER. What is your judgment about the need for an experi
mental laboratory or an experimental place, say, at Muscle Shoals,
that could investigate the making of raw materials and study as to
how to reduce the cost of materials used in fertilizer?
Doctor HOWARD. I think something of that kind will be necessary
continually. My belief is that it should work along with industry ;
as the industry grows, to have the manufacturing work do as much
as possible ; to learn what we can from the manufacturer and help
him solve his problems. I believe that is the way.
Mr. FISHER. Do you think that would help the fertilizer industry
like the experiments have in other industries, like the automobile
business and things of that kind ?
Doctor HOWARD. Yes; help the industry to build up and, I think,
competition will help.
Mr. FISHER. Is it your judgment that if Muscle Shoals plant was
operated with that idea in mind, it could be operated successfully
and would bring about a reduction of the cost of fertilizer, that it
would not have to manufacture fertilizer there, to get certain results ?
Doctor HOWARD. No, sir; I do not see any point to operating that
plant as an experimental plant. The art has advanced too far ahead
of that point.
Mr. FISHER. What sort of research do you think should be made
at Muscle Shoals on the question of manufacturing fertilizer?
Doctor HOWARD. I do not see the necessity of doing any research
at Muscle Shoals. I believe it could be done in other places, here
in Washington or at other places, as well. I do not see that the
equipment there is particularly useful in the program.
Mr. FISHER. Do you think, then, it ought to be left with the ferti
lizer companies themselves as to whether or not they reduce the price
of the raw materials, and the Government should take no steps
about it to aid the farmers in getting cheaper fertilizer?
Doctor HOWARD. My opinion is that the shortest road to cheap
fertilizer is to help the manufacturer. He is building up a power
ful competition between himself, you see, and if you help to build
288 MUSCLE SHOALS

up different branches of the industry, make them as strong as they

can, they will answer the question of cheapness for us. We have
seen that effect in the price of ammonia. It has only been a few
years that liquid ammonia cost 30 to 35 cents a pound in cylinders ;
that is the only way you could buy it. Competition came along
between the various manufacturers. At that time it was made en
tirely from material recovered from the coke ovens; then the direct
synthetic people came in and got competing and the price went down
to a quarter or a half of what it had been before, and now it is re
ported it is being sold for about 5*4 cents a pound in tank cars.
That is a long step from 30 cents a pound.
Mr. FISHER. Do you think the operations of the Department of
Agriculture, in so far as it has conducted experiments in the manu
facture of nitrogen, have been worth while in assisting the farmers
and that we need that?
Doctor HOWARD. Yes, sir; very, very much.
Mr. FISHER. Do not you think in the same way, carrying that a
step further, it could be an aid to the farmers in getting other
materials?
Doctor HOWARD. Yes; I think so—the same tj-pe of research in
conjunction, as far as possible, with manufacturers, to take up the
general problems of the industry that can be solved for all branches
of the industry, and should be solved, so far as possible, by the
central agency.
Mr. STAFFORD. Are you acquainted with the process that is being
used at Hopewell, Va. ?
Doctor HOWARD. Yes, sir.
Mr. STAFFORD. Wherein does that process differ from that at Mus
cle Shoals?
Doctor HOWARD. The No. 2 plant, I guess you mean.
Mr. STAFFORD. Yes.
Doctor HOWARD. It is entirely different ; you go at it in an entirely
different way. There is no step in the whole process that is at all
similar. But the Hopewell plant is similar to the process which was
attempted at nitrate plant No. 1 ; in fact, that company designed for
the Government the nitrate plant No. 1 and afterwards built another
plant themselves, operated it for a number of years, and then, on the
total experience gained, they built this large plant at Hopewell.
which operates practically like the large German plant.
Mr. STAFFORD. In this industry, in the manufacture of fertilizer
and synthetic nitrogen, is there a continuous transition going on and
improvement in the art?
Doctor HOWARD. Yes, sir; very strenuous.
Mr. STAFFORD. Can you just describe, generally, the character of
that transition stage in the art?
Doctor HOWARD. Yes. For instance, there are many steps to this
proposition. One of the problems is the compression of the gas.
Ten years ago there was nobody in this country really competent to
design large compressors of that kind.
Mr. CoCHRAN. I did not get that.
Doctor HOWARD. Ten years ago, there were few people familiar
with the designing of compressors and the building of compressors
from 250 to 1,000 atmosphere, that would be from 4.000 to 15.000
pounds to the square inch; but in the period of 10 years that has
 MUSCLE SHOALS 289

been learned and there are a number of people who know how to do
it successfully now, and there is not a particle of trouble or danger
on that branch of the work. Again, 10 years ago there was little
known about the catalyst that should be used; there were many
things we knew that could be used, but it was a question of which
was the best. That has been pretty well solved.
Mr. STAFFORD. And which would you say, from a business stand
point, is regarded as economically the best ?
Doctor HOWARD. The best process ?
Mr. STAFFORD. Yes.
Doctor HOWARD. The various branches of the direct synthetic am
monia process, which simply depends on obtaining a mixture of
nitrogen and hydrogen gas in proportions to form ammonia, and
compressing that gas and passing it over a catalyst at the proper
temperature to transform it directly to ammonia gas, and this is
afterwards pressed out and tapped on as liquid ammonia.
Mr. STAFFORD. Have you any suggestion as to which is the cheap
est method of production of fertilizer?
Doctor HOWARD. It is generally concede—well, it is my opinion
that the by-product, so far as it goes, is the cheapest of all. That
is just a question of bookkeeping; you have to have it; if you are
going to make coke or gas, you make the ammonia, and you can
either save it or throw it away. So probably you should list that
as the cheapest. Then it is generally conceded that the direct syn
thetic ammonia process is the next cheapest.
Mr. STAFFORD. And what is the third, next to them?
Doctor HOWARD. I could not say; it would be a question of the
eyanamide or the Chilean nitrate. The natural product, I should
think.
Mr. McSwAiN. Doctor, will you tell me if you have studied care
fully on the ground nitrate plants Nos. 1 and 2 at Muscle Shoals?
Doctor HOWARD. I worked there for a couple of years.
Mr. McSwAiN. For a couple of years ?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. Is it not a fact there is a great portion of the equip
ment in plant No. 1 which is still good and available for the direct
synthetic process, if sufficiently strong compressors and other auxil
iary equipment were supplied (
Doctor Howard. Yes, sir; it could be used.
Mr. McSwAiN. In your judgment, what is the total cost of such
necessary additional equipment to make nitrate plant No. 1 a going
concern for the direct synthetic process?
Doctor HOWARD. I have not thought of that problem for some
time. I would say somewhere between half a million and a million
dollars.
Mr. McSwAiN. Exactly. Now, with the expenditure of an outside
of a million dollars, then, what would be the capacity of production
of nitrogen at No. 1 plant?
Doctor HOWARD. It would be about 30 tons a day.
Mr. McSwAiN. Thirty tons a day?
Doctor HOWARD. Yes, sir; of ammonia.
Mr. McSwAiN. Of ammonia?
Doctor HOWARD. Yes, sir.
290 MUSCLE SHOALS

Mr. McSwAiN. What percentage of that would be nitrogen?

Doctor HOWARD. About 80 per cent.
Mr. McSwAiN. So that you would have a production, then, of
about 24 or 25 tons a day ?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. In view of the extremely low power consumption,
what in your opinion would be the cost of the nitrogen per pound?
Doctor HOWARD. I think it would be around 4 to 5 cents.
Mr. McSwAiN. And the farmers are now paying for the nitrogen
they buy for fetilizer purposes along from about 14 to 16 cents a
pound, are they not?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. And you can produce it in No. 1 plant, by the
expenditure at the outside of a million dollars, for about 4 to 5 cents
a pound ?
Doctor HOWARD. Yes, sir; but I would like to explain that that
ammonia is not in shape
Mr. McSwAiN. I understand that is ammonia. That is the basis.
Doctor HOWARD. Something has to be done with it.
Mr. McSwAiN. That is the basis ; that has to be bubbled up through
some carrier, has it not ?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. That carrier can be phosphoric acid, can it not ?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. And the phosphoric acid is a plant food?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. So that you can make one element of plant food
carry another element of plant food, tie the two together and get
something between 60 and 80 per cent of plant food in a volume, can
you not?
Doctor HOWARD. Yes, sir ; that can be done.
Mr. McSwAiN. That is practical, is it not ?
Doctor HOWARD. Yes, sir; that is practical.
Mr. McSwAiN. And, of course, the Department of Agriculture
stated that as a fact in its report of 1928, and I suppose that informa
tion came from your literature, did it not ?
Doctor HOWARD. It is generally known throughout the world that
can be done.
Mr. McSwAiN. It first learned it from your literature, did it not;
it first learned it from j-ou all, did it not?
Doctor HOWARD. I should hesitate to say that.
Mr. McSwAiN. It learned it from some literature, did it not?
Doctor HOWARD. Yes, sir; it learned it from some literature. I
think if you will go back 55 or 50 years, it was known that could be
done.
Mr. McSwAiN. Fifty years ago?
Doctor HOWARD. Yes ; at least that long.
Mr. McSwAiN. So that the scientific world knew that 50 years
ago?
Doctor HOWARD. Yes.
Mr. McSwAiN. And there are lots of people in Congress who have
not learned that even yet.
Doctor HOWARD. Yes, sir.
 MUSCLE SHOALS 291

Mr. McSwAiN. Now, Doctor, it is true, as you say, in view of the

increasing volume of production of nitrogen in its various forms in
the United States, that the 40,000 tons of annual production at
Muscle Shoals annually has become relatively unimportant, is it
not?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. If the present rate of domestic production in
creases, how many years will it be before, in your judgment, we will
not be under the obligation of importing any Chilean nitrate at
all?
Doctor HOWARD. The increase last year, 1929, was four times as
great as the year before. If we would do that once more, we would
be free from Chile.
Mr. McSwAiN. We would be free from Chile?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. Now, Doctor, that being so, the fertilizer manu
facturers in this country, of course, none of them as fertilizer man
ufacturers produce nitrogen, do they?
Doctor HOWARD. Well, the American Cyanamid Co., perhaps, is
the exception. No ; there are other exceptions.
Mr. McSwAiN. Where is the American Cyanamid Co.'s plant?
Doctor HOWARD. At Niagara Falls.
Mr. MoSwAiw. In Canada, you mean ?
Doctor HOWARD. Yes ; that is true.
Mr. McSwAiN. I am talking about the United States, Doctor.
Doctor HOWARD. The Hopewell plant makes sodium nitrate.
Mr. McSwAiN. They dp?
Doctor HOWARD. That is their main product.
Mr. McSwAiN. For agricultural purposes?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. Do they sell any of it in the United States?
Doctor HOWARD. Yes, sir ; they do ; a trainload every day.
Mr. McSwAiN. Do you know what the present production of
sodium nitrate is?
Doctor HOWARD. It is not known officially; as near as we can
make it out, it is about six or seven hundred tons a day.
Mr. McSwAiN. Six or seven hundred tons a day of sodium nitrate?
Doctor HOWARD. Yes, sir.
Mr. McSwAix. Now, do they sell that to farmers, or do they sell
that to the fertilizer manufacturers, for the manufacturer to mix
with his potash he imports from Germany and France and phos
phoric acid which he produces himself in his own acid chambers ?
Doctor HOWARD. I am not familiar with their system of market
ing; I could not tell you that. I could not tell you whether they
would sell it to the farmer, if he asked for a truck load, or not.
Mr. McSwAiN. Of course we all know there is only about 15.5 per
cent of nitrogen in a ton of sodium nitrate ; is not that true ?
Doctor HOWARD. Yes, sir; that is true.
Mr. McSwAiN. Now, it is a fact that the fertilizer manufacturers
have to buy their nitrogen either from the meat packers, in the form
of blood, or from the cottonseed crushers in the form of cottonseed
meal, or from the Chilean producers, in the form of Chilean nitrate,
or from the American Cyanamid Co., or some other cyanamide pro
ducers, and if the fertilizer manufacturer produces no nitrogen him
292 MUSCLE SHOALS

self, which seems to be the testimony of Mr. Brand yesterday, can

you see any reason why the American manufacturers of fertilizer
should oppose the production of nitrogen at Muscle Shoals ?
Doctor HOWARD. No; if it was limited to nitrogen, I do not think
they would.
Mr. McSwAiN. If it is limited to nitrogen and nitrogen products,
you do not see why they should, do you ?
Doctor HOWARD. I should not think it would be worrying them.
Mr. McSwAiN. Doctor, as a matter of fact, up to the last few
years, the American Nation, for the purposes of national defense,
for purposes of agriculture, and for purposes of industry, was
dependent upon Chilean nitrates, was it not?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. And the Chilean Government had it at any minute
in its power to exercise a right which we could not object to, to close
its gates and forbid a pound to be exported, did it not?
Doctor HOWARD. Yes, sir.
Mr. McSwAiN. And do you remember the present export duty
per ton?
Doctor HOWARD. Yes; it amounts to something a little over $12
a ton, I believe.
Mr. McSwAiN. Yes; $12.50.
Doctor HOWARD. Although I would like to explain part of that is
being returned to the industry as a bonus; it is practically being
reduced.
Mr. McSwAiN. But it is not being returned to the American agri
cultural industry.
Doctor HOWARD. It is being returned to the manufacturers of
Chilean nitrate in Chile, to keep them on their feet.
Mr. McSwAiN. Oh. In other words, the Chilean Government is
taking care of the Chilean producers of nitrogen at the expense of
the American consumers of nitrogen, is it not?
Doctor HOWARD. Well, I believe it works to the advantage of our
own people, because
Mr. McSwAiN. Now, Doctor, if you can explain to me whv an
export duty on Chilean nitrates works to the advantage of anybody
in the United States
Doctor HOWARD. Oh, no.
Mr. McSwAiN (continuing). I will introduce a bill to raise your
salary. [Laughter.]
Doctor HOWARD. I do not mean to say the export duty; I mean
the bonus the Chilean Government is paying the Chilean producer,
to keep him going, is an advantage
Mr. McSwAiN. An advantage to whom ?
Doctor HOWARD (continuing). Because it keeps him in competition
with Germany.
Mr. McSwAiN. But the price of Chilean nitrate, per unit of plant
food and per unit of nitrogen, is higher to-day than any other source
of nitrogen, is it not?
Doctor HOWARD. Yes.
Mr. McSwAiN. Then it is not in the field to press the price down,
is it?
Doctor HOWARD. It is part of it.
 MUSCLE SHOALS 293

Mr. McSwAiN. If you will explain that, I will raise your salary
Mr. RANSLEY. Out of your own pocket?
Mr. McSwAiN. Yes; I will contribute the total sum of 1 cent
and a blank check. [Laughter.] If you will explain now how it
is that Chilean nitrate, which is the highest-priced source of nitrogen
in the world to-day, as shown by Mr. Brand yesterday and everybody
else admits—how that helps to keep the price of nitrogen produced in
Virginia, West Virginia, and New York down—why, we would like
to hear it.
Doctor HOWARD. The Chilean nitrate and the main product of the
Hopewell plant are identical, except the Hopewell material has per
haps 1 per cent more sodium nitrate in it; it is probably higher.
Xow, those two materials are competing. I wish there were more
of them, so there would be more competition.
Mr. McSwAiN. So do I.
Doctor HOWARD. I do not think it is an advantage to the American
farmer, and the men who have to use them, to have the Chilean in
dustry go completely out of business.
Mr. McSwAiN. Well, now, do not you think it would be a big help
to the American industry, consumers of nitrogen like the chemical
manufacturers and the American farmers and to the United States
Government that buys nitrogen for explosives, if the Chilean Govern
ment would take off its export duty entirely ?
Doctor HOWARD. Yes; I would like to see them give it all back. It
would amount to the same thing, as I see it, if it is necessary to do it,
to keep the industry going, to pay that back as a bonus.
Mr. McSwAiN. But if they paid it back to the manufacturers, it
would still be on the back of the American consumers, would it not?
Doctor HOWARD. Yes.
Mr. McSwAiN. I am not talking about giving the Chilean manu
facturer anything back, Doctor; he must take care of himself; he
made us take care of ourselves in this country.
Doctor HOWARD. Yes, sir.
Mr. MoSwAiN. Now I am asking you this: If the Chilean Gov
ernment would take off the export duty, so that the nitrogen could be
loaded f. o. b. ships in Chilean ports $12.50 a ton cheaper than it is
to-day, it would be $12.50 a ton cheaper in Charleston, S. C.
Doctor HOWARD. That is true.
Mr. McSwAiN. Would not that help you, me, and all of us in
America ?
Doctor HOWARD. Answering your question, I think that would do
more good than raising my salary. [Laughter.]
Mr. McSwAiN. That is fine. Since you have answered that cor
rectly, I am in favor of raising both. [Laughter.]
Mr. COCIIRAN. Doctor, would the operation of the Government's
facilities at Muscle Shoals in the production of fertilizer or its ingre
dients reduce the cost of fertilizer to the American farmers ?
Doctor HOWARD. Possibly.
Mr. COCHRAN. To what extent?
Doctor HOWARD. My personal opinion is it would temporarily
reduce it; but, in the long run, it would retard the whole program
and the farmer would have to pay eventually. I think doubtless
adding 40,000 tons of nitrogen in any program is going to reduce the
294 MUSCLE SHOALS

price; it could not help it; it is going to have that tendency. But
if, by adding that 40,000 tons, you stop a number of expansions,
such as the one going on at Hopewell and Charleston, and a number
of plants that are contemplated, if you stop all that because that
40,000 tons comes out, perhaps in two or three years from now it
would constitute a loss.
Mr. COCHRAN. Then the ultimate result would be an injury to the
American farmer?
Doctor HOWARD. Yes, sir.
Mr. CoCHRAN. In your opinion what beneficial use can be made
of the Government's facilities at Muscle Shoals ?
Doctor HOWARD. My opinion is it should be maintained as long
as it is needed for national defense ; after that date it should be sold
for the most that the Government can get out of it.
Mr. CoCHRAN. That is at present, then, it should be maintained
just as it is now ?
Doctor HOWARD. It should be maintained pending the day that
the War Department says we need it no longer, sir.
Mr. CoCHRAN. Nothing should be done with it at present?
Doctor HOWARD. No ; unless it could be leased on favorable condi
tions.
Mr. COCHRAN. Leased for what purposes?
Doctor HOWARD. Any purpose that would maintain it as a plant
in shape for war purposes, that was needed for that purpose.
Mr. COCHRAN. That is, leased for any purpose other than the
manufacture of fertilizer or its ingredients?
Doctor HOWARD. I should think, if there is an opportunity to
lease it for fertilizer manufacture, I would be in favor of doing that
first of all.
Mr. CoCHRAN. Even though it would result in a detriment to the
farmer ultimately?
Doctor HOWARD. Yes; I think it should be done if the Govern
ment can get something out of it.
Mr. HILL. Doctor, your opinion that it should be kept for national
defense is the opinion which your department has had for the last
six or eight years, the last six years anyway, has it not ?
Doctor HOWARD. I could not speak for the department ; I was not
in the department that long ago.
Mr. HILL. I think the hearings of this committee will show that.
In other words, all of these weeks and months that this committee
has been sitting here, trying to make a disposition of Muscle Shoals,
has been a waste of time, has it not ?
Doctor HOWARD. I think it is an extremely complicated problem, it
is difficult.
Mr. HILL. If you feel nothing should be done with it, then all of
this effort on the part of Congress for all of these many years, all
of these hearings, all of these bills, all of the time that has been
taken both in the committee and the two legislative bodies themselves
has been just a waste of time?
Mr. McSwAiN. And the Chief of Ordnance of the War Depart
ment has the opinion it is not necessary for national defense; the
Chief of Ordnance told you last week it is no longer necessary for
national defense.
Doctor HOWARD. Yes.
 MUSCLE SHOALS 295

Mr. McSwAiN. So, on that theory, we ought either to sell it, give
it away, or blow it up ?
Doctor HOWARD. Yes, sir.
Mr. HILL. Blow up the nitrate plants on the Tennessee River?
Mr. RANSLEY. It is simply a power plant to-day.
Mr. HILL. We are talking about the nitrate plants now; we are
not talking about the power end.
Mr. RANSLEY. We are talking about Muscle Shoals.
Doctor HOWARD. I think there is going to be a certain limit to
the use of cyanamide. The experience in Europe has indicated
that, and I believe it will be the same here ; so that there is a limit
to the amount that can be used. I see no reason why the company
owning the patents should not lease that plant and buy the power
necessary to operate it and carry it on as a part of their program.
Mr. HILL. For the manufacture of nitrogen for fertilizer?
Doctor HOWARD. Yes. When it comes to the amount of cyanamide,
so far as you can market it for use directly on the soil, without using
it as a raw material and putting it through a lot of other manipula
tions to produce something else, it is probably as cheap a material
a« can be used.
Mr. HILL. The Government has, as you probably know, about
$67.000.000 invested in nitrate plant No. 2. which does not include
the hydroelectric facilities, or nitrate plant No. 1.
Doctor HOWARD. Yes, sir.
Mr. HILL. Then you would say it would be advisable, I take it,
from your last statement, that the Government should lease that to
some private concern?
Doctor HOWARD. Lease or sell; I would rather see it sold, myself.
Mr. HILL. You would rather see it sold ?
Doctor HOWARD. I think it would be better for the whole indus
try, to settle that problem, to sell it to the American Cyanamid Co.
or the Union Carbide Co.—they both have talked as though they
could use it—and settle this question.
Mr. HILL. Just dispose of it entirely?
Doctor HOWARD. Yes. I think it would be better for the farmer,
and I think it would be better for the country as a whole if that
thing could be settled once for all, and the Government would get the
maximum out of it in that way.
Mr. HILL. There has been organized what they call a cartel, which
is an agreement or monopoly between the Chilean producers and the
German producers, has there not?
Doctor HOWARD. Yes; I think so.
Mr. HILL. In other words, have not you practically got a world
trust on nitrogen; is not that what is amounts to?
Doctor HOWARD. Outside of the United States.
Mr. HILL. Is it not true that the interests here in the United States,
to say the least of it, are working with that trust and negotiating to
get into it. and whatever price the trust fixes our producers over
Here follow, and their trouble has been our antitrust laws have given
them some difficulty, is not that it, and there is practically a world
trust on nitrogen, is there not?
Doctor HOWARD. No; I do not see there is a monopoly. There is
an attempt, no doubt, to make such a thing, but I think it has failed
effectively.
296 MUSCLE SHOALS

Mr. HILL. There is a very definite attempt, is there not, to do that?

Doctor HOWARD. Yes; I think there is a very definite attempt to
do that, but I think it has failed.
Mr. HILL. Why do you say it has failed ?
Doctor HOWARD. Due to the fact prices have been reduced year
after year and the industry, apparently, is worried. The prices this
year are cheaper than they ever have been before. Of course, I am
talking about the wholesale trade. There is a big spread, unfortu
nately, between the price nitrogen sells for at wholesale and what
the farmer has to pay after it is stored and distributed.
Mr. HILL. Is nitrogen cheaper to the farmer this year ?
Doctor HOWARD. I say it is cheaper in the wholesale market.
Mr. HILL. You do not know about the farmer?
Doctor HOWARD. No ; I could not say that. That is a very difficult
thing to determine, in view of the fact that prices vary throughout
the year in different localities. At the price of ammonium sulphate
on the New York market, which is a criterion you can go by,
ammonium sulphate is being quoted for export in the last few weeks
for $38 a ton ; it is quoted for domestic consumption at $40—which
shows the anxiety to get it out of the country and relieve the
congestion.
Mr. HILL. Is not that because the farmer is not able to pay for it
at that price?
Doctor HOWARD. It is several dollars a ton—six or eight dollars a
ton—cheaper than it was last year at the same time.
Mr. HILL. In other words, what you say shows the farmer is not
able to buy that ammonium sulphate and we are exporting it?
Doctor HOWARD. Yes.
Mr. HILL. And are exporting it at a much cheaper price than what
it is selling for here for domestic consumption because he can not
buy it?
Doctor HOWARD. Yes.
Mr. HILL. Is not that correct ?
Doctor HOWARD. He is buying a great deal; he can not take it all;
that is true.
Mr. HILL. No. Then you say there has been this agreement be
tween the German producers of nitrogen and the Chilean nitrate
producers?
Doctor HOWARD. Yes, sir; some suggestion of an agreement.
Mr. HILL. It has been published in 'the Wall Street Journal, has
it not?
Doctor HOWARD. Yes.
Mr. HILL. That there was an effort for the world control of
nitrogen prices?
Doctor HOWARD. Yes.
Mr. HILL. Absolutely.
Doctor HOWARD. I think there is a phase of that which is perhaps
favorable in that they agree to handle the advertising program. I
do not think it means necessarily a rise or even a maintenance of a
price schedule, because they realize, if they are going to continue to
make nitrogen and to selfmore of it, they have to sell it at lower
prices.
Mr. HILL. But it does mean this, that there is not going to be any
competition?
 MUSCLE SHOALS 297

Doctor HOWARD. Exact!y.

Mr. HILL. In other words, they are going to get all they possibly
can squeeze out of it. and there will be no competition among them;
is not that correct ; that is the end and object of the whole thing—
to destroy competition?
Doctor HOWARD. Yes ; I would sav so.
Mr. HILL. Surely. That is all.
Mr. DOUGLAS. Doctor, what is the chemical composition of the
carrier that contains not only nitrogen but also phosphoric acid?
Doctor HOWARD. It is simply liquid phosphoric acid.
Mr. DOUGLAS. Liquid phosphoric acids
Doctor HOWARD. First liquid phosphoric acid is manufactured and
neutralized with ammonia, and you get practically the salt of am
monium phosphate.
Mr. DOUGLAS. Are there any companies manufacturing ammonium
phosphate ?
Doctor HOWARD. Yes. sir ; Ammo-Phos, the product of the Ameri
can Cyanamid Co. at Warners, is a commercial grade of ammonium
phosphate.
Mr. DOUGLAS. Are there any other companies manufacturing it?
Doctor HOWARD. Yes. I think the Aanaconda Copper Co. makes
a small quantity at their smelter in the West.
Mr. DOUGLAS. At Great Falls?
Doctor HOWARD. Yes; out in Montana; and there is considerable
made in Europe, in Germany, and at various places throughout the
world it is being made to some extent, v
Mr. DOUGLAS. In terms of cost of nitrogen and the phosphoric
content to the farmer, is that Ammo-Phos cheaper than any other
fertilizer containing the same plant-food elements, but not in the
same chemical compound ?
Doctor HOWARD. I think, as far as my knowledge goes, it has been
ordinarily more expensive.
Mr. DOUGLAS. More expensive?
Doctor HOWARD. But it is a concentrated material and, therefore,
stands shipment well and has been shipped all over the world to
distant points to advantage. Most of it has been marketed in foreign
countries.
Mr. DOUGLAS. In terms of the actual amount placed on the land,
is it cheaper or more costly ?
Doctor HOWARD. It is probably cheaper to put ammonium phos
phate on in Formosa or in Sumatra.
Mr. DOUGLAS. In other words, it is a question of freight rates?
Doctor HOWARD. It is more expensive to put it on 50 miles out of
Baltimore, where acid phosphate and ammonium sulphate are so
cheap.
Mr. DOUGLAS. Is the manufacture of ammonium phosphate pat
ented ; is that process for the manufacture of ammonium phosphate
patented ?
Doctor HOWARD. I think there are some patents on it, but not
generally—just on one particular way of doing it. The general
process of neutralizing phosphoric acid with ammonia is not pat
ented ; that has been known too long.
298 MUSCLE SHOALS

Mr. DOUGLAS. So that even though there is a patent on a process,

that would not of itself be any inhibition?
Doctor HOWARD. No.
Mr. DOUGLAS. You said a few minutes ago, in reply to a question
of Mr. Fisher, I believe, and I wanted to get vour meaning clear,
you feel experimental work conducted by the United States would
be of advantage to the farmer ?
Doctor HOWARD. Oh, yes; absolutely.
Mr. DOUGLAS. When you said that, I gathered you meant that
experimental work could better be conducted here.
Doctor HOWARD. Yes.
Mr. DOUGLAS. In some small laboratory, rather than at Muscle
Shoals?
Doctor HOWARD. Yes. I believe the organization which has been
working on that for a great many years is better fitted to go ahead
economically and carry on that work than any new organization
that might be created.
Mr. DOUGLAS. Then later you said, as I recall, that the operation
of Muscle Shoals for the production of fertilizer would temporarily
result in cheaper fertilizer to the farmer, but that, over a long
period of time, it might result in, a disadvantage to the farmer.
Doctor HOWARD. Yes. I think I should-
Mr. DOUGLAS. This was the question I wanted to ask you : Does
that judgment of yours apply to the operation of the plants there
by the United States, as well as by private enterprise ?
Doctor HOWARD. That is just the point I would like to clear up.
In making the statement that it might help temporarily, I had in
mind some system of subsidized production in which somebody
would be hired to do that and paid in power concessions or some
thing of that kind, in which case part of the cost of producing that
fertilizer would be paid by the United States. If the plant was sold
or leased in such a way that there would be no subsidy attached
and the manufacturer who took the project over and made fertilizer
there, manufactured it, taking everything into account as though
it were his own plant, I think it would do no harm to the industry
or the farmer in the long run.
Mr. DOUGLAS. I see. Can you see why a subsidized operation
would result, in the long run, in a disadvantage to the farmer?
Doctor HOWARD. There are a number of companies using this
process in the United States.
Mr. DOUGLAS. Using what?
Doctor HOWARD. Making ammonia in the United States; others are
contemplating going into the business. Those who are in it have
plans for expansion. If I were in their position, I might hesitate a
little bit in making expansions, if I thought the Government was
going to pay somebody else for competing with me.
Mr. DOUGLAS. So the disadvantage to the fanner over a long period
of time would be in the reduction of the production of fixed nitrogen
in some chemical '.
Doctor HOWARD. Yes.
Mr. DOUGLAS. That would be the disadvantage?
Doctor HOWARD. Yes—holding up the expansion problem.
Mr. DOUGLAS. With the probable consequent increase in price; is
that your idea ?
 MUSCLE SHOALS 299

Doctor HOWARD. Yes, sir; that is my idea.

Mr. DOUGLAS. Then, to sum it all up, you feel the logical thing to
do with Muscle Shoals is either to sell it or to lease it to private
enterprise?
Doctor HOWARD. Yes, sir.
Mr. DOUGLAS. That is all.
Mr. RANSLEY. Thank you very much, Doctor. Now, Doctor Cot-
trell, will you take the stand ? You are familiar with hearings ?
STATEMENT OF DR. F. G. COTTKELL. CHIEF OF FERTILIZER AND
FIXED NITROGEN INVESTIGATIONS, BUREAU OF CHEMISTRY
AND SOILS, DEPARTMENT OF AGRICULTURE
Doctor COTTRELL. Yes, sir.
Mr. RANSLEY. And you have heard the numerous questions pro
pounded both to Doctor Howard and Doctor Knight?
Doctor COTTRELL. Yes, sir.
Mr. RANSLEY. Have you in mind any one point, or more, that you
can clear up, after hearing the evidence that has been adduced
to-day?
Doctor COTTRELL. No ; I think in what I have said before, on my
many visits here, I have outlined this situation as I have seen it and
about all that has happened since having been that some of the
predictions I made at those times, and that were more or less ques
tioned then, seem to have been fairly well verified by subsequent
developments. They were as to the rate of production and the fall
ing cost of production. If anything, they have come a little faster
than even I was in a position to expect.
Mr. RANSLEY. Doctor, will you dwell for a time upon what you
consider the value of Muscle Shoals from a business standpoint ?
Doctor COTTRELL. Well, now that the Army has indicated its lack
of further interest in it, I can see very little reason for maintaining
it. It seems to me it might just as well be disposed of on the best
terms possible, including its effect on the local community and other
wise. That is, there is certain equipment, certain facilities, and that
is a natural manufacturing center, and the question should be studied
carefully by a competent group empowered to make the best disposi
tion that can be made on a business basis. It should be liquidated
then as any other business would liquidate its material assets.
It seems to me the purposes for which it was originally built have
been served, in so far as the set-up there can do that under Govern
ment auspices, to good advantages, and you have the power equip
ment on the one side that is certainly useful and advantageous. As
to whether that should be operated* by the Government, or leased
by the Government, or disposed of entirely, is a matter of general
governmental policy in power work. And from the standpoint of
the nitrogen station, from the standpoint of the plants, it seems to
me we have come more and more directly to the point where they
have served their usefulness. I think they have served a consid'-
erable usefulness, even in their idle state, and I do not feel the time
expended by this committee or by others of us who have studied the
problem has been by any means lost; I think it has been a part of
the general educational campaign that we had to go through in order
to establish a nitrogen industry in this country and to get the public
 300 MUSCLE SHOALS

in general educated up to it. Our little laboratory has tried to do

its part in that same way. We have not only done certain work in
developing ideas and methods and information that could be passed
on to the industry and others, but we have done a good deal in the
way of training men for the industry ; we have had a good deal to
do with staffing. We are actually doing more work at the labora
tory now and see larger possibilities for improvement in methods,
in the technology of pnosphorus, and to some extent potash produc
tion, than in nitrogen—the nitrogen sale is now in such firm hands
and going so rapidly and to a very large extent competitively, I
think. I think there is very considerable competition both in the
technological and probably in the business and economic features
in the industry to-day, both locally and internationally to some
extent.
Of course in all those matters, there is bound to be a considerable
amount of getting together and trying to eliminate what business
looks upon as destructive competition, and there is a good deal to
be said for that point of view. Competition can get really into a
constructive ground and the most we can do, from the Government
side. I think, is to try to guide that sort of thing and bear down
on the one side or the other, as there seems to be too much or too
little competition in the way of producing the most advantageous
results for the ultimate purchasers. And I think it was in that
sense that Mr. Howard was trying to explain his idea of the effect
of the Government actually operating under subsidy. Sometimes an
operation, a competitive operation under subsidy, may produce a
disturbance of the flow and equilibrium in business and inasmuch
as business has to maintain itself upon a working and profitable
basis—it can not get its operating out of the blue sky—if it is run
ning inefficienth', why the ultimate consumer must pay for it
eventually, and it is our business to be careful in trying, to keep a
proper competition and not throwing business into such competition
that its legitimate expenses, its necessary expenses, I will say, go up
to a point where the ultimate consumer will have to pay for it. It
is the same sort of thing that the various public-service commissions
have to base their work upon in trying to strike a middle field, and
that has been pur point of view. We have tried to maintain that
point of view in our work in the laboratory, in studying statistics,
and studying the relationship of different processes, as well as the
different economic conditions.
Mr. WURZRACH. You are still with the Department of Agriculture?
Doctor COTTRELL. Yes, sir.
Mr. WURZRACH. Now, if either one of the plans was put into effect,
that is, the plan proposed in the Norris resolution, or any other plan
that involved ultimate Government operation of those plants, and
you were consulted as a part of the Department of Agriculture,
would you, as a business man and with your experience and study of
this whole question, recommend going into fertilizer production on a
large scale, or even production for experimental purposes, at Muscle
Shoals ?
Doctor CoTTRELL. No; I should be sorry to see it. I should look
on it as a good deal of a burden.
Mr. WURZRACH. And if you were consulted by this commission, or
hv n.nv other governmental agency, you would recommend against
 MUSCLE SHOALS 301

doing either one of those two things—either running plant No. 1 for
experimental purposes, or both plants for productive purposes—large
production?
Doctor COTTRELL. I feel the Muscle Shoals set-up is rather too
large to be efficient for the kind of experimentation I feel is most
worth while, which I think is justifiable.
Mr. WURZRACH. You think it would be more expensive than the
probable results would justify?
Doctor CoTTRELL. Yes. I think at least it could be done better on
a smaller scale and more economically. The results might justify
the expense to do it ; you might get very important results, but the
same results could certainly be gotten on a very much smaller scale
and very much more efficiently, and more rapidly, I think; that is my
judgment.
Mr. WURZRACH. That statement would possibly lead to the con
clusion that we ought to consider this Muscle Shoals project wholly
as a power project, which I am not quite willing to agree to, because
I do not want to get away from the idea of cheap fertilizer and I
want to see whether you will agree with me that your first expressed
conclusion is not altogether inconsistent with the idea of bringing
about cheaper fertilizer to the farmers. For instance, even though
you could not manufacture fertilizer in such a way and at such a
price to be a benefit to the farmer—that is, whether you are devoting
the power and plants wholly to fertilizer manufacture—can you see
a probability of leasing the plants in such a way, under such guar
antees and such limitations as to profit—say 8 per cent, which I think
was suggested in one of the bills—where the lessee or the operator
of the properties could engage in the manufacture of some other
by-products that would also be important, if not necessary, in the
matter of national defense and, at the same time, bring about a suffi
cient production of fertilizer at a certain limited price, that the far
mer would receive a substantial benefit? To amplify my question,
I ha.ve in mind the lease to the American Cyanamid Co., represented
by Mr. Bell.
Doctor COTTRELL. Yes.
Mr. WURZRACH. Under an authority granted to the President, or
to some one else, to sit across the table with prospective lessees, as
suming that might be some one who has a proposition identical to
or similar to the proposition that was represented by Mr. Bell. Do
you think that could be worked out in such a way that all of the
purposes could be served, that is, a fair return to the Government
for the money that has been expended, use of the power, and the
manufacture of fertilizer in such a way that the farmer would
derive a benefit? Do you think that can be worked out?
Doctor COTTRELL. Yes, I think something of that type is probably
the most efficient and expedient way of doing it; but it is rather
necessarv, in carrying out such negotiations, to give your negotiator
quite a free hand in the particular form and even as to the particular
amount of each motive that is pressed. If you do not do that, you
are apt to pay a very high price for getting one or the other of the
definite points that you prescribe for him to meet; because whoever
js dealing with you from the other side, realizing your negotiator is
handicapped by having an arbitrary requirement that he must meet,
101229—30 20
302 MUSCLE SHOALS

is going to use that as a lever to get undue concessions at some other

point, and that is the main difficulty in the bids of those companies.
Mr. WURZRACH. In other words, any limitations that are placed on
the negotiator, whoever that might be, ought to be such general
limitations that they would fit a number of people?
Doctor CoTTRELL. Yes.
Mr. WURZRACH. Who might want to compete and bid for the
proposition ?
Doctor COTTKELL. What you must do to make that efficient is to fit
the operation into the industrial and business conditions as they
exist. You can not change them ; the country is set up with certain
avenues and a certain interlacing of industries that are too rigid to
change. Now the negotiator must be in a position to appreciate
those, to estimate them and to fit into it, and you have to leave such
negotiations to the ability and integrity of your negotiator.
Sir. WURZRACH. In other words, as I expressed here the other day,
if we had mother hubbards to sell, it would be a very easy proposi
tion ; but we have something here that will only fit somebody with a
certain figure.
Doctor COTTRELL. Pixactly.
Mr. WURZRACH. Have you read Mr. Douglas's proposed bill?
Doctor COTTRELL. No; I do not think I have seen that.
Mr. WURZRACH. I have an idea that pretty well carries out your
views of the situation. You do agree to this, do you not, Doctor
Cottrell, that unless we confer authority on some one to negotiate
along the lines we have been talking about, you are almost compelled
to make this wholly and solely a power proposition ?
Doctor COTTRELL. Yes, sir ; I think that is largely it. It is the old
saying that battles have been won by good generals and battles have
been won by poor generals, but no battle has ever been won by a
debating society and, when you come to carrying on the negotiations,
the more people you have to sit in on the negotiations, the less likely
you are to get definite results ; because negotiation is, after - all,
definitely a debate.
Mr. HILL. You mean if you had 533 on one side of the table, then
certainly you would never get any agreement ?
Doctor COTTRELL. It is going to be very fortunate for the other
man ; he is certainly put into a good position.
Mr. McSwAiN. I suppose about the only benefit that my friend
from Texas, Mr. Wurzbach, referred to about the farmer, was
cheaper fertilizer? That is the benefit you had in mind when you
answered his question, was it not?
Doctor COTTRELL. Yes. Now, as to just how much you can
get
Mr. McSwAiN. We are talking about the benefit the farmer can
get. The only "benefit he can get is cheaper fertilizer. That is what
you had in mind—cheaper fertilizer?
Mr. WURZRACH. Yes.
Mr. McSwAiN. Now, according to your general statement
Doctor COTTRELL. I do not think that is going to be a very large
matter in any case you can put your finger on.
Mr. McSwAiN. In other words, your idea is the more benefit you
give to the farmer, the more harm you do him? You agree with
Doctor Howard, that if you make cheaper fertilizer down there, you
will destroy the industry and ultimately it is going to cost him so
 MUSCLE SHOALS 303

much more, and the more cheap fertilizer you give him, the more
you hurt him?
Doctor CoTTRELL. I do not see you are making cheaper fertilizer
down there; you are simply making fertilizer at the same cost and
then putting the bonus on it. If you are doing that, I do not see
that does very much good. Now, your physical conditions limit you
as to what you can actually make your fertilizer for; you can juggle
the figures there, but you can not go outside pretty much of what
the industry can do generally.
Mr. McSwAiN. You are at the head of the Government's labora
tory in relation to the fixation of atmospheric nitrogen ?
Doctor CoTTRELL. Yes, sir.
Mr. McSwAiN. Does that have to do with the chemical aspects of
the problem of atmospheric fixation ?
Doctor COTTRELL. Primarily, yes.
Mr. McSwAiN. Secondarily, with what does it have to do?
Doctor COTTRELL. We have had mechanical details to work out
in the machinery ; we have had a little to do with its relation to the
plant work, although that is mostly through other laboratories and,
of course, we have had to study in general those economic condi
tions as they reflect upon the relative prices.
Mr. McSwAiN. Where is there authority in the law for your study
of any of those economic problems ?
Doctor CoTTRELL. Merely in so far as it determines for us which
things are most worth while. In the study of chemistry there is no
use going out and studying chemical processes that on account of
the economics of the proposition are bound to fail.
Mr. McSwAiN. Who is the expert in the laboratory on the eco
nomics problem ?
Doctor CoTTRELL. Mr. Howard.
Mr. McSwAiN. Mr. Howard is the expert on economics?
Doctor CoTTRELL. I rely on him to follow those things and to
keep up his records.
Mr. McSwAiN. Did he take a degree at any university on
economics ?
Doctor COTTRELL. No; he is a chemical engineer, I think.
Mr. McSwAiN. Have you anybody there that took a degree on
economics ?
Doctor COTTRELL. Not in our organization.
Mr. McSwAiN. Where do you learn economics: what books, maga
zines, or papers do you read from which you get your ideas on
economics?
Doctor CoTTRELL. We read the general press.
Mr. McSwAiN. Do you ever read this literature that the Ameri
can Fertilizer Association pets out?
Doctor COTTRELL. Oh, yes; we get that along with the others.
Mr. McSwAiN. That is pretty good economics along a certain
point of view?
Doctor CoTTRELL. It is very carefully done.
Mr. McSwAiN. Yes; it is very carefully done; it is pretty good
literature.
Doctor COTTRELL. Yes.
304 MUSCLE SHOALS

Mr. McSwAiN. Doctor, you say this plant down here at Muscle
Shoals has already served a very useful purpose ?
Doctor COTTRELL. I think so.
Mr. McSwAiN. Just standing still?
Doctor COTTRELL. Yes.
Mr. McSwAiN. Now. if it has already served a useful purpose
standing still, why sell it; why not keep it there a while longer,
and maybe it will be useful some time longer I
Doctor COTTRELL. That is another alternative, certainly.
Mr. McSwAiN. Because the longer it stays there the more discus
sion there will be and the more education of those you speak about.
Doctor CoTTRELL. Exactly.
Mr. McSwAiN. They are all getting educated now
Doctor COTTRELL. Yes.
Mr. McSwAiN. And, in another 10 years, their education might be
complete and they might be ready to agree ?
Doctor COTTRELL. They might. I would not say it would be com
plete, even then, but it might be some sort of degree more complete
than now.
Mr. McSwAiN. You assume, in your discussion, the Army has de
cided that Muscle Shoals property is no longer needed for national
defense ?
Doctor COTTRELL. That was stated here in the committee. I was
simply referring to the statement that was made.
Mr. McSwAiN. I was the gentleman to say that General Williams
said that.
Doctor CoTTRELL. I was speaking from that.
Mr. McSwAiN. Now, from your study of economics and all of
these other problems relating to national defense, do you take it that
the Chief of Ordnance or anybody else in the War Department, is
the custodian of national defense ?
Doctor COTTRELL. No.
Mr. McSwAiN. Who must decide those problems of national de
fense?
Doctor COTTRELL. Well, I do not know just where they are located.
Mr. McSwAiN. Who decided we must build Muscle Shoals?
Doctor COTTRELL. Congress.
Mr. McSwAiN. Who decides whether we must have an Army at
all, or not?
Doctor COTTRELL. I suppose Congress.
Mr. McSwAiN. Who decides whether we shall have a Navy or
not?
Doctor CoTTRELL. Congress.
Mr. McSwAiN. Who decides how much Navy we shall have?
Doctor COTTRELL. All of you gentlemen.
Mr. McSwAiN. Who decides how much of an Army we shall have?
Doctor COTTRELL. You gentlemen.
Mr. McSwAiN. Now, who must decide whether Muscle Shoals is
necessary for the national defense, Doctor?
Doctor COTTRELL. It is up to you gentlemen eventually, of course ;
but you seem to want the opinions of some of us on various phases,
and I was just simply referring to such opinions as have been given
in your own quotation.
 MUSCLE SHOALS 305

Mr. McSwAiN. Yes. Now, coming to that quotation, you assumed

the Army, as the arbiter of national defense, has decided that
Muscle Shoals must be scrapped, did you not (
Doctor CoTTRELL. Yes. I was quoting General Williams for the
Army. I have no brief on that situation.
Mr. McSwAiN. But assuming even the Army has lost interest in
Muscle Shoals, as you say, it is still manifest the farmers have some
interest in it?
Doctor CoTTRELL. Some of them.
Mr. McSwAiN. And the farmers had an interest in its original
establishment under the national defense act of 1916, section 12-t,
did they not, Doctor ?
Doctor COTTRELL. Yes, sir.
Mr. McSwAiN. Doctor, did not you, two or three years ago—I
have forgotten how long—advise the use of and advise this com
mittee to expend a certain sum of monev on rehabilitating plant
Xo. 1, just for experimental purposes, and to make a laboratory of
it on a big scale, on the theory your little test tubes in your labora
tory up here might work one way ; but, when you went to the actual
mechanical application, it might fail in a big way, might not work ?
Did not you say that would be a good thing to do ?
Doctor COTTRELL. I have never been particularly enthusiastic about
it. Many people have felt that would be wise, and I was willing
to see it tried if they, thought it was worth while.
Mr. McSwAiN. That was one way the Department of Agriculture
suggested at that time to sidetrack the Muscle Shoals issue, and you
and Doctor Knight went down there and looked over the field, did
you not ?
Doctor COTTRELL. Yes, sir.
Mr. McSwAiN. And you met me there, right in plant No. 1.
Doctor CoTTRELL. Yes, sir.
Mr. McSwAiN. And came back here and made that recommenda
tion?
Doctor COTTRELL. I do not remember I made a positive recom
mendation on that or not.
Mr. McSwAiN. You came up here to the committee.
Doctor COTTRELL. I remember the discussion. My own attitude on
that, frankly, has been always what it is here: I think the plant is
rather large for most efficient work. In the various projects that
have come up I have felt a number of times that was probably the
lesser of the two evils, to take hold of that and do it, and we did try
to plan, if we had to operate those, if we were asked to operate
those, what the best thing we could do with it would be, and at one
time it looked as if the operation of No. 1 would be perhaps the best
thing at that time. Conditions have passed on a good deal since
then, so I feel to-day there is much less need, much less occasion, for
doing that. The very things that would have been experimental
then have, to a large extent, been solved by industry since; so that
is even less important to-day that it was at that time.
Mr. McSwAiN. Can you conceive of any economic theory whereby
the fanners and the industry of the United States would be injured
by the taking off by Chile of its export duty on Chilean nitrate?
Doctor COTTRELL. No.
306 MUSCLE SHOALS

Mr. McSwAiN. That would help American farmers and American

industry, would it not?
Doctor COTTRELL. Yes ; any decrease in cost is a real benefit, of
course.
Mr. McSwAiN. And if they took that export duty off, that price
would drop $12.50 a ton. would it not?
Doctor COTTRELL. Yes; it would drop somewhat.
Mr. WURZRACH. Unless you had a local trust.
Mr. McSwAiN. A local trust, where?
Mr. WURZRACH. Here in this country.
Mr. McSwAiN. Of course. Now, do you know of any American
capital or manufacturers that have any interest in the Chilean
nitrate beds or the Chilean nitrate processing concern ?
Doctor CoTTRELL. There has been American capital interested
down there at one time or another; just how much capital is now
invested there I could not say, but the Guggenheim Co. was inter
ested in it heavily at one time and I think still are. and I think the
Du Pouts are still interested there.
Mr. McSwAiN. The Du Fonts and the Guggenheims—and is any
body else interested in the Chilean nitrate beds or processing?
Doctor CoTTRELL. I do not know of any other in detail.
Mr. McSwAiN. So it is to their interest to maintain the export
duty, is it not ?
Doctor CoTTRELL. I do not know really whether it would work to
their interest or against them.
Mr. McSwAiN. Your expert over there. Doctor Howard, says he
thinks those processors get part of that export duty in the form of
a bounty.
Doctor CoTTRELL. Yes. I do not know the details of that.
Mr. McSwAiN. That is all.
Mr. HILL. You have a world cartel on nitrogen now, have you not,
Doctor?
Doctor COTTRELL. There seems to be at least one in the making.
Mr. HILL. Certainly ; it has not been born yet ; it has been con
ceived, has it not?
Doctor COTTRELL. I should think that is a clear assumption.
Mr. HILL. There is a world cartel on nitrogen, and. by " world
cartel." we mean a monopoly, do we not?
Doctor CoTTRELL. An attempt to approach it ; certainly.
Mr. HILL. Absolutely : that is all.
Mr. DOUGLAS. Doctor Cottrell, vou are the person who invented the
Cottrell process for reducing stack losses in copper metallurgical and
ferrometallurgical work ?
Doctor COTTRELL. Yes ; I took out some patents on it once.
Mr. DOUGLAS. And you have had a great deal of experience, have
you not, in various electrolytic processes?
Doctor COTTRELL. Somewhat.
Mr. DOUGLAS. And the electrolysis of zinc somewhat ?
Doctor COTTRELL. Only experimentally.
Mr. DOUGLAS. But you are fairly familiar on that subject?
Doctor COTTRELL. Yes ; I know more or less of the technology.
Mr. DOUGLAS. And various other metalliferous subjects?
Doctor COTTRELL. Yes.
 MUSCLE SHOALS 307

Mr. DOUGLAS. In addition, of course, you are an expert on general

electrochemistry ?
Doctor COTTRELL. I suppose I am.
Mr. DOUGLAS. I mean you would be willing to admit that under
duress, would you not, Doctor?
Doctor CoTTRELL. Yes. You have experts defined as ordinary
men away from home, and under that definition I expect I could
qualify.
Mr. DOUGLAS. Well, Doctor, at Muscle Shoals is one of the great
power-generating units in the country, I suppose, is it not—cer-
tanly a very large capacity ?
Doctor COTTRELL. Well, it is an important one ; yes.
Mr. DOUGLAS. And its capacity can be very materially increased?
Doctor COTTRELL. Yes.
Mr. DOUGLAS. Relatively speaking, the power to be developed at
Muscle Shoals and in the immediate vicinity of Muscle Shoals, so
that it would not have to be transmitted any distance, would be cheap
power, would it not?
Doctor COTTRELL. Well, that depends. I am not familiar enough
with the hydraulic engineering in that whole Tennessee River coun
try to speak in technical terms, really ; it is in a field that I have
not the figures in mind.
Mr. DOUGLAS. Let us assume it is cheap power relatively.
Doctor COTTRELL. It is relatively cheap power.
Mr. DOUGLAS. It is relatively cheap power?
Doctor COTTRELL. Yes.
Mr. DOUGLAS. Do vou know very much about the deposits of tha
various minerals in that general vicinity?
Doctor CoTTRELL. No; not in detail. I have heard it said there
are, and my attention has been drawn to this one and that, at various
times; but I am not in a position to make an estimate of it.
Mr. DOUGLAS. Of the tonnage, or whether or not it is commercial
in grade, or anything like that?
Doctor CoTTRELL. No ; nothing of that kind.
Mr. DOUGLAS. Now. Doctor, in the manufacture of fertilizer, or
fixed nitrogen, or fertilizer bases, there would, of necessity, be a good
many by-products, would there not?
Doctor COTTRELL. Yes; there might be and that is, of course, a
feature in modern industry, that different operations are tied in one
with the other and that is one of the chief ways of cutting costs.
Mr. DOUGLAS. Yes.
Doctor COTTRELL. And, as a matter of fact, is one of the places
where the Government would be rather handicapped as compared
with outside industry; because it is not quite as easy for the Gov
ernment to turn quickly into that sort of manufacturing and mer
chandizing of by-products as an industry that has less formal
restrictions upon it.
Mr. DOUGLAS. So that if the fertilizer to be manufactured at
Muscle Shoals were to be cheaper, it would be very largely because
of the profit made on by-products?
Doctor CoTTRELL. Yes ; that might be.
Mr. DOUGLAS. And, Doctor, do not you think if Muscle Shoals
Were leased to some corporation and in the lease that corporation
308 MUSCLE SHOALS

were limited to a return of 8 per cent of a certain valuation ; that is,

from the sale of fertilizer, that limitation would prove to be of some
advantage to agriculture ?
Doctor COTTRELL. It might. It would be very hard for me to
estimate that offhand.
Mr. DOUGLAS. I mean the mere existence of a check of that sort,
a rigid limitation, might prove to be of some advantage to agri
culture ?
Doctor COTTRELL. Yes.
Mr. DOUGLAS. In that, first of all, it imposes a limitation ?
Doctor COTTRELL. Yes.
Mr. DOUGLAS. Secondly, it would give some basis for comparing
the costs there with the costs elsewhere ?
Doctor COTTRELL. Yes ; it might.
Mr. DOUGLAS. So there might be some advantage oil that score?
Doctor COTTRELL. Yes; it might help.
Mr. DOUGLAS. Then, if the natural resources in the vicinity of
Muscle Shoals are what a good many people seem to think they are,
in grade, size, and so forth, it is quite possible, is it not, that Muscle
Shoals might be leased not only for the purpose of producing fixed
nitrogen, but also for the purpose of utilizing the electrical energy
produced at Muscle Shoals in the reduction of some of those de
posits, or the general development of an electrochemical business
down there ?
Doctor COTTRELL. Yes. That is what I had more or less in mind
in saying the expedient thing was to utilize that plant to the best
advantage, considering the region and the country as a whole. The
most efficiency in the normal development of industry is determined
by the Economic conditions.
Mr. DOUGLAS. And the maximum utilization of that plant prob
ably would be, would it not, in the use of the electrical energy, first,
for the production of fixed nitrogen or fertilizer bases of some sort
and, secondly, for the production of electrochemicals of various
kinds?
Doctor CoTTRELL. I am rather inclined to think electrical energy
will have very little to do with fertilizer.
Mr. DOUGLAS. With fertilizer?
Doctor COTTRELL. Established fertilizer methods, both notrogen
and phosphorus and even potash are getting further and further
away from the use of electrical power as a dominant factor, and it
depends more on coal, chemicals, and raw materials of other kinds;
so that the electrical power would probably be considered as rela-
tivt'ly mobile, as concerned with the fertilizer features.
Mr. Dour.LAS. But it might be a very important factor in the estab
lishment of some elect rochemical industry down there, might it noti
Doctor COTTRELL. Yes; exactly. That is why we should not tie
too tightly to the idea of fertilizer if we look at it as getting a most
economical set-up.
Mr. DOUGLAS. In other words, should Congress decide the power
to lease Muscle Shoals should be delegated to some individual, or
some group of individuals, in that delegation of power the person
to whom the power is to be delegated, or the group of individuals,
should not be 190 tied down by many details.
Doctor CoTTRELL. No.
 MUSCLE SHOALS 309

Mr. DOUGLAS. And, secondly, a power given to him to lease should

contain the general provision that ne must consider at least the estab
lishment of an electrochemical industry.
Doctor CoTTRELL. Yes.
Mr. DOUGLAS. In other words, make the field as broad as possible,
if he is to lease the plant?
Doctor CoTTRELL. Yes.
Mr. DOUGLAS. So that it is to be used for the maximum advantage ?
Doctor CoTTRELL. Yes.
Mr. DOUGLAS. That is all.
Mr. HILL. Doctor, before the World War, Germany and most of
the other European countries were almost entirely dependent upon
Chile for their nitrogen, were they not ?
Doctor COTTRELL. Yes; very largely so.
Mr. HILL. To-day Germany is absolutely independent?
Doctor CoTTRELL. Yes.
Mr. HILL. In other words, fixing a sufficient amount of nitrogen
not only to meet her home demand and home consumption, but she
is even exporting it?
Doctor CoTTRELL. Certainly.
Mr. HILL. Is that correct?
Doctor CoTTRELL. Yes, sir.
Mr. HILL. At the same time we are importing over 1,000,000 long
tons of nitrates from Chile and paving an export tax of $12.53 per
ton?
Doctor COTTRELL. Yes. sir.
Mr. HILL. That is all!
Mr. EANSLEY. The hearing is completed. Thank you very much,
Doctor.
Doctor COTTRELL. Thank you. Mr. Chairman.
(The committee thereupon adjourned subject to the call of the
chairman.)
 APPENDIX

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Tuesday, February 28, 1928.
The committee met at 11.15 o'clock a. m., Hon. W. Frank James (acting
chairman) presiding.
STATEMENTS OF COL. THOMAS M. RORINS, MAJ. L. H. WATKINS, MAJ. R. T.
COINEB, AND CAPT. H. P. ORAM, OF THE CORPS OF ENGINEERS, UNITED STATES
ARMY
The following letter was read aloud by the clerk of the committee:
WAR DEPARTMENT,
OFFICE OF THE CHIEF OF ENGINEERS,
Washington, February 20, 1928.
The CHAIRMAN COMMITTEE ON MILITARY AFFAIRS,
House of Representatives, Washington, D. C.
DEAR SIR: 1. In compliance with your request by telephone, I beg to submit
the following information with reference to the electrical installation at Wilson
Dam in connection with your consideration of H. R. 8305, Seventieth Congress,
first session.
2. The provisions in lines 9 and 10 of page 3 for generating equipment suffi
cient to generate 240,000 horsepower, and that in lines 13 and 14 for an electrical
tie connection with capacity not less than 120,000 horsepower between Dam
No. 2 and the steam plant, are met adequately by the present installation. The
rated capacity of the present generating equipment at Dam No. 2 is 260,000
horsepower.
3. The requirements of the resolution that the United States build and turn
over to the lessees Dam No. 3 and Cove Creek Dam will involve entirely new
construction, no work having been done on either of these projects. In this con
nection it should be stated that the latest estimates by this department indicate
that the cost of constructing these dams will exceed appreciably the amounts
stated in the resolution as the limiting amounts upon which charges will be based.
This is on the assumption that these dams when built will be so constructed as
to fit in with the ultimate development of the Tennessee River system for its
maximum utility. Construction on any lesser scale would be uneconomical in
the long run.
Very truly yours,
HERRERT DEAKYNE,
Brigadier General, Acting Chief of Engineers.
NOTE.—Information by telephone: Now making survey with a view to deter
mining what is best ultimate development of whole Tennessee River Basin,
navigation, power, and flood control.
Mr. JAMES. All right, Colonel Robins; please proceed.
Colonel RORIVS. Mr. Chairman, General Jadwin, the Chief of Engineers,
directed me to state to the committee that he regrets to be unable to be here
because he has been called before the Commerce Committee of the Senate in
connection with flood control, and he directed me to appear here in his place and
to bring with me Major Coiner, who is in charge of Muscle Shoals affairs in the
office of the Chief of Engineers, and Major Watkins, who is in charge of the
Tennessee River survey, and Captain Orani, who is the district officer at Florence,
Ala., in charge of the Wilson Dam.
i We will undertake to answer any questions that the committee would like to
put to us.
k Mr. JAMES. Have you not any statement to make as to why this is all neces
sary, in regard to that letter?
311
312 MUSCLE SHOALS

Colonel RORINS. Do you wish me to base my testimony on the letter?

Mr. JAMES. I think you ought to start in on the letter. Begin on the facts
stated in the letter.
Mr. WRIGHT. I suggest that we want to know the facts.
Mr. FURLOW. I suggest that the chairman explain to the committee exactly
why these gentlemen are here, and then let these officers give us the information
we want.
Mr. McSwAiN. With your permission, I will say to Colonel Robins that this
committee has been acting on the assumption that it would cost not less than
$32,590,000 to build Dam No. 3 at Muscle Shoals, and not more than $20,000,000
to build the dam at Cove Creek. This letter that has just been read is the first
intimation we have had that the original estimates of the Engineer Corps of the
Arny are in error, either too low or too high. We wish to know what is your
present estimate and how you arrive at it, first as to the cost to build Dam No.
3, and next, Cove Creek.
Colonel RORINS. Very well, sir. Last year the committee passed a resolution
calling for further investigation of the Cove Creek site, and in response to that the
Secretary of War, upon recommendation of the Chief of Engineers and with the
approval of the President, made an allotment for the work from river and harbor
funds, and a special investigation of the Cove Creek proposition was carried out
during the past year in connection with the survey of the Tennessee River.
A partial report covering the further developments of the survey was submitted
to Congress on February 24, and is now being printed as House Document No.
185.
Mr. QUIN. That is the 24th of this month, February?
Colonel RORINS. Yes, sir. The new estimates of cost that are stated in that
letter are based upon the result of the further developments of the survey as set
forth in this report.
Major Watkins, the officer in charge of the survey, has the figures here, and I
suggest that he take the chair at this point.
Mr. JAMES. Very well. Please give your name and rank.
STATEMENT OF MAJ. L. H. WATKINS
Major WATKINS. The new estimated cost of Dam No. 3 provides for raising its
height in order to fit in better with the other projects on the Tennessee River
above; that is, with the development of that river as a whole. That will increase
its cost from $32,500,000 to approximately $38,000,000. It will increase the horse
power which you can develop at the projects approximately 34 per cent, so that
it will be more economical from a power-development point of view to have this
increased height and increased cost.
Mr. HUGHES. How much does that raise the dam?
Major WATKINS. It raises the dam approximately 5 feet, plus a certain amount
of surcharge which increases the effective height from approximately 38 feet to
approximately 51 feet.
Mr. SPEAKS. And expressed in horsepower, what would be the increase?
Major WATKINS. The increased horsepower which we get there would be
approximately 179,000 kilowatts. It gives approximately 240,000 horsepower
at 100 per cent load factor.
Mr. FURLOW. So that we may have it in the record, of course you gentlemen
are conversant with the Madden bill that the committee has been considering
for the leasing of the Muscle Shoals property?
Major WATKINS. Yes.
Mr. FURLOW. What is the expenditure that will be necessarv by the Govern
ment for us to enter into that lease—the total sum—according to your first
estimate, the one we have been working on up to the present time? What does
that figure?
Major WATKINS. The figure that you have been working on up to the present
time was $32,500,000, if I am not mistaken.
Mr. FURLOW. Yes. What is the complete figure we should work upon accord
ing to the last estimates?
Major WATKINS. According to the last estimates, on a somewhat different
basis from that on which the other was made, if the Government builds the dam,
we should figure on $38,000,000.
Mr. HOFFMAN. Is that all chargeable to the hydroelectric development?
Major WATKINS. To the hydroelectric development plus the navigation
development.
 MUSCLE SHOALS 313

Mr. HOFFMAN. As I understand it, under the terms of the lease, the American
Cyanamid Co. would be pledged to bear the intere8t on the cost up to only $26,-
500,000; that is the original estimate of 832,500,000, less $6,000,000; but the
amortization payments must be made up to $32,500,000; and now that cost to
the Government would be increased to $38,000,000?
Major WATKINS. $38,000,000.
Mr. HOFFMAN. Chargeable properly to the leasing proposition?
Major WATKINS. According to the original estimate—I am not familiar with
the details of the bill. I simply made the estimate on the dam.
Mr. FURLOW. Perhaps you can now give us the specific items that will take
this extra money that you will have to expend.
Major WATKINS. It 'is due to the height of the dam.
Mr. FURLOW. To the height of the dam?
Major WATKINS. It increases the cost of the dam and also the figures for the
power-house installation which goes with the dam.
Mr. HOFFMAN. There is one provision in this lease at Dam No. 3, that it shall
include all installation sufficient to generate there 250,000 horsepower. That is
what the Government under the lease is pledging to give these people.
Major WATKINS. It seems that for the eventual economical development at
this point there would be required an installed capacity of approximately 284,-
000 kilowatts. That is based upon a great deal of regulation by storage.
My study for the survey has gone into and determined the effect which
you can get by storage regulation on projects on the Tennessee River, taking into
consideration the first Cove Creek reservoir, and then storage projects on the
Clinch, and storage projects for the whole system. The installation of 284,000
kilowatts for Dam No. 3 is for the eventual development of the system.
The economical installation required at Dam No. 3 would be less until reser
voirs for the system are installed. For example, with the Cove Creek and the
Clinch and river system, the installation is approximately 205,000 kilowatts. In
other words, it is appreciably less. I have been interested in the development of
the river as a whole, and I have not figured out the commercial development at
Dam No. 3 without Cove Creek and the other projects; but Dam No. 3 should be
laid out for an ultimate installation of about 284,000 kilowatts.
Mr. HOFFMAN. I think the thing we are trying to get at is whether or not the
increased cost is properly chargeable to the leasing corporation.
Major WATKINS. Exactly so, for the simple reasont hat you get increased power.
You increase this power about 34 per cent.
Mr. HOFFMAN. If you will recall, when Mr. BeU was here, he said that they did
not need that. He spoke of the amounts that Senator Norris had cited to show
that the entire development would produce, I think, 1,250,000 horsepower, and
he claimed that while that may be the ultimate capacity as called for by the
generating equipment, they could not actually use anywhere near that amount;
that it would not be available.
Mr. FURLOW. What inspired this second study?
Major WATKINS. Under the provision of acts of Congress we are making a
survey of the whole of the Tennessee River and its tributaries to determine the
projects which should be laid out and developed to fit in with the system as a
whole. 1 have made a careful study of projects for the whole of the Tennessee,
and as it affects Dam No. 3, the most economical height for the dam if you are
going to develop power there seems to be this new height.
With the old project, the power house costs more for the amount of power,
developed than it does with the new project. The new project seems to give the
most economical results. It is the better investment. It is an improvement over
the old power project.
Mr. FURLOW. The original plan, then, did not contemplate the development of
the entire Tennessee River as you are now planning its development?
Major WATKINS. The original figures were based on the old plan.
Mr. FURLOW. Tentative figures?
Major WATKINS. Yes; and the new plans are based on further studies which
indicate that the new plan is an improvement over the old plan, and it fits in
with the whole development of the river. When they laid out the old plan they
had not made the studies for the development of the river as a whole.
Mr. FURLOW. We have this bill now before us for the purpose of keeping this
stand-by proposition, as you know, for the manufacture of nitrates in time of
war and of fertilizer in time of peace. I am just wondering now. We are drifting
into the question of the development of the power industry for the Tennessee
River. Do you think that is essential for the development of this project to
carry out its original purpose?
314 MUSCLE SHOALS

Major WATKINS. If you are going to develop Dam No. 3, I think it should be
done along the lines that fit in with the development of the river as a whole and
along the line that will be most economical. I stated that I was surveying the
Tennessee River, in order to explain the reason for the new estimates. That is
the idea. It will fit in better with the development of the river—it seems from
the data I have—to raise the height of the dam about 5 feet, and allowing for a
surcharge, it will give an effective height of 51 feet instead of 38 feet.
The Tennessee River, the river is in a narrow channel. In high floods it rises
rapidly and spreads over the flood plain so that the tail water at power projects
rises up quite rapidly in high floods.
The power house, for the amount of power developed, and other installations,
costs a great deal more for the lower height than for the greater height. If you
can raise projects to a greater height you can in general develop power more
economically than with the lower height.
Mr. FDRLOW. The point I am trying to get is whether with that lease the Gov-
erment is justified in making this expenditure. When we have a piece of property
that with a little over $30,000,000 will serve our purpose, is the Government justi
fied in making this further expenditure simply for the development of the upper
Tennessee River? That is the point I am trying to get at.
Major WATKINS. The higher head is a better investment than the other.
There must be a return on the investment for the money spent; and you get better
returns for your money in the new project.
Mr. FURLOW. If we do not need this additional expenditure there in order to
protect these improvements, in leasing the Muscle Shoals property, who benefits
by this additional expenditure?
Major WATKINS. Whoever builds the project.
Mr. FTJRLOW. Whoever builds the other project for the Tennessee River; is
that it?
Major WATKINS. What is that?
Mr. FURLOW. Whoever enters into the power business along the Tennessee
River above Muscle Shoals?
Major WATKINS. The benefits of the new plan are that it fits in with other
projects and it is a more economical project, according to my studies, than the old
plan. In other words, for a certain amount of money which you invest in the
new project you get a greater return.
Mr. FURLOW. But the benefit goes to the upper Tennessee, does it not?
Major WATKINS. No; it goes to the man who builds this dam.
Mr. FTJRLOW. This dam?
Major WATKINS. To the man that is building this dam. It goes to him, this
increase in power.
Mr. McSwAiN. This previous study of the Tennessee River was made under
Major Fiske, was it not?
Major WATKINS. The original one was made by Major (now Colonel) Burgess.
Mr. McSwAiN. And you say that was somewhat superficial, at least?
Major WATKINS. The studies had not been made for the development of the
river as a whole. You see, to within the last year I have made a study for the
development of the river as a whole, and the original plans did not have the bene
fit of the data which I have had in working up the new plans.
Mr. McSwAiN. Now, what we want to know is this: Is your study so thorough
and your calculation so accurate and your computation of all forces and factors
that go into the whole problem so complete that you are reasonably sure that
some other engineer will not come along next year and revise your plan and tell
us that we have built it too high, or that we have not built it high enough? Can
we be sure next year some one will not come and tell us we ought to build it 48
feet instead of 38 feet, or that we ought not to build it so high? We want to know
that the engineers are right about this thing. We thought we were right before.
It is just a question of how thorough you have been. We are not critical. You
know, this is a big pile of money. It is not figures with us; it is money.
Major WATKINS. Of course, final, actual, detailed construction plans for the
construction of the project may be revised in one way or another, but the general
plan and cost required for the actual construction of the dam has been determined.
Mr. HUGHES. I would like to ask this question: In the first place, was not the
estimate made simply as a power proposition, and not having in view the improve
ment of the river, as much as your last estimate?
Major WATKINS. It was made before we had made a complete study for the
development of the river and before we had the information which I now have
upon the development of the river as a whole.
 MUSCLE SHOALS 315

Mr. HUGHES. And your estimate now operates for the improvement of the
river as well as for the power proposition?
Major WATKINS. It operates for the improvement of the river as a whole.
Mr. HUGHES. Yes.
Major WATKINS. Yes; and it is an improvement—that is, the raising of tnis
dam is an improvement. It is more economical.
Mr. QUIN. As I understand it, tnis increase in the height of the dam adds 34
per cent, which is a big increase in the power, and in addition to that it fixes
navigation better on the entire project. It pays in dollars and cents, if a business
should go there that would want to use all of that power?
Major WATKINS. Yes; as a business proposition it pays appreciably, raising
it higher.
Of course, the question as to the installation which you put in there would
depend upon the purposes for which you are using the power; its load factor,
storage, and other things of that nature.
If developed for a 50-per cent load factor, with a reasonable amount of storage
regulation, wlu'ch I think it will certainly have, due to the great benefit which
storage gives for the development of power, I think that eventually you will want
there about 284,000 kilowatts. Of course, you may not install all these units now,
if you do not need the power. That may make a reduction in the cost actually
required at the present time. '
Mr. JAMES. Under the $32,500,000, $6,000,000 was to be charged off to naviga
tion, was it not?
Major COINER. Our estimate for the pure navigation was $4,600,000. It has
been written in as $6,000,000.
Mr. JAMES. How much additional is there for navigation under this?
Mr. McSwAiN. What part of the $38,000,000 would be charged to the naviga
tion?
Major WATKINS. I do not know the basis.
Major COINER. That would have to be recomputed. I should estimate that
$5,000,000 might be approximately correct on the larger dam with the increased
height, but that would require a little study. It is somewhat complicated.
Mr. JAMES. Will you figure that up and send it to us?
Major WATKINS. Yes.
Mr. JAMES. And how about flood control; is anything to be charged off for
flood control?
Major COINER. You have a surcharge figured for flood control?
Major WATKINS. Yes, I have a surcharge here for the control of the flood at
the dam.
Mr. JAMES. How much would you credit to flood control?
Major WATKINS. Oh, to flood control?
Mr. JAMES. Yes.
Major WATKINS. I have worked out the extent to which reservoirs and other
projects will control floods on the river. This is a run-of-river project, and it will
have a surcharge which will help to control the flood at and below this reservoir,
and it will help somewhat in developing the power at this project and those below;
but the benefits from that have not been definitely worked out. My office is
running operations now to determine the eflect of this. It will not be so very great;
that is, the actual return you get from it. It will improve it somewhat.
Mr. McSwAiN. How many miles further up the river will this increased height
of the dam make the river navigable?
Major WATKINS. Practically no farther. It was raised in order to fit in with
the next project above. Having picked out the site above, it was found that you
had to raise this dam to fit in with the next one above. I will put it this way, that
you could raise it higher without interfering with the project above, and by raising
it higher, you would increase its economic feasibility. In other words, you get
a better development than under the old system.
Mr. McSwAiN. Would not this make deep water farther up the river?
Major WATKINS. Very little, because at the head of the pool there is a shoal or
rapids and the dam for the next project above is located on these rapids, so that
the length of the pool is practically the same. Perhaps it will be just about a mile
or so longer.
Mr. McSwAiN. That being so, it does not strike me as forming a basis for
increased charge to navigation. If it does not help navigation any, why charge
navigation with more of it?
Mr. HOFFMAN. That is the thing I was trying to get at. It seems to me that
this bill that we are considering is peculiar in that it represents the proposal of a
private corporation, really, to the Government, and in that there are established
316 MUSCLE SHOALS

certain limiting amounts for these improvements that are to be made for the
Government. They have agreed, for instance, to pay 4 per cent interest on the
construction cost up to $26,500,000 on Dam No. 3, and up to $20,000,000 on Cove
Creek. Now, if we can increase the efficiency of these projects, that will benefit
this corporation; but, unless thay will agree to bear that increased cost, if it is
just for the purpose of increasing the hydroelectric development, then it seems to
me to be poor business for the Government to spend any more money, because it
is dependent upon whether this corporation is going to agree to increase its limiting
amount upon which they will bear this additional expense and amortization.
Mr. GARRETT. They do not propose to amortize these amounts above.
Mr. HOFFMAN. No; they have told us just what they will do. Up to a certain
amount they will bear the expense of interest charge upon the investment.
If the Air Nitrates Corporation is to be the only beneficiary under this, then
why should the Government spend $6,000,000 more on this one project to give
the benefit to this company that has not agreed to bear any increased cost under
the terms of this bill?
Mr. FURLOW. The present set-up we are considering there now on the original—
what you call now the tentative—program is adequate to take care of all the
obligations of the Government if we entered into this lease; is not that true?
Major WATKINS. It will not fit in with the development on the river, and it
will not turn out power as economically as the new project.
K Mr. FURLOW. I realize that. You said before that you were conversant with
this bill.
Major WATKINS. What is that?
Mr. FURLOW. You said before that you were conversant with this Madden
bill, so I am asking you now if the present set-up contemplated by your tentative
proposal or plan for development is or is not sufficient and does not give the Gov
ernment all it needs without additional expenditure on the part of the Govern
ment? Granting the ideal development is the one you have proposed now, is the
development which you have considered as calling for an expenditure of some
$32,000,000, adequate to guarantee the Government performance of all its part
of this lease, if we entered into it?
Major WATKINS. That depends upon the basis on which the Engineer
Department considers it for navigation.
Mr. FURLOW. Is there some other representative of the Engineer Department
here that can give us that assurance? We are going into a contract now where
we will have to pay out $8,000,000 more.
STATEMENT OF MAJ. R. T. COINER
Major COINER. If I may preface my remarks with a little explanatory state
ment about these former estimates and the way in which they were arrived at,
and what is presumably the reason that led to their being incorporated into the
bill, it might clarify the situation somewhat.
The original project at Muscle Shoals was figured out away back before the
war about 1916. At that time Major Burgess submitted to the Congress a
report on the improvement at Muscle Shoals by Dams Nos. 1, 2, and 3; but on
account of the advantages that that particular site offered for power, the report
departed from the usual course of reporting simply the navigation structures and
stated that while navigation structures of this general nature could be built, it
would be a very disirable thing to combine navigation with power, because you
would get BO much more for the investment, and you had to build the dam,
anyway.
Then when the war broke out, and it was decided to build the Wilson Dam, they
followed practically the plan laid down by Major Burgess for Dam No. 2; and
Dam No. 1 below Dam No. 2 was also built. That is a navigation dam pure
and simple. Dam No. 3, the next of the three that was contemplated by the
Burgess plan, of course was originally estimated on the basis of pre-war prices
and it was very much less than the price would be under existing conditions.
On the experience gained in the construction of the Wilson Dam (Dam No. 2),
a reestimate was made of Dam No. 3 and that is where the $32,500,000 came from.
Mr. HILL. What was the date of that estimate?
Major COINER. It was about 1924 or 1925, I should say, that the figure of
$32,500,000 was gotten out.
Mr. HILL. Who made that estmate?
Major COINER. That, I think, was made by Major Tyler, who was in charge
of construction of the Wilson Dam at that time, and he said that on the basis of
 MUSCLE SHOALS 317

-our experience at Dam No. 2, and due to the increased prices, he figured that
Dam No. 3, constructed approximately along the lines suggested originally by
Major Burgess, would cost about $32,500,000.
That, however, contemplated an installation of only 180,000 horsepower—elec
trical installation.
The company's proposition as submitted to the Congress and embodied in this
bill provides for an increase of over 33H per cent in the installed capacity, but
does not provide for an increase in the cost of installing that capacity. That is,
they take the $32,500,000 estimate, and they set the installed horsepower up one-
third, as you will note. The bill calls for 250,000 instead of 180,000 horsepower
upon which the estimate was based. That makes an appreciable difference in
the cost, to start with. All of these estimates thus far have been based on the
study for the development of Muscle Shoals primarily for navigation, made 12
years ago. Since that time the Congress has directed a survey of the entire Ten
nessee River Basin, to determine what should be the ultimate development of the
entire system, with a view to getting the most you possibly could out of it for
navigation, for power, for flood control, and every correlated subject. That is
the survey that Major Watkins has been making.
As the result of that survey that he has been carrying on, and considering the
river as a whole, not considering just getting over this one shoal with navigation,
but considering what should be the development of the river for all purposes, it
now develops that Major Burgess's estimate of the kind and size of dam that
should be put in at Dam No. 3 does not fit in quite as well as a little more elabo
rate structure, giving us a little greater height at that place, and consequently a
little greater power. The matter has now progressed beyond the original stage,
and we have a bird's-eye view of the Tennessee River system as it should be
developed eventually.
There is no idea that this development will all go through immediately, but any
construction that is carried on henceforth should fit in closely with what is the ideal
ultimate development of that river.
Turning now to Cove Creek briefly, the estimate at Cove Creek originally
given us was appreciably more sketchy than that $32,500,000 that Major Tyler
worked out for the cost of Dam No. 3.
Mr. HILL. It was appreciably what?
Major COINER. More sketchy; more uncertain; more tentative; and that
for this reason. When the Cove Creek Dam was first suggested as being desirable
to fit in with this scheme below, the Tennessee River survey had not progressed
very far as yet—this general survey of the entire Tennessee River system—and
some figures were called for in a hurry.
Mr. JAMES. What year was that?
Major COINER. That was about 1925. All that was known at that time was
that there was a good site for a dam up in the vicinity of Cove Creek.
They went up and looked it over, and made such surface examinations as
they could, and said that a dam probably should be about so high there, should
be built along approximately such lines, and that such a dam would cost about
$25,000,000 on the basis of existing prices, and that is where the $25,000,000 came
from.
Since that time we have had a chance——.
Mr. JAMES. How high was that dam to be?
Major COINER. It is my recollection that dam was figured to be 220 feet high.
There have been a number of different estimates, and I am not absolutely certain
in my mind as to which one that was, but I think that was the one.
Since that time we have had a chance to make detailed geological examinations,
to take core borings, to sec exactly what there is under the foundation, and Major
Watkins's present figures are very, very close to what the figures should be. I
doubt if any engineering estimate could be made closer than the figure that is
now before the committee.
Mr. QCIN. What is his figure now for Cove Creek?
Major COINER. $37,500,000.
Mr. HOFFMAN. That is for Cove Creek?
Major COINER. Yes.
Mr. HOFFMAN. That is $17,000,000 above the limitation of cost in this bill.
Major COINER. This includes, of course, the entire cost. That limitation
put in the bill contemplated an expenditure of $26,000,000, of which $5,000,000
will be written off for navigation.
Mr. HOFFMAN. Of the $17,000,000, how much probably can be written off
^or navigation—how much of that increase written in?
101229—30 21
318 MUSCLE SHOALS

Major COINER. On that, again, we would have to do some more computing.

Mr. QDIN. This estimate is $38,000,000 and the other is practically $38,000,000?
Major COINER. Essentially $38,000,000. It is very close. :
Mr. FISHER. Is that dam as it is to be constructed a benefit for flood control at
Chattanooga?
Major COINER. Yes.
Mr. FISHER. Was not that taken into consideration when the height was
raised?
Major COINER. It will have an effect on flood control in the valley below there.
The effect will not be extremely great, but it will be enough to be noticeable.
Mr. FISHER. It is believed, is it not, that if it is built to 225 feet, it will prevent
any flood as great as any which has heretofore visited Chattanooga, in the lower
parts of the city?
Major COINER. On that Major Watkins can tell you better than I can. His
studies along those lines have not been entirely completed, I believe.
Mr. QDIN. There is one thing that ought to be brought out. How much
higher will the Cove Creek Dam be?
Major WATKINS. Two hundred and twenty feet is what was used in Major's
Fiske's estimate, and that is what is used in the present estimate.
Mr. HILL. In other woids, you have not changed the height at all?
Major WATKINS. No, sir. In connection with the flood control in my survey
I am required to determine that, too. I have made a thorough study of the
effect you can get in controlling the floods from reservoirs. I have gone into it
thoroughly and have worked out the actual amount of water held out during
flood period, and have run operations to determine the reduction of the flood
height at points on the river below. The effect which Cove Creek would have
had upon the reduction of flood heights during the 1926 flood at Rockwood is
about 6.6 feet; at Chattanooga it is 5.7 feet; at Florence, 1.8 feet; and at John-
sonville 1.6 feet.
Mr. FTJRLOW. Have these districts you mention been imperiled by floods in
the past?
Major WATKINS. Yes. The Tennessee Valley, beginning up near its upper
end, has a flood plain forming on each side of the river, and that opens out as
you go downstream until it is about a mile wide at the lower end. The height
of river bank is about 35 feet, while the flood rises to 50 feet.
Mr. GAKRETT. I want to inquire how much increase in primary power there
will be at Cove Creek under these later estimates you have made?
Major WATKINS. The increase in primary power at Cove Creek?
Mr. GARRETT. Yes.
Major Watkins. About 80,000 horsepower, but Cove Creek is a storage pro
ject. The storage is used to regulate the power of other projects, more than for
the development of power at the site. That is its purpose. Although it has
enough storage for almost complete annual regulation, its purpose is that of regu
lation of projects below.
Mr. GARRETT. How much would that increase the projects below at 2 and 3?
Major WATKINS. At 2 and 3?
Mr. GARRETT. Yes?
Major WATKINS. I would like to state, in that connection, that the regulation
provided by Cove Creek includes not only the regulation of stream flow, but
power. The exact amount of regulation you would get at Dams Nos. 2 and 3
depends upon the policy adopted for the distribution of the excess power it will
increase.
Mr. McSwAiN. What would be the maximum increase?
Major WATKINS. I will have to figure that.
Mr. McSwAiN. Mr. Chairman, I move that we let the committee go into open
session while these gentlemen figure this out. Then we can go back into execu
tive sesssion afterwards. We have the right to sit during the session of the
House.
(The motion was seconded, and the question being taken, the motion was
agreed to, and the doors of the committee room were thrown open, whereupon a
handsome tray of silver was presented on behalf of the members of the committee
to Representative Hill of Alabama. At the conclusion of the foregoing ceremony,
the committee again went into executive session.)
Mr. McSwAiN. Now, Major Coiner, to resume the investigation, what will be
the increase in primary power at Dam No. 3, by raising the height of that dam 5
feet as proposed by the present survey?
Major COINER. It will give an increase of approximately 34 per cent.
 MUSCLE SHOALS 319

Mr. McSwAiN. Thirty-four per cent. Reducing it to absolute figures in terms

of horsepower, it will increase it from how many primary horsepower to how many.
Major COINER. The primary horsepower under existing conditions for 98 per
cent of the time—I mean under the first estimate with the former 38 feet of avail
able head—would have been about 34,000 horsepower.
Mr. McSwAiN. You increase it now to 45,000.
Major COINER. Increase it practically one-third. Just a moment please.
My former statement of run-of-river horsepower at Dam No. 3, I think, was a
little high.
What Mr. McSwain is trying to get is, what is the primary run-of-river power,
without any auxiliary or anything else. That is hydroelectric run-of-river power
that you get from the river any day in the year. It is about 27,000 net horse
power instead of 34,000 horsepower.
Mr. JAMES. We have always understood it was 35,000.
Major COINER. The 98 per cent of the time power which is what we generally
talk about is 34.000. The absolute, net 100 per cent of the time horsepower is a
little less, but we frequently talk of 98 per cent of the time horsepower, because
you can usually pick up that little by manipulation.
Mr. CHAPMAN. Is that 34,000 what you ordinarily refer to as primary horse
power?
Major COINER. Practically. The 34.000 horsepower for this project is the
amount to which you can by manipulating your pondage a little bit catch the
high points of your demand. It depends a little bit on what kind of pondage it
is, as to whether you have to have an absolute 100 per cent run-of-the-river or
whether you can figure 98 per cent.
Mr. CHAPMAN. Under this proposed change in the dam, how much increase
would there be over that 34,000; would it be 45,000, or something like that—
44,000?
Major COINER. Yes; around 44,000.
Mr. FURLOW. What is Dam No. 2, 100 per cent?
Major COINER. Dam No. 2 at 100 per cent, without allowing any pondage or
anvthing else, was 62.000 kilowatts.
Mr. FURLOW. And how much at 98 per cent?
Major COINER. We have figured the primary of Dam No. 2 as 70,000 kilowatts.
Mr. JAMES. The figure we have had heretofore was 78,000.
Mr. McSwAiN. Right in that connection, here is Captain Oram, whom I saw
there last year at the switchboard. He was in charge there. Suppose we let him
put right in there what they have actually been taking off of the switchboard and
selling to the Alabama Power Co., there.
Captain ORAM. It is between 115,000 and 120,000 kilowatts; that is all we can
take away from the dam at one time with the transmission line.
Mr. McSwAiN. Suppose you had all the transmission lines in you need, and all
the customers you need, how much have you been getting in charge through
generators? How much could you get?
Captain ORAM. It depends on the run-of-river.
Mr. McSwAiN. How much has it been running?
Captain ORAM. The minimum flow of the river will be such as to give vou
about 67.000 kilowatts.
Mr. McSwAiN. That is 80,000 or 90,000 horsepower, is it not?
Captain ORAM. It would be one-third more.
Mr. McSwAiN. Sixty-seven thousand plus 22 would be 89,000 horsepower.
Captain ORAM. About 90,000 horsepower.
Mr. McSwAiN. Ninety thousand horsepower, minimum?
Captain ORAM. Yes.
Mr. McSwAiN. About 98 per cent of the time?
Captain ORAM. That is figured on the 98 per cent of the time basis.
Mr. JAMES. With this new height at Cove Creek, how much primary horse
power will you have, 98 per cent af the time, at Dam No. 2?
Major COINER. On river regulation alone—that is, just increased flow of water
from the low stages—the increase would be almost exactly 50 per cent.
Mr. JAMES. You would get one-half more?
Major COINER. Yes.
Mr. JAMES. We have alwavs been told that it would double the horsepower at
Dam No. 3.
Major COINER. I have noticed in several statements, that statement made; but
the figures do not work out that way. I have been at a loss to know where those
320 MUSCLE SHOALS

figures came from. I have noticed several times in statements on the floor of the
House and also on the floor of the Senate where some gentleman has stated that
it would double the primary horsepower; but I can not find it in the flow of the
river.
Mr. McSwAiN. Somebody said that who was supposed to know, and we have
been talking here with Mr. Bell who is a careful man and is proposing to put up
millions of dollars, and he has said that it would double the power to build Cove
Creek.
Major COINER. There is this in the regulation by Cove Creek that should be
brought to the attention of the committee, and that is the possibilities of a power
regulation from Cove Creek. With the development of power at Cove Creek
during what is the normal low flow of the river, by letting out an increased
amount of water from Cove Creek storage, developing power at Cove Creek, and
a little below Cove Creek Dam from this excess water, you would get power
which, by interchange, could be used to fill in the low available power from the
lower dams. You would get what we call a power regulation. So that this
power which is available from the Cove Creek storage and from the Cove Creek
power house during the time of normal low flow in the river, would fit in exactly
to fill in the low place in your power curve from No. 2 and No. 3. With what
you get from Cove Creek, by putting a tie line between Cove Creek and the lowor
dam, you could use that power to fill out gaps in the Wilson Dam production,
and No. 3 production if No. 3 were built, and that increases your primary power
vastly more than the river regulation increases it.
Mr. JAMES. How much more?
Major COINER. So that it would bring it to 166,000 horsepower, primary.
Mr. McSwAiN. Where?
Mr. HILL. That would be almost double, would it not?
Major COINER. That is with the power interchange as well as increased flow.
Mr. HILL. It would be double?
Major COINER. You really get more of an advantage from regulation by
storage through this interchange of power, than you do by the increased flow or
water. There are two elemcnts from storage regulation; there is the actual in
crease in the water flow at the low time, and the fact also that, you would I*
developing excess power from your power plant at the storage dam and putting
that into the system just at the time that the system needs it most.
f Mr. McSwAiN. But, Major, it has been stated here that Cove Creek is too far
away to transmit the power to the Muscle Shoals area. It is 400 miles by the
line of the river, and it has been stated that power could not be transmitted
economically that far.
Major COINER. You may not be able to transmit it directly to Muscle Shoals,
but you will transmit it to the area that Muscle Shoals is feeding.
Mr. McSwAiN. Suppose that Muscle Shoals is making fertilizer right down on
on the hill?
Major COINER. If you are going to make fertilizer right there, the transmission
line will cost $6,000,000.
Mr. McSwAiN. It will be how long?
Major COINER. Two hundred and fifty miles long.
Mr. McSwXiN. That is, in a straight line?
Major COINER. By the line it would naturally follow, by way of Hales Bar.
Mr. MoSwAiN. Does that $6,000,000 include the right of way?
Major COINER. Yes.
Mr. MC-SWAIN. Copper wire and everything?
Major WATKINS. The necessary wires to carry the interchange I spoke of.
Mr. McSwAiN. What is the loss of power in transmitting it that distance?
Major WATKINS. You would probably lose 15 per cent of that transmitted;
that is, if it was transmitted all the way. I have not figured it out exactly, but
it will be a small amount; because, in the first place, when it is worked out it is
found that low flows are in part filled in by stream which helps to fill in gaps and
reduces the amount which must be transmitted long distances; and the whole
loss in the transmission is not great.
Mr. FURLOW. Without taking into consideration the interchange, because we
have not been considering that at all up to the present time, what would be the
total horsepower, primary and secondary power, developed under the proposed
plan—that is the old plan—and what would be the primary and secondary power
developed under the new plan? What regulation would there be there?
Major COINER. This is with Cove Creek in?
Mr. FURLOW. Yes.
 MUSCLE SHOALS 321

Major COINER. With Cove Creek in, the Wilson Dam primary would be in
creased from we will say, in round numbers, 70,000 kilowatts, to slightlv over
100,000 kilowatts; about 105,000 kilowatts, probably.
Mr. FURLOW. And that, in terms of horsepower, would be 25 per cent more?
Major COINER. About one-third more.
Mr. JAMES. Now suppose you should take these 11 dams, including Cove
Creek, Clinton, and Melton Hill and Senator Dams, plus Dams Nos. 2 and 3,
how much will you have, primary horsepower?
Major COINER. Of the entire proposed Tennessee and Clinch systems?
Mr. JAMES. That is the 11 dams, and including these I have named.
Major COINER. You mean the 11 dams for which applications have been
made to the Federal Power Commisson?
Mr. JAMES. And that have been approved by the Federal Power Commission.
Take those 11 dams, plus Dams Nos. 2 and 3.
Major COINER. I should have to pick those out, Mr. Chairman.
Mr. JAMES. Call them off, so that we can have them.
Major WATKINS. These 11 dams all along the river, do you mean?
Mr. JAMES. Yes; these that Major Fiske and everybody else from that time
down has approved, that have been approved by the Federal Power Commission
and by the Tennessee Power Development Co., and that have been approved all
the way up the line.
Major WATKINS. I have not got those separate. I have separate data on
each of those projects when used with the Clinch system. With that system, I
can tell you the whole; and I can pick out each of the other projects.
Mr. JAMES. How much does it amount to?
Major COINER (after making calculation). It is about 635,000 horsepower
primary power for the 11 projects, with No. 2 and No 3.
Mr. JAMES. According to a study made by the East Tennessee Development
Co.—and they were basing their statement upon studies made by Maj. H. E.
Fiske of the United States Army—before the Muscle .Shoals inquiry, there would
be 600,000 horsepower developed from the operation of these 1 1 dam projects
desired by the East Tennessee Development Co., and Dams Nos. 2 and 3. I
wish you would put in the record what Mr. Bell was asking for under this bill.
He is asking Dams Nos. 2 and 3 and Cove Creek Dam, plus the Melton Hill,
Senator, and Clinton. I wish you would put in how much horsepower you would
have under this. He is only asking for these out of the 11. According to the
figures you give now and the evidence that I have read to you which was given
out before the joint inquiry, by the president of the company, which is paying
for these dams, all this increase of money on Dams Nos. 2 and 3 is only going to
give them about 13,000 horsepower more; is that true?
Major COINER. On this particular layout?
Mr. JAMES. Yes.
Major COINER. That appears to be correct. However, Mr. Chairman, it
would appear, if I may express an opinion, inadvisable to permit this bidder, or
anyone else, to build permanent structures in the Tennessee River which pre
sumably will be in there for two or three generations when built, unless those
structures fit into the best economic development of the system as a whole. You
need not put in all the power units, but when a dam is built, it ought to be built
of a size that is going to fit the ultimate development, and not ruin the site so
that the ultimate development never can go through and everybody is barred
effectually from getting the economic result on that river.
Mr. JAMES. That is not what I am getting at. In 1926, when I was on the
joint committee, these figures were made by the Corps of Engineers—600,000.
Now it is 635,000 horsepower; and a million dollars spent on Dam No. 2 and
millions of dollars on Dam No. 3, and you are only going to get 35,000 at those
dams.
Major COINER. That is 35,000 horsepower for run-of-river primary; but with
the increase in power brought about by storage, and development of the power
in the entire system, that becomes vastly greater.
Mr. JAMES. How much greater?
Major COINER. For instance, as indicative, we would have to go through
another set of figures to give the figures on this particular thing, but I have before
me a series of different projects; not all these same ones, but it gives comparison
of the run-of^river horsepower on the few projects that I have here. The total
is 270,000 horsepower from run of river. With the stream flow regulation that
becomes 681,000 horsepower. With stream and interchange of power, it becomes
1,058,000 horsepower. You started out with 270,000 run of river. That is
322 MUSCLE SHOALS

practically multiplying it by four; so that you can see the possibilities of a devel
opment which takes into account all the advantage that you can get from these
various interchanges.
Mr. JAMES. How high are you figuring on Cove Creek Dam now?
Major COINER. Two hundred and twenty feet.
Mr. JAMES. That is just what Major Fiske recommended in 1926. There is
no change now from what it was figured when we had the joint commission, when
Major Fiske recommended at that time that it be made 220,000; is that true?
Major COINER. That is correct.
Mr. JAMES. Did you read the speech Senator Norris made in the Senate the
other day?
Major" COINER. I read the speech that he made, I think it was on the 23d.
Mr. JAMES. He was speaking on two days. How do those figures that he gave
compare with what you now have?
Major COINER. My recollection is that Senator Norris in his speech stated that
Cove Creek would, through stream regulation, double the output at Dam No. 2.
^ Mr. JAMES. I mean where he ran it up to about a million and a half. He did
that, did he not?
Mr. HOFFMAN. I do hot have that here, Mr. James, but I think it
Mr. JAMES. Mav I interrupt you a minute?
Mr. HOFFMAN. Yes.
Mr. JAMES. Major Coiner, I wish you would put in the record what Senator
Norris has said on one side, and then on the other side, right opposite, what your
figures are, and state on what you base them, so that we will have that. I wish
you would go through what passed in the Senate on those days when Senator
Norris was speaking, so that we will know whether his figures were 1,500,000 or
2,000,000 as he talks about.
Major COINER. That is, wherever Senator Norris uses figures and makes a
statement, they give what we think those figures should be?
Mr. JAMES. Yes.
Mr. WRIGHT. We want the facts. You want what he says, and then you waut
the facts.
Mr. HOFFMAN. What you want to bring out is here, I think. Mr. Bell, in the
second day of our session here, discussed the statement that Senator Norris made
when he reached 1,250,000 horsepower as the total hydroelectric proposition that
was to be handed to tne leasing corporation. Mr. Bell said that Senator Norris
took the whole capacity ot Muscle Shoals, he took a total installation of 600,000
at Dam No. 2, and to that he added the installed capacity proposed for Dam
No. 3 at 250,000, which gets us up to 850,000, and then he took the total installed
capacity for Cove Creek at 200,000, bringing it up to 1,050,000, and he then took
100,000, the total capacity proposed for three dams at Melton Hill, Clintjn, and
Senator, which ran it up to 1,150,000.
Then Mr. Bell said he threw in another 100,000 for good measure.
Later Mr. Bell said his figures were—
"that we had now worked the thing up to where our estimate of power, including
the steam plant, is 340,000 horsepower. The steam plant will thereby be used
to build up the secondary power, so that really with steam and water you have
340,000 horsepower, and that means all the rest of the secondary power that is
left is six months or less."
What we are trying to get at is the estimate of the engineers in between Mr.
Bell's estimate of only 340,000 and Senator Norris's estimate of 1,350,000 horse
power.
Mr. JAMES. In other words, we want the facts and not figures.
Mr. HOFFMAN. There is such a great variance there. He says we are giving
them a 340,000-horsepower proposition. Senator Norris says we are giving them
a 1,250,000-harsepower proposition. I would like to know, as a new man on the
committee, just what the actual hydroelectric power is.
Major COINER. Those figures of Mr. Bell were for all the Clinch River; that is,
the Cove Creek
Mr. HOFFMAN. He says all of the power that they ultimately could get that
would be utilized for their purposes would be 340,000 horsepower; that all the rest
would be secondary, less than six months a year.
(Thereupon, at 12.45 o'clock p. m., the committee adjourned until to-morrow,
Wednesday, February 29, 1928, at 10 o'clock a. m.)
 MUSCLE SHOALS
COMPARISON or STATEMENTS MADE BY SENATOR NORRIS IN SPEECH IN SENATE
ON FERRUARY 23 AND 24, 1928, WITH DATA COMPILED RY UNITED STATES
ENGINEER DEPARTMENT
STATEMENTS BY SENATOR NORRIS
(P. 3554)
Prime power for Wilson Dam from un
regulated flow:
Horsepower
99.4 per cent of time- . 87, 300
97 per cent of time 100,000
83.3 per cent of time-- 141,000
66.67 per cent of time, 205, 000
50 per cent of time 306,500
20 per cent of time 600, 000
7 per cent of time. .over 1,000, 000
(P. 3555)
Present capacity, N. P. No. 2 steam
plant, 80,000 horsepower.
With additional unit the capacity
would be 120,000 horsepower.
Dam No. 3 will make 65 miles of
river navigable at all seasons of the
year.
Dam No. 3 will produce about 40 per
cent as much power as Dam No. 2.
(P. 3556)
"The dam and steam plant at Muscle
Shoals have never been completed ac
cording to the original plans and speci
fications. In the dam there are some
more power units to be installed The
place for the installation is provided
and all the appliances of housing and
foundation for such additional power
units are complete and ready for the
installation of the machinery. Since
the necessary work for the installation
of the machinery has already been paid
for and since the power is there to oper
ate the additional machinery and is at
present going to waste, the committee
considers it but good business to install
this machinery. The steam plant is in
practically the same condition. The
buildings and foundations have all been
constructed with the idea of putting in
the additional machinery and, for the
same reason, the committee believes
that this additional machinery should
be installed and that it is an economic
loss, both as to the steam plant and the
dam, not to install what has already
been provided for and the main ex
pense connected with it already paid."
323
DATA RY THE UNITED STATES ENGINEER
DEPARTMENT
Prime power for Wilson Dam from un
regulated flow, based on over-all effi
ciency obtained by tests:
Horsepower
99.4 per cent of time,. 91,000
97 per cent of time 107,000
83.3 per cent of time.. 145,000
66.67 per cent of time. 225, 000
50 per cent of time 347,000
20 per cent of time 698, 000
7 per cent of time 1, 210, 000
It should be understood that this
total amount of power could never be
generated economically but the stream
flow is sufficient to produce it theoret
ically.
Present capacity N. P. No. 2 steam
plant, 80,000 horsepower.
With additional unit the capacity
would be 120,000 horsepower.
Dam No. 3 will make 85 miles of
river navigable at all seasons of the
year.
Dam No. 3 will produce about 40
per cent as much power as Dam No. 2
with a head of 38 feet, With a head
of 51 feet as provided by the latest
plans, Dam No. 3 will produce 55 per
cent as much power as Dam No. 2.
The prime power output of Wilson
Dam will not be increased by the in
stallation of additional hydroelectric
units until such time as the stream flow
is regulated by storage reservoirs or un
less the plant is operated in conjunction
with a system having large steam
reserves. The prime power available
from Wilson Dam supplemented by the
steam station at nitrate plant No. 2
increased to 120,000 horsepower would
be approximately 214,000 horsepower,
which is below the capacity of the
present hydroelectric installation. It is
therefore not economical to further in
crease the hydroelectric installation
until storage reserv.oirs are built or until
arrangements are made to utilize the
plant in a system where the additional
hydro output can be transmitted and
sold at a rate which will give a fair
return on the investment required.
The question as to whether it would
be economical to install the additional
unit at the U. P. No. 2 steam plant
can not be definitely determined until
the requirements of the system in
which it is to operate are known as
well as the rate at which the output
can be sold.
324 MUSCLE SHOALS

(P. 3634) The cost of the property covered in

the Cyanamid bid was approximately
The bid of the American Cyanamid $123,500,000.
Co. covers property owned bv the From the latest estimates the cost
Government, which cost $125,104,000. of additional construction under the
Estimated cost of additional con Cyanamid bid would be approximately:
struction by the Government under the Including locks $83, 000, 000
Cyanamid bid, $77,300,000. Exclusive of locks. 77, 225, 000
Approximate cost of power properties
now owned by the Government, ex
Approximate cost of power properties clusive of locks, $54,500,000.
now owned by the Government exclu The installed capacity of the power
sive of locks, $56,000,000. project when completed will be as
The power project when completed follows :
will have an installation of 1,220,000 Horsepower
horsepower. Cove Creek.. 200,000
Dam No. 3 250,000
Dam No. 2 595,000
Total 1,045,000
Steam plant No. 2 120,000
1, 165, 000
(P. 3635) From latest estimates the cost of
additional construction under the
Estimated cost of additional con Cyanamid bid would be approximately
struction under the Cyanamid bid. as follows:
(Estimate made by Mr. Merrill, ex- Additional Units, Dam
secretary Federal Power Commission.) No. 2 $8,000,000
Additions to Dam No. 2.. $8, 285, 000 Dam No. 3 (exclusive of
locks). 35,000,000
Dam No. 3 (exclusive of Transmission lines, No. 2
locks) 34, 650, 000 to No. 3 225,000
Transmission lines, No. 2 Cove Creek Dam (exclu
to No. 3 225,000 sive of locks) 34, 000, 000
Cove Creek Dam (exclu Transmission line, Cove
sive of locks) 38, 140, 000 Creek to Dam No. 2,
Transmission line, Cove not required under bid.
Creek to No. 2 6, 000, 000
Total 77,225,000
Total 87,300,000
Mr. Norris gives this total as The total property investment of
$77,300,000. the United States as computed by the
Under the Willis bill the total prop United States Engineers is approxi
erty investment of the United States mately as follows:
would be as follows: Nitrate plant No. 1 . $12,000,000
Nitrate plant No. 1 $12,888,000 Nitrate plant No. 2 (in
Nitrate plant No. 2 (in cluding steam plant
cluding steam plant and Waco quarry) 64, 500, 000
and Waco quarry) 67, 555, 355 Dam No. 2 (to present
Dam No. 2 (to present capacitv. exclusive of
capacity) 43, 388, 000 locks).'. 42,500,000
New dams at Cove Creek New dams at Cove Creek
and Dam 3 and addi and Dam 3 and addi
tion to Dam 2 $77, 300, 000 tion to Dam 2 $77, 225,000
Total capital in Total capital in
vestment of vestment of ft
United States-. 201, 131, 355 United States. - 196, 225, 000
Mr. Norris gives this total as $202,- Approximate cost of additional
404,335. 40,000 horsepower unit to steam plant
Estimates cost of additional steam at nitrate plant No. 2 as required by
plant built at the expense of the the bill is $1,000,000.
Cyanamid Co., $5,400,000.
 MUSCLE SHOALS 325

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Wednesday, February 29, 1928.
The committee met, pursuant to adjournment, at 10.30 o'clock a. m., Hon.
W. Frank James presiding.
Mr. JAMES. The committee will please be in order.
STATEMENTS OF COL. THOMAS M. ROBINS, MAJ. L. H. WATKINS, MAJ. R. T.
COINER AND CAPT. HUGH P. ORAM, OF THE CORPS OF ENGINEERS, UNITED
STATES ARMY
Major COINER. Mr. Chairman, I believe I was on the stand when we quit
yesterday. You had asked for certain figures on the ruu-of-river power out
put from Cove Creek, Dam No. 3 and Dam No. 2, and then to include the other
three dams on the Clinch River that were included in this bill; and then you
asked for another set-up with the 1 1 dams asked for by applicants to the Federal
Power Commission, and to include with that Dams Nos. 2 and 3, and see what
we would get.
Mr. JAMES. We would also like to have what the set-up would be if the 1 1 dams
and Cove Creek were operated as a separate proposition apart from Dams Nos.
2 and 3.
Major COINER. Eliminating the two from the calculation?
Mr. JAMES. You would have to do more than that. The East Tennessee
Development Co. would operate Cove Creek with no connection at all with Dams
Nos. 2 and 3, which will be a different set-up from Cove Creek being operated by
the same people for the benefit of Dams Nos. 2 and 3.
Major COINER. Yes. As a matter of fact, though, Mr. Chairman, I think
that any two companies would necessarily interconnect their plants, because it
would save money to both of them if they did interconnect their plants, and
operate the whole thing, to get the maximum output from the system as a whole.
It would pay, even though every one of those 11 clams were owned and operated
by a separate company. In self-defense they would almost have to hook up
and work together with an interchange.
Mr. JAMES. The horespower would not be the same if the 11 dams, for instance,
were operated by the East Tennessee Development Co. for a power proposition
up there? It would be entirely different if it was operated if the the one had
Dams 2 and 3 and used that for auxiliary. We have both propositions before us.
Under the Norris bill, if it should pass, or under the LaGuardia bill, if that
should pass, then it would be a case where this committee would not have any
power to act in regard to those 11 dams up there. What we would like to know
is how much horsepower by the passage of those two bills goes to somebody else,
not in connection with fertilizer, down at the other end; do you see?
Major COINER. Yes. That will require a little more computation. Most
of these things require a good deal of figuring before you can give an answer that
is even approximately correct, because the conditions change so much with each
particular set-up you assume.
Mr. JAMES. We do not need that so much in connection with the Madden bill,
but we will need it in connection with the Morin bill and the LaGuardia bill and
the other bills we have.
Major COINER. Yes, I see that.
Mr. SPEAKS. You are speaking now of the dams between Cove Creek and Muscle
- Shoals?
Mr. JAMES. Cove Creek, Melton Hill, Senator, Clinton, and the 11 dams up
there where the application has been approved by the chief of engineers and by
the Federal Power Commission. How much power would be gotten to Muscle
Shoals would depend on whether it was controlled by the man who had No. 3, or
by somebody else.
Mr. SPEAKS. All the water coming over intervening dams will eventually get
to Muscle Shoals, will it not?
Major COINER. Yes.
Mr. SPEAKS. So that control of the water is the important question?
Major COINER. Of course, if they hold the water above, the partv below will
suffer.
Mr. SPEAKS. When we had that proposition up last year, I interrogated the
representative of the Federal Power Commission at considerable length, inquiring
whether he was safeguarding the public interest by withholding the issuance of
Permits, and he said he was.
326 MUSCLE SHOALS

Mr. JAMES. If these 11 dams up on Cove Creek went to the East Tennessee-
Development Co , and somebody else got Dams 2 and 3, unless there was a pro
vision in the lease given by the Federal Power Commission to take care of that,
the man who had these 1 1 dams up there could so manipulate the water as to
practically put the fellow down below out of business. That is what the Federal
Power Commission said to us in 1926, when we were on the joint committee, that
you would have to put different language in there from what they generally had
on other contracts.
Mr. SPEAKS. I am quoting from the record. [Reading:/
"Mr. SPEAKS. Your duty is to protect the interests of the United States.
Now, have you at all times regarded Muscle Shoals as an important governmental
activity, and have you endeavored to safeguard the interest of the United States
in connection with this plant?
" Mr. MERRILL. That is what I have endeavored to do.
"Mr. SPEAKS. In considering power sites, which might affect the efficiency of
Muscle Shoals, you have properly protected the interest of the people of the
United States?
"Mr. MERRILL. That is right.
"Mr. SPEAKS. And that has been your sole purpose?
"Mr. MERRILL. That has.
"Mr. SPEAKS. I can realize how, apprehending that it might become necessary
for the Government to turn this plant over to a private company, and in prepa
ration for that eventuality you might authorize son\e one to go ahead and make
a survey, and still have in mind that when final action is taken, the sole thought
and purpose must be the welfare of the people of the United States."
We endeavored to impress him so that no permits would be granted until the
whole Muscle Shoals project was determined. You are familiar with that.
Major COINER. The Federal Power Commission is still holding to that policy.
Mr. JAMES. They are holding up the permits at the request of this committee;
but if either the LaGuardia bill or the Norris bill was to pass, then of course they
would not hold them up any more.
Mr. SPEAKS. Of course, they would do as they pleased; and if they then
granted a permit to the East Tennesseee Development Co. it might conflict with
those lower down.
In 1922 and 1926 it was suggested that if this language was put in, provided by
the Federal Power Commission, I should think you could protect them.
Mr. McSwAiN. Does not the promise by the members of the Federal Power
Commission who appeared before us expire with the end of the present session
of Congress, so that we will either have to ask for a renewal of those pledges, or
the thing is gone?
Mr. JAMES. The question is whether, when you say "this session of Congress,"
you mean the first or the second session of Congress.
Mr. McSwAiN. Did we not say "session of Congress" rather than "Congress"?
It is in the resolution, somewhere.
Mr. GARRETT. I think it would be both sessions.
Mr. McSwAiN. I think we had better look into that, and think about that.
Major COINER. Major Watkins has worked out, from the data he had avail
able, figures answering the questions of the committee yesterday, and we are
prepared now to give them.
Of course you understand to get an exact determination, it is quite a long
drawn out and laborious process; but these figures we have are taken from opera
tions that were run through to see what would happen on a set-up including all
the dams on the river, and the figures will give a very close approximation. There
is just a very small percentage one way or the other from what the true set-up
would be with these particular dams in. It changes the whole thing if you elim
inate some dams from the system, so that we can not say that the figures are
absolutely right; but they are a very close approximation.
For the system consisting of Cove Creek Dams 2 and 3, the horsepower avail-
able 98 per cent of the time would be 8,700 at Cove Creek, 37,500 at Dam No. 3
and 84,000 at Darn No. 2 making a total of 130,200 horsepower.
For 90 per cent of the time that horsepower would be increased to 176,300.
Counting in the stream flow regulation without any power interchanges, which
we spoke about yesterday, just the regulation of the stream by the Cove Creek-
storage, we would, of course, gain nothing at Cove Creek; but on Dam No. 3 we
would have 74,000 instead of 37,500.
 MUSCLE SHOALS 327

Mr. McSwAiN. Ninety-eight per cent of the time?

Major COINER. Practically 98 per cent of the time.
At Dam No. 2 it is 134,000 instead of 84,000, giving a total horsepower of
stream regulation by Cove Creek Dam of 204,000 instead of 130,000 horsepower.
If, in addition to the stream regulation, there was a line interconnecting these
plants so that we would get a power interchange as well as the stream-flow regula
tion, the total output then would be 318,000 horsepower for those three units.
Taking the system of those three dams, Cove Creek, Dam No. 2, and Dam
No. 3, and including the other three dams on the Clinch River; that is, Clinton,
Melton Hill, and Senator, or Kingston as we call it now—because the further
studies have indicated that the Senator Dam should be moved a little; that is,
between a half and three-quarters of a mile from the Senator site, and to distin
guish it we have given it a new name, but it is a dam that would serve the same
purpose and the names may be considered as interchangeable—there the power
for the system on run-of-the-rivcr 98 per cent of the time is 135,200 horsepower;
and 90 per cent of the time it is 184,900 horsepower.
The 98 per cent output with the stream-flow regulation due to Cove Creek will
increase from 135,000 to 242,100 on that system, an increase of practically 80
per cent, due to stream flow regulation. With both stream flow and power regu
lation on that system of dams, it would increase to 431,700. That is nearly
double the output due to stream regulation alone.
Mr. WRIGHT. That is 98 per cent of the time?
Major COINER. Yes.
Mr. \VURZRACH. That is 431,000 as against 318,000?
Major COINER. As against 135,000 run-of-river. Just a moment; the 318,000
was the power from the three dams alone. Now, if these three other dams on the
Clinch River were put in, it would be increased to 431,000.
Mr. WURZRACH. That is, increased from 318,000?
Major COINER. To 431,000.
Mr. WURZRACH. And that increase would be due wholly to the dams on the
Clinch River?
Major COINER. To those three little dams on the Clinch River. That is one
result of the power interchange you would get.
Mr. WURZRACH. That would be an increase of 113,000, due wholly to the three
dams on the Clinch River?
Major COINER. Yes.
Mr. WURZRACH. What would be practically the cost of the construction of
those three dains?
Major COINER. Twenty-two million dollars.
Mr. McSwAiN. For the three of them?
Major COINER. For the three.
Mr. WURZRACH. That would be entirely and wholly the best investment that
the Government could make?
Major COINER. That is the big thing that the bidder gets out of this bill.
328 MUSCLE SHOALS

Effect of storage reservoirs at Cove Creek, War Ridge, and Cumberland Gap on
hydro prime power at projects on Clinch and Tennessee Rivers for 60-foot draw
down at each of these reservoirs
APPROXIMATE HYDROPRIME POWER AT 80 PER CENT EFFICIENCY

Stream Power
Run of Run of flow reg- regula
river 98 river 90 ulntiou tion
Effec per cent percent without with
Project tive of time of time power power
head (horse (horse inter inter
power) power) change change
(horse (horse
power) power)

SYSTEM A
Cove Creek 198 8 700 12 800 0 W.OOO
Dam No. 3 51 37, SIX) 49,500 74,000 92,000
Dam No 2 92 84 000 114 000 134,000 166,000

Total 130,200 176,300 208,000 318.000

SYSTEM R
Cove Creek 198 8,700 12,800 0 53,000
18 800 1 200 0 4. TOO
Melton Hill 68 2,900 5, 100 2.000 20.000
24 1,300 2 800 3,100 10.000
Dam No. 3 51 37, 500 49,000 74,000 124, 000
Dam No 2 92 84 000 114 000 134 000 220,000

Total 135 200 184 900 213 100 431.70O

SYSTEM C
War Ridge - 152 2,500 4,700 0 20.700
Cumberland Gap 132 1 300 2 410 0 10.400
Cove Creek , 198 8,700 12,800 0 47,000
Clinton 18 800 1 200 0 4,800
Mellon Hill 68 2,900 5.100 1,300 17.800
24 1,300 2 800 2 100 9. MO
Coulter Shoals - 55 17.500 23,000 9,400 34,000
Marble BlulT 33 14 700 19 500 9 800 32,000
White Creek 35 5 17 400 24 000 40 000 68,000
Chickamauga (Foddy) (Sherman) . 45 26,800 39 000 67,000 93.000
Dam No 3 51 37 500 49 500 74 000 103,000
Dam No. 2 - . ... 92 84,000 114 000 168 000 180,000

Total,. 215 400 298 010 371 600 620.200

Mr. REECE. If it does not divert you may I ask, including that system of dams
under your present assumption, what would be the cost per horsepower?
Major COINER. For those six dams?
Mr. REECE. For the six dams; yes. If you have, not that ready, let it go.
You can put it in the record later.
Do you have, so that you can give it offhand, the cost per horsepower considered
at Dam No. 3 and also at Cove Creek under your increased cost calculation;
approximately, I mean?
Major COINER. Do you want the cost per horsepower-year or the cost of the
installed horsepower?
Mr. REECE. The cost of the horsepower per year. We can let all those ques
tions be answered later.
Major COINER. We can get answers to those questions.
Mr. REECE. Since that question has arisen before and has entered into dis
cussions, what I think might be put in the record is the cost per horsepower at
Cove Creek and also at Dam No. 3, and then the cost per horsepower, considering
that whole series of dams.
Mr. McSwAiN. As an average?
Mr. REECE. Yes.
Mr. WURZRACH. It was testified before this committee that the cost per
horsepower-year was $17, 1 think, at Dams Nos. 2 and 3, and the Cove Creek Dam,
was it not? '
 MUSCLE SHOALS 329

Mr. McSw.MN. Yes, that is what he has estimated on.

Mr. QUIN. That was Mr. Bell; it was not any engineer of the Government
who said that.
Mr. WURZRACH. This would materially decrease it.
\lr. REECE. As suggested by your query, it probably would be well also to put
into the record the construction cost per horsepower on each one of those items,
and then of the Cove Creek Dam, No. 3, and then of the series.
Major COINER. To make sure I get just what yor want: The construction cost
per horsepower-year, or per installed horsepower capacity? There are so many
different ways of attacking the problem.
Mr. REECE. I think it would be well, as the chairman suggests, to include the
various ways, and put it in the record, the installed horsepower, and then also the
reasonably expected horsepower when you consider the
Major COINER. That is, of No. 2 as it is now?
Mr. REECE. No. 2 as it is, after these other additional expenditures may have
been made, and Cove Creek; on No. 3 and Cove Creek, and then on the series of
six dams.
Major COINER. I see.
Mr. WRIGHT. In other words, you want to have put in the record the cost of
installation per horsepower?
Mr. REECE. Yes.
Mr. WRIGHT. Then you want to get in the record what it will cost to produce a
horsepower with those six dams a year—what the per year will be.
Mr. REECE. Separately and collectively.
Mr. GARRETT. In connection with that same question, can you also include
there the increased horsepower that will be created by virtue of the erection of
the six dams?
Mr. McSwAi.v. He has given it.
Mr. GARRETT. I want it itemized. Then you will have the cost of each dam,
the amount of horsepower that it will be increased by virtue of the construction
thereof; and then the question arises, would it not be better for the United State*
to construct these dams and own them and keep them, than to let somebody else
construct them and have them afterwards.
COST PER HORSEPOWER OP DAMS IN TENNESSEE RIVER SYSTEM
The installation required for the development of the hydroelectruc power at
each project depends upon the storage regulation provided and the annual load
factor at which this power is to be furnished to the market. The installation
required for the storage regulation supplied by Cove Creek alone by the storage
projects on the Clinch and Powell system and by the reservoirs of the entire
system with normal drawdown is given in Tables 15, 16, and 17, Appendix B,
part 1, of the report for 50 per cent load factor. The cost of installations are
also given in these tables and are based on construction of these projects by pri
vate interests, which involves a large item for taxes, insurance, and interest
during construction. While the ultimate installation that should be provided
has not been definitely determined, it is believed that they will be approximately
as given in Table 17, Appendix B, part 1, of the report.
The cost per horsepower for the hydroelectric installations as given in the above
tables, which excludes the cost of navigation facilities, and the approximate
costs per horsepower-year and per kilowatt-hour are as follows:
330 MUSCLE SHOALS

Costs of hydro installations and output for three systems as shown

Hydroelectric
lations
instal- -

Estimated output
- - -

Cost (less — — —— — —i t ***

Project benefits to - Cºst

navigation) | Installed Sºº Horse- º

...” installed
horse-
-
power
Per horse- Miłłspºr
power ears
power power kilºwatt
year hºur

system 1 | |
Cove Creek (including transmis
sion lines)------------------------- $38,540, 643 220,000 $175.00 79,000 | $19.55 2*
Dam No. 2.--------------------- ---- 000, 000 555, 000 81.00 448,000 19.55 -*

83, 540, 643 775,000 108.00 527,000 19.55 -*

|
38, 540, 643 220,000 175.00 78,900 19.60 3 tº
,000,000 322,000 102.50 238,500 21.65 : 3.31
45,000,000 555,000 81.00 447,500 1865 -sº

115,540,643 -
1,197,000 97.00 764,900 tº go tº
|
38, 540, 643 220,000 175.00 is wo ** s: 15

-
5,328,000
10,736,000 ſº
51,500 tº
208.90 . 163
30, . . ...
20. 60 .
is .
Kingston (Senator) 6,442,000 25,600 252.00 15, 200 20.60 3 &
Dam No. 3.---- __| 33,000,000 322,000 || 102.50 244, 400 21.25 3.25
Dam No. 2. -- 45,000,000 555,000 81.00 450, 100 20.30 3.11

Total------------------------- 139,045,643 | 1, 186,000 117.00 825.863 ** 3. It

Major Coin ER. That gets into a question of policy that the executive officers
are not competent to decide. That is for the Congress to decide, whether we
are oing into Government ownership and operation or not.
Mr. WRIGHT. You can reach a conclusion after you get those facts. |

Mr. GARRETT. I have already reached one myself in relation to the main
question.
Mr. REEcE. I was wondering whether you have an idea how far Cove Creek
will back the water up on the river; how near the Virginia border. That is unim
portant. I was just wondering whether you had that in mind. This is what
gave rise to the query in my mind, Major.
I Major Coix ER. Seventy-four miles, Cove Creek. The pool will be 74 miles
Ong.
Mr. REECE. When application was made for construction of a bridge across
Clinch River, just a few miles this side of the Virginia border, the War Depart
ment suggested that the bridge should be 90 feet high, and I believe you had a
hearing over there in the Senate on it. -

Major Coix ER. You see, there are other storage projects above Cove Creek
contemplated in the final system for the total development of the river.
Mr. REECE. If these other dams are constructed, it would be necessary to
have a bridge built at that point to be approximately 90 feet high?
Major Coin ER. Yes.
Mr. McSwain. I will check my cornfield knowledge of hydraulics with your
expert knowledge. Assuming that Cove Creek dam as a storage reservoir is
operated for the advantage of and with reference to the maximum efficiency of
Dams 3 and 2 at Muscle Shoals, would not that same operation have the same
effect in promoting the efficiency of the three dams at Senator, Clinton, and
Melton Hill?
Major Coin ER. The same water would have to go over all of those dams, and
you could run it through your turbine and develop power with the head available
on every dam. If you built more dams down the Tennessee River, each of those
dams would get that water.
Mr. McSwain. I know, but listen, Major. The Melton Hill, Clinton, and
Senator Dams are all three in the same status with reference to the operation of
Cove Creek Dam?
 MUSCLE SHOALS 331

Major COINER. Yes.

Mr. McSwAiN. Whatever would help one of those would help both of the
-others?
Major COINER. Yes.
Mr. McSwAiN. And whatever would hurt one of the three would hurt the
other two?
Major COINER. Yes.
Mr. McSwAiN. Could you not extend that same process of reasoning and say
that whatever would hurt one of the three or all of the three would hurt Dams
3 and 2 at Muscle Shoals?
Major COINER. You will get an increase in power at every dam below Cove
Creek from any water that is allowed to pass out of the Cove Creek storage.
The exact way in which it will affect the power output at the dams below depends
to quite an appreciable extent on the way in which that water is released, the rate
at which it is released. A greater effect can be secured for any given dam by
handling it with respect to that particular dam; and the same thing applies to
any particular series of dams. The maximum effect of the three dams immedi
ately below the Cove Creek storage would not necessarily give the maximum
effect on dams down the river as far as Dams 2 and 3. You would, of course, get
an increase for every cubic foot of water you would allow to pass down the river
and vou would get the power from that water at all the dams below it.
Mr. RANSLEY. If that be true, it is absolutely necessary that the Government
should keep control of the building of these dams?
Major COINER. It is necessary that there be some central control for the opera
tion, to get the maximum effect from the flow of the river.
Mr. WRIGHT. As a hydroelectric proposition if would not be feasible to con
struct the Cove Creek Dam just for the power which would be generated there,
would it?
Major COINER. Oh, no; it would not.
Mr. WRIGHT. In other words, Cove Creek is almost strictly a storage proposi-
-tion?
Major COINER. Yes; very largely.
Mr. WRIGHT. To affect the river and enhance the power below it?
Major COINER. But understand me, by storage I do not mean merely water—
storage. There is another effect which is even greater than that of the storage of
water, and that is the power that you would generate from releasing that storage
at Cove Creek and at the little dams immediately below Cove Creek. That power
could be fed into the system at the time when it is needed most, so that you really
would get a power regulation. Those dams would be in a sense auxiliaries, just
like steam auxiliaries, used to convert secondary into primary. You would have
a hydro auxiliary for your system.
Mr. WRIGHT. But the storage is the essential thing, at last? You have to have
the water stored to regulate it and turn it in as you need it?
Major CoiN'ER. Yes, sir. That is one thing I did not bring out in connection
with the general request that we submit the cost per installed horsepower for the
dams below Cover Creek. In addition to the actual cost of installing the machin
ery at the dam, there is a charge which should properly be levied against that
plant and credited to Cove Creek for the storage benefit that you are going to get
from Cove Creek. The cost of building the dam and the power house and install
ing machinery certainly should be increased by a proper sharo of the cost of storage
above. However, no dams that are built on Clinch River below Cove Creek by
"the lessee under this bill will carry the provision for payment for these benefits
which is in the power act, as I understand, the bill before the committee specifi-
-cally provides that there shall be no such charge made.
Mr. McSwAiN. As against Senator, Melton Hill, and Clinton.
Mr. WRIGHT. The building of Cove Creek Dam as it affects those on the Clinch
River and the Tennessee and below there, will depend on the way that Cove Creek
dam is handled; that is, as to when the water should be released.
Major COINER. Very largely.
Mr. WRIGHT. You want it in the time of the dry season; the water stored there
should properly be released so as to increase the water power below?
.Major COINER. Yes; but as I said before, any release benefits everybody below.
For the maximum, I would have to figure on that awhile.
>. - Mr. .WRIGHT. Cove Creek could be so handled that it would prove of little
value to the /lams below? In other words, if it was all turned loose near the same
time, or at the same time, and you had no water there in time of drought, it would
.not answer .the purpose?
332 MUSCLE SHOALS

Major COINER. It would be possible. It would be inconceivable, however, that

anybody who had Cove Creek would handle it in .that way. But it would be
physically possible; yes.
Mr. WRIGHT. Yes! As I understand, the engineers have been making a study
for a year or two of the Tennessee system.
Major COINER. More than that.
Mr. WRIGHT. For many years, and especially in the last year or two, have they
had in view the water-power development, flood control, and navigation?
Major COINER. Yes.
Mr. WRIGHT. You have tied all those in together.
Major COINER. Correct.
Mr. WRIGHT. As the result of those studies you say that Dam No. 3 at Muscle
Shoals ought to be raised 5 feet from the height which was originally named?
Major COINER. That is correct.
Mr. WRIGHT. That grows out of these studies you have been making in con
nection with the whole system for flood control, water power, and navigation,
and you think it is desirable that you should raise Dam No. 3 five feet over the
former estimate?
Major COINER. That is correct.
Mr. WRIGHT. That accounts for the increase of over $6,000,000 in the cost,
which was estimated before at $32,500,000, and now you have run it up to $38,-
000,000?
Major COINER. Yes.
Mr. WRIGHT. So that the increased height of the dam accounts for that
increase in cost?
Major COINER. Not entirely. There is also included in the estimates based on
these latest studies for the system as a whole the installation of a little more
power and some additional flowage rights.
Mr. WRIGHT. So that all this increases the cost of machinery in the dam?
Major COINER. It is for additional installation and additional flowage.
Mr. WRIGHT. At Cove Creek, Major Fiske made a rather exhaustive report on
that proposition, did he not?
Major COINER. Major Fiske started that survey of the Tennessee system as a
whole.
Mr. WRIGHT. Yes.
Major COINER. But the report that he submitted was the first partial report,
a little over a year and a half ago.
Mr. WRIGHT. In June, 1926.
Major COINER. A little over a year and a half ago. Major Fiske was relieved
from duty there in the usual course of events, and Major Watkins was detailed
as district engineer at Chattanooga, and he has been carrying on that survey for
a year and a half.
Mr. WRIGHT. In May, 1926, it is true that Major Fiske did make a rather
exhaustive report on the Tennessee?
Major COINER. We call that a partial report, all the time. It was based on
the data available at that time and could hardly be called exhaustive.
Mr. JAMES. Why not put that in the record?
Mr. WRIGHT. The Fiske report?
Mr. JAMES. Yes.
Mr. WRIGHT. Very well.
Mr. JAMES. Without objection, it will be inserted in the record.
Mr. WRIGHT. At that time the height of Cove Creek was juet the same as it
is now.
Major COINER. Yes.
Mr. WRIGHT. The height he recommended was the same as you recommend?
Major COINE'R. Yes.
Mr. WRIGHT. And his estimate of the cost was $20,000,000?
Major COINER. Yes.
Mr. WRIGHT. What I want to know is, the explanation as to why this short
period of time should have increased it to nearly $38,000,000?
Major COINER. There has been made available in the interim lots of data that
Major Fiske did not have at his command at that time. His examination at
Cove Creek at the time this first partial report was submitted, as I endeavored
to explain yesterday, was based on nothing like sufficient data for a real engineer
ing estimate of what construction would cost at Cove Creek. In order to get
some figures an examination of the site was made, and from what could be deter
 MUSCLE SHOALS 333

mined by a hurried examination of the country about to get some idea what the
flowage would be and what the cost of that would, be, he arrived at that figure.
The further studies we have made have been accompanied with core borings
on that site. We have gotten down to see what underlay the dam site, and we
have made detailed surveys of the entire country to determine what the flowage
is. We have had time to make a study and to find out just exactly what that
flowage was going to cost us, and the figures now are based on exact information,
whereas before it was an approximation based on inexact information; the best
data available, but not sufficiently good to be really considered an estimate that
you could place a great deal of dependence upon in construction. It was a
tentative estimate.
Mr. WRIGHT. But it occurs to me that there is a very wide difference in the
total cost. I can understand how there might be a difference of a million or
two of dollars, but this practically doubles the cost of the Cove Creek Dam. I
do not know, of course, which is right, but there is quite a wide difference.
Mr. GARRETT. As you developed there, what would be the difference in the
construction of the dam as they recommend, and the same dam irrespective of
all those other things?
Mr. WRIGHT. It is the same height. The cost has not changed very much
since 1926, has it, of material and labor?
Major COINER. I think not greatly.
Mr. WRIGHT. Or for the installation of machinery?
Mr. HUGHES. The cost has changed downward instead of upward. •
Mr. WRIGHT. It seems it ought to have. You say there is not a great deal of
difference in the cost of machinery and the installation thereof, or in the work or
material that enters into this construction at Cove Creek, since 1926, at the time
Major Fiske made his report.
Mr. GARRETT. 1926 was nearly the high-water mark on costs.
Mr. WRIGHT. Yes. Will you please tell the committee, if you have the data
here, the various elements that enter into the cost of this Cove Creek dam, and
the estimate you put on each one? For instance, what would the dam itself
cost; what does the installation cost; what docs the land cost that you are going
to submerge; what estimates have you put on the land?
Mr. JAMES. Have you got there a detailed estimate of the $20,000,000, or
do you just say $20,000,000?
Mr. HILL. I think he said $20,000,000.
Mr. McSwAiN. He said $18,000,000, with $2,000,000 allowed for good luck.
Mr. JAMES. You have down at your office a detailed estimate of that $20,-
000,000, have you not?
Major COINER. If a detailed estimate was made by Major Fiske, we should
have it in the office.
Mr. JAMES. Will you put that in the record? Put in the $20,000,000 in one
column, and then right next to it the $38,500,000, so that we can see what is
raised. Will you make a note of that, Major?
Major COINER. I will do that.
Mr. McSwAiN. The items of cost in the new estimate is what we want, in
parallel columns.
Mr. HILL. I think you will find that in House Document 119, Sixty-ninth
Congress, first session, page 96, Major.
Mr. WRIGHT. All right. Now, let me add this.
Major COINER. This is Major Watkins's estimate, based on his detailed
examination of the entire matter. You do not want the item of earth excavation,
and so on?
Mr. WRIGHT. I want it all to go in the record, the details of the accounts.
[From Doc. No. 185, Seventieth CongressI
REPORT ON COVE CREEK DAM SITE AND RECOMMENDATION FOR DESIGN OF DAM,
POWER HOUSE, BARGE LIFT, AND SPILLWAY
Ry C. M. HACKETT
ACCESS TO SITE OF DAM
Railway.—The Southern Railway between the towns of Clinton and Coal
Creek approaches to within approximately 6 miles of proposed dam. Grading
for a spur from nearest point on this railway to site can be economically done.
101229—30 22
334 MUSCLE SHOALS

Two bridges are necessary, a small one across Coal Creek and a larger one across
the Clinch River about a mile below site of dam.
This railway should be a single-track, well-constructed, permanent line, with
adequate sidings at both ends for storage and shifting of cars; coal bunkers and
water tanks conveniently accessible for locomotives, locomotive cranes, etc.,
should also be provided.
Roads for motor trucks.—To provide a low level road, the present unimproved
river road through the Longmeyer farm, which connects dam site with highway
leading to the village of Coal Creek, should be graded, macadamized, and given a
good wearing surface. There should also be a well constructed, high-level road,
built to south end of dam site from the improved country road near Anderson-
ville. This high-level road should later be extended through to road system
north of the Clinch.
ELECTRIC POWER FOR CONSTRUCTION PURPOSES
It is recommended that all shop machinery, air compressors, stone crushers,
concrete mixers, and gantrys for placing concrete be electric driven.
A transmission line of the Tennessee Power Co. passes within a quarter mile
of dam site and a substation of needed capacity (approximately 3,600 K. W.),
with necessary line breakers, transformers, lighting arresters, and power feeder
board could be quickly and economically erected and connected to it. Arresters,
.line breakers and transformers could be erected in the open, but feeder board
and low voltage breakers should be placed in a small fireproof building.
This substation should be regarded as a permanent installation, as it will be
in service upward of five years and subjected to much harder usage than the
average town or industrial plant.
STORAGE RESERVOIR
Caves.—All caves along reservoir shores below elevation 1050 should be care
fully investigated, and unless it is obviously apparent that no other outlet exists
than the one which opens into the reservoir, they should be sealed with a con
crete barrier.
Wave action.—Shores of reservoir from elevation 990 up to 1, 050 will be
subjected to severe wave action, and, where overburden is deep, considerable
slides into pool may be expected. In clearing basin of timber and relocating
roads and railroads, consideration should be given to possible extent of these
slides and measures taken to prevent masses of timber from sliding into pool
and roadways from being damaged.
Clearing basin.—Timber should be removed up to elevation 1,057. This
includes "down" and partly decayed trees. Unless this is thoroughly done, a
large amount of floating debris will work its way to the dam, and need to be
drawn ashore there and destroyed, as otherwise it will become the source of
serious gate, rack, and turbine trouble.
Timber standing on overburden which is likely to be undermined by wave
action should also be removed.
Dyke.—At two points in the Clinch Valley side of the divide between the
Clinch and Holston watersheds, designated on core drilling exploration maps
as ranges A and B, it will be necessary to block possible leaks in subgrade and to
build earth dike at A to prevent escape of water from reservoir in to the lower
Clinch. The dike at A, shown by drawing No. 11, will be of considerable length
and have a maximum height of approximately 30 feet. The underlying rock at
the site of this dike should be made tight by drilling and grouting. The dike
itself can be most economically constructed by using an earth fill with well-
puddled clay core. The surface of fill on pool side up to top of surcharge level
should be riprapped with stone of good size and of sufficient depth to prevent
wave action from reaching dirt embankment.
Range B will require drilling and grouting as range A, but no embankment
is necessary, as the present surface of sag is above surcharge level of pool. Some
riprap may however be needed to protect overburden from erosion by waves.
Inspection during initial filling of pool.—A careful examination along shores of
pool should be made while it is filling to note possible loss of water into rock
fissures where solution channels may have been formed.
This inspection patrol should begin by the time a depth of 50 feet of water is
registered at dam and be repeated for each foot of rise above that level. The
shores on Holston and Cumberland Valley sides of pool only need be inspected.
 MUSCLE SHOALS 335

DAM SITE

Cores taken from borings at site A and range G, together with record of holes,
including water level and pressure tests, indicate the existence of rock whose
condition is suitable for the foundation of a dam of the size and type shown by
accompanying drawings.
Excavation need be no deeper than necessary to reach sound rock, which in
bed of river and north abutment is comparatively near the surface. An over
burden of from 20 to 60 feet in depth overlies rock at south abutment and a
considerable overburden must also be removed from spillway.
Precedence in regard to excavation should be such that overburden material
can be placed on the flood plain downstream from dam to bring the level of this
area above high water. This is the only convenient space available for storage
warehouses, concrete mixers, shops of various kinds, railway yards, etc., needed
during construction period, and these utilities must be above flood level. The
space therefore offers a convenient dump for waste material from excavation,
and, after removal of temporary structures, can be used for any permanent
buildings or docks required by power plant or navigation.
Careful and thorough grouting of rock must be done at dam site, the depth of
grout holes depending on what is shown by pressure line on accompanying drilling-
record sheet.
It is not recommended that excavation be done or core wall built at range G,
but rock must be thoroughly grouted, down to a point where it is tight under
100 pounds pressure. The upper strata which borings show contain seams and
small cavities must be thoroughly explored and filled tight with grout. This
work should extend to abutment of dam and along the range to a point where
tight rock structure is encountered.
The following drawings show conditions found by core drilling done at dam
site A and range G, and drilling and wash boring done at ranges A and B, Cove
Creek Reservoir:
Drawing No. 12. Diamond core and exploration drilling, site A.
Drawing No. 13. Record of diamond core drilling, sheet No. 1, site A.
Drawing No. 14. Record of diamond core drilling, sheet No. 2, site A.
Drawing No. 15. Record of diamond core drilling, sheet No. 3, site A.
Drawing No. 16. Record of diamond core drilling, sheet No. 4, site A.
Drawing No. 17. Diamond core and exploration drilling, range G.
Drawing No. 18. Record of diamond core drilling, range G, sheet 1.
Drawing No. 23. Record of diamond core drilling, range G, sheet 2.
Drawing No. 19. Diamond core drilling in spillway.
Drawing No. 20. Record of diamond core drilling in spillway.
Drawing No. 21. Diamond core drilling, ranges A and B.
Drawing No. 22. Record of core drilling done at ranges A and B.
Drawing No. 13, record of diamond core drilling, Cove Creek dam site, ex
ploration holes, shows material variations in pressure tests obtained by drilling
contractor and those obtained by Government engineers in retest of some of the
holes. The recently determined elevation of water table, it will be noted, is
consistent with location of pressure levels in retested holes, and, as retesting was
carefully done with improved equipment, results obtained by Government engi
neers arc probably more nearly accurate than those obtained by contractor.
The suitability of rock for foundation of a dam is determined by results ob
tained from core drilling rather than pressure tests, the latter seldom giving a
true representation of conditions in rock structure of the character found at this
site. Some idea of depth to which it may be necessary to carry grout holes may
be obtained from pressure tests, and the extent of grouting work can also be
determined from them within fairly close limits, but the usefulness of pressure-
test results in deciding on the suitability of foundation at Cove Creek is com
paratively small.
STRUCTURES
The general arrangement of dam, spillway, power house, and barge lift, recom
mended is shown by drawings:
Drawing No. 1. General plan.
Drawing No. 2. Section through dam and power house.
Drawing No. 3. Power house, downstream, and east elevations.
Drawing No. 4. Power house general plan and west elevation.
Drawing No. 5. Power house piping passages and penstock plans.
336 MUSCLE SHOALS

Drawing No. 6. Power house section A. A. and plans at elevations 870>

and 903.
Drawing No. 7. Power house bus floor and roof plan.
Drawing No. 8. Dam section, stability.
Drawing No. 9. Barge lift elevations.
Drawing No. 10. Barge lift plan and sections.
Details of this work to follow.
Dam.— Dam is gravity type and designed for surcharge of 7 feet above normal
full pool elevation 1050. Spillway is of the diversion type and gate controlled.
Roadway will be needed across dam for construction purposes and later for plant
service. The position of dam between roadway systems north and south of the
Clinch and Powell Rivers is such that a roadway across it would be of much value
as a high-level crossing for a direct route between these systems. The Cove
Creek Reservoir will destroy existing roadways across the two valleys for many
miles, and the elevation of dam roadway, as well as its location, makes it superior
as a link in a north-and-south roadway connection to any bridge that would give
equal service that could be built at reasonable cost.
Inspection tunnel through dam is provided at levels varying with foundation
and extending from spillway section at south end to near west abutment. Ex
pansion joints which extend through dam should have concealed drains near
downstream face to catch and convey to lower pool any water that may find its
way through joints when blocks have contracted because of low temperatures.
These drains will aid materially in preventing disintegration of concrete by keep
ing surface dry on downstream face of structure.
It will be possible to greatly reduce joint leaks by putting 6-inch well drill
holes down through them to rock, near upstream face of dam and filling them
with renewable asphalt plugs arranged for periodical softening by electric heat
ing. This will not, however, entirely stop leaking, and drains noted above are
therefore necessary. These joint drains also serve to carry storm water from
roadway, roofs, cooling water discharged from transformers and generator thrust
bearings, and any leakage or waste from water and oil systems in power house.
Whether or not it will be necessary to put drains and pressure relief pipes in
foundation of dam can be determined when excavation for heel trench is being
made. See stability section, Drawing No. 8.
To give dam concrete a neat and uniformly pleasing surface appearance,
honeycomb and other defects should be cut out and patched, form rod holes
pointed, and surfaces, down to pool level both sides, cleaned of nail pits, rough
places, and stains.
Spillway.— Record of flow in the Clinch River indicates that spillway at Cove
Creek Reservoir will seldom be in service, but that one must be provided as an
emergency measure.
A diversion-type spillway is, therefore, recommended as being the most eco
nomical to construct and maintain, and least likely to cause damage in bed of
stream or interfere with navigation.
With exception of headworks, this spillway will be chiefly excavation and
securing possible loose sections in the ledges over which spilled water will fall.
The excavated material is needed for filling in flood plain, as noted under head
ing "Dam site," and its removal is necessary to prevent its being washed into
river channel when water must be spilled.
The gantry method of handling spillway gates at dam is more satisfactory
than any integral scheme. This machine can be kept in repair, or replaced
readily and cheaply, and can be used to handle gates when the require repair
ing or painting, as well as for raising and lowering. Gantry is also useful in
placing and removing stop logs, removing drift from in front of gates and for
handling materials.
Power house.— Walls and piers of generator room with its substructure are
designed for concrete masonry, reinforced where necessary. The room in which
transformers, breakers, busses, switchboard, and plant utilities are placed is
structural steel frame and concrete-slab construction. All windows and doors
should be of metal, floors of quarry tile in generator room, painted concrete in
high-tension room and basement, and marbleoid or similar material in all other
rooms, except switchboard room which should have a cork tile finish. All glass
except where marked otherwise should be muffled, wired.
All inside wall and ceiling surfaces should be cleaned and pointed smooth,
then sized and have two coats of paint. Outside surface of power house walls,
including substructure from low-water level, should be cleaned of form marks
 MUSCLE SHOALS 337

and have rod holes pointed. If found impractical to remove form work in time
to get satisfactory surface on concrete by rubbing with carborundum brick, the
surface, after all patching and cleaning down is done, should be gone over thor
oughly with power-driven wire brush and given a wash coat of cement and lime
having sufficient density to give uniform tone to the work.
Roof slabs should be formed to give satisfactory drainage to leader heads.
Waterproofing of high grade is necessary, with special attention to flashing to
prevent leaks at expansion joints. Counter flashing should be of copper. A
roof covering consisting of five-ply felt, Barret specifications, and a thick coat of
tar and gravel is permissible for waterproofing, but this should be covered within
two years by a surfacing of quarry tile.
Roof leaders should be of cast iron, buried in concrete columns, and connected
to joint drains at lower end. Connections from leader piping to leader heads
must be exposed and have ample flexibility to allow for roof-slab movement.
An automatic elevator, 1,500 pounds capacity, equipped with micro leveling
device, should be installed where shown.
Power house is arranged to have two cranes for inside service, one 200-ton
capacity with 25-ton auxiliary hoist in generator room, and the other 60-ton
capacity with 10-ton auxiliary hoist in the bay at south end of transformer service
track. The latter crane is for service in assembling transformers, circuit breakers,
etc., as well as for unloading parts from cars and placing assembled units on trans
fer trucks on various floors of high-tension building. A gantry crane is recom
mended for penstock gate, stop log, and trash-rack service in forebay.
Electric heating, using current from a house generator, is recommended for
plant. This will include heat in pits below generators, operators' rooms, switch
ing and transformer galleries, etc. House generator will also provide current for
lightening plant and camp, as well as power for barge lift gates, gantrys, pumps,
crane service, battery charging, etc.
Barge lift.—Barge lift is designed to operate on the principle of balanced lift,
driven by varying depth of water in lift tank. Electric power drive can, however,
be provided for operating lift if desired, and space is arranged for necessary
mechanisms.
It will be noted that in water-load drive operation no power other than gravity
is required for movement of tank from either upper or lower position. Lifting
tank is designed to carry a varying depth of water. The greater amount when lift
is going down is enough to overcome friction and light-brake contact. The lesser
amount when lift is coming up permits counterweights to lift the tank and over
come friction, including light-brake contact. The lift therefore does not require
IK>wer from any outside source for its operation except for brakes and sump
pumps. The gravity system of operation requires that chamber into which lift
ing tank descends shall be kept free of water and that guard gate and tank gate
be provided as indicated. No gate will, however, be required for adjusting lift
to suit the Clinton pool lever, as the slight variation here can be compensated
for by increasing or decreasing tank travel.
The method of operation outlined above has the advantage of no working parts
of lift submerged and all parts of machinery accessible, movement both ways will
be regulated by limit switches and automatic, speed-controlled electric brakes
on sprocket shafts, and as they can be applied at 12 or more points, and will be
capable of holding full-loaded lift without counterweights, safety is assured.
All gates are of the submerged type. Those located at upper level are counter
balanced and motor operated. Those on lift tank and at lower level are air
operated. All of the gates operate with water on both sides, except adjustable
seal gate opening into upper pool, which operates in air. The large gate valves
required for filling and emptying space between guard gates and lifting tank
at both upper and lower levels will be motor operated.
Reinforcing is recommended for barge lifts inclosing structure above elevation
848. The location, quantity, and size to be as per details. Mechanisms for
barge lift and adjustable gates have complete safety equipment, and speed of
operation is such that a boat can be transferred from lower to upper pool or vice
versa, a difference in levels of 220 feet, in approximately 20 minutes. Access to
top of barge lift and dam, from power house and adjacent levels, is provided by
elevator and stairway. Elevator will be automatic micro leveling, 2,500 pounds
capacity. Gantry of 100-ton capacity will be required for service on barge lift.
Exterior surface of barge list concrete should be finished same as power house,
omitting wash coating.
338 MUSCLE SHOALS

INDOOR VERSUS OUTDOOR HIGH-TENSION EQUIPMENT

Full consideration has been given to the merits of both indoor and open sir
arrangement of high-tension equipment, and the housing of this apparatus,
together with its connections and control, is recommended for the following
reasons:
(1) The difference in cost for the same protection and flexibility of operation
with apparatus housed or suitably placed and protected in the open air is small,
but in this case favors indoor installation.
(2) The reliability of equipment if under roof is greater and it will be much
less likely to be damaged, especially during shut-down periods, than if placed
out of doors.
(3) Labor required to keep apparatus in shape and have it ready for service
after shut down will be less, deterioration will be less, and replacement of parts
will be less.
(4) No delay in getting plant in service will be experienced when needed
because of unfavorable weather.
(5) Less expense will be incurred for guarding and protection of equipment
during periods of shut down.
(6) No reasonable excuse can be advanced by operating force for neglecting to
have plant in shape for service at any time.
(7) Operating conditions will be better with line breakers consolidated with
balance of equipment and placed where repair work, oil treating, inspection, etc.,
can be done under cover. This arrangement permits the use of a compact and
economical closed piping system whereby oil can be drawn from storage tanks,
breakers, or transformers, and dried, filtered, and distributed as desired, thereby
reducing fire risk and oil losses to a minimum.

CAPACITY OF PLANT

It is recommended that capacity of power plant be placed at 165,000 K. W.

This approximates the average demand for highest periods in highest months for
seven years, 1903 to 1909, inclusive. Only one year, 1907, shows higher peaks
than could be covered by above capacity. The scarcity of these peaks and their
short-time period indicates that the really economic installation for this plant as
a unit in the ultimate power system is possibly somewhat lower than recommended
above, but since plant is in a large measure designed to meet emergency require
ments over a considerable term of years while balance of watershead is being
developed, it is advisable that it capacity shall be such that it can, when necessary,
supply something above normal economic demands for power and water.
No' pro vision is made for local distribution from this plant. Its function in the
system is confined to holding up base load. This refers to supplying water to
d'ownstream plants, as well as to its power output. No sluices are provided. All
water discharged from reservoir must go through wheels. of power units, or over
spillway.
ELECTRICAL EQUIPMENT

Power house is arranged for three main units and t%vo auxiliary or house units.
Rating of main units each approximately 55,000 K. W., 60 cycle, 13,800 volts,
109 revolutions per minute. Rating of house untits each 750 K. W., 60 cycles,
2,300 volts, 900 revolutions per minute.
Nine single phase, 18,333 K. W. 13,800/154,000, 60 cycle, oil insulated, water-
cooled transformers will be required, three for each generator.
Breakers are recommended in generator leads to transformer banks; also a
13,800-volt tie bus between them, by means of which any generator can be operated
in conjunction with any bank of transformers.
High-tension breakers, disconnects and busses are arranged to give a high
degree of flexibility in feeding the four transmission lines shown. Two more
outgoing lines can be added, if desired, making a total of six, any two of which
will carry the maximum output of all generators.
A truck type board is recommended for house machines, and all plant and
camp auxiliaries. Main unit control, feeder, regulator, battery and instrument
boards should be panel boards.
 MUSCLE SHOALS 339

Leads from main generators to transformers, leads from house machines, and,
local feeders for power and lighting, unless 3-phase cable is used, should be in
fiber duct. All control wiring, signal wiring, wiring to indicate instruments, etc.,
should be in metallic conduit.
Care should be taken to insulate all metallic conduit supports to prevent them
from becoming conductors of current.
All ground connections from apparatus, insulator supports, instrument trans
formers, etc., should be insulated from structural steel framing and concrete
reinforcing bars.
Ground field may be placed in overburden in pool near spillway section of dam,
or in flood plain below dam. Copperweld grounding points in groups are recom
mended for this work. The total number of points to be determined by soil
conductivity test. If points are placed in pool they should be at or near the limit
of draw down elevation 990. If in flood plain, they should be driven in an earth
bench along edge of tailrace between dam and spillway discharge. This earth
bench should be about 10 feet wide and 1 foot above tailwater level. The loca
tion alongside tailrace is the better of the two, as it permits of easy test and
renewal of points and connections when necessary. It is also more convenient
for installing conduit in which to place cable leading to ground field.
One 80-ampere-hour storage battery with two 5 K. W. charging sets will be
required for plant.
STAND-RY PERIOD

During the time when water is being stored, no operation in Cove Creek power
house other than one of the house generators will be required. This unit will
operate 24 hours per day supplying power and light to plant and to families
resident there. The wafer required for unit will reduce storage, but may be
necessary, to maintain a small flow in the Clinch River, and this will be the most
practical and economical means of drawing it from reservoir.
If there is no demand for water in the stream below dam during shut-down
periods, power can possibly be obtained for operating plant and camp from some
local distribution system. This would involve construction of a small substation
and probably a few miles of light transmission line. Such a source of power is
not as reliable as the house unit, and the investment in apparatus plus line loss
and cost of power would represent a value in excess of that of water used.

FIRE PROTECTION

Main generating units should be furnished with top and bottom spray rings
connected to cooling water supply. Control valves for admitting water to rings
of each unit should consist of one gate and one quick opening lever operated valve
with drain between them. The quick opening valve should be inclosed in a case
having glass front.
Oil storage and filter room should be protected by a standard carbon dioxide
fire extinguishing equipment of size suited to requirements.

INITIAL HLLIN,J OF RESERVOIR

It may require several weeks to bring water level in reservoir up to the height
necessary for operating power units. During this period the lower Clinch will
receive no water from the region above Cove Creek Dam and it is, therefore,
assumed that impounding of water will not commence till the beginning of rainy
season has brought flow into Clinch from tributaries below Cove Creek to an
amount equal to minimum recorded discharge of the river at Clinton.

COST ESTIMATE
-.

It will be noted that attached cost estimate includes, besides items for dam,
power house, barge lift, spillway, and general expense, the cost for transmission
line from Cove Creek to Dam No. 2, Muscle Shoals. This line must be built in
conjunction with the Cove Creek plant, as it is by exchange of power, as well as
the discharge of water, that the storage plant can be made to fill the requirements
for which its construction is recommended.
340 MUSCLE SHOALS

Estimate of cost, Cove Creek Dam and initial transmission line to Wilson Dºn
COVE CREEK DAM

t
Item Quantity Unit cost Total

:
Main dam: - -

Cofferdams--------------------- '700 linear feet------- $125 per linear foot-- $87,500

Earth excavation.-- - 59,951 cubic yards--- $1 per cubic yard---- 59,951
Rock excavation---------------- 89,211 cubic yards--- $4 cubic yard-------- 356,844
Preparing foundation and grout- 165,242 square feet--- $0.40 per square foot- 66,095
1ng.
Concrete—
Mass----------------------- 628,145 cubic yards-- $10 per cubic yard--- 6, 281,450
Piers, arches, walls---- - 7,286 cubic yards----| $15 per cubic yard--- 109,290
Parapets, roadway finish--- 1,500 cubic yards --- $30 per cubic yard--- 45,000
Railroad track, foundation ---------------------- Lump sum---------- 125,000
drains, miscellaneous equip- |
ment. .

Roadway, lighting, and conduit----------------------- -----do--------------- 10 000

Total, main dam-------------- -------------------------------------------- $7,141, lºi
Spillway: |
Earth excavation.--------------- 373,584 cubic yards-- $1 per cubic yard---- 37+, ºr
Rock excavation--- - 162,759 cubic yards. $4 per cubic yard---- 651, ſº
Preparing foundations---------- 113,750 square feet--- $0.40 per square foot- 45,500
Concrete— -

Mass----------------------- 53,149 cubic yards--- $10 per cubic yard--- 531.490

Piers, arches, apron--------- 10,651 cubic yards--- $15 per cubic yard--- 159,7
Parapets, roadway finish--- 350 cubic yards------ $30 per cubic yard--- 10,500
Gates, gantry, tracks--------------------------------- -

Roadway, lighting, and power------------------------ d

Total, spillway---------------
Power house: -

Cofferdams--------------------- 350 linear feet------- $125 per linear foot-- -

Earth excavation.-- -, 33,427 cubic yards--- $1 per cubic yard---- 33,427

Rock excavation----- - 33,515 cubic yards. $4 per cubic yard.... 125,000
Preparing foundations--- --- 26,832 square feet---- $0.40 per square-foot
Concrete draft tube and intak | 61,324 cubic yards--- $12 per cubic yard--- 735,888
sections.
Steel penstocks----------------- -------------
Building structure------------------------------------
Sash, doors, skylights-----------------------------
Heating, ſighting, and power ----------------------
Tiling, painting, and finish- |----------------------
ng.
Turbines and governors-----------------------
Generators and exciters------------------------
Switchboard and low-tension ----------------------
wiring.
Transformers and high-tension ----------------------
equipment.
Auxiliaries--------------------------------------------
Head gates, gantry, and tracks.

Total power house----------------------------------|----------------------

Barge lift:
Cofferdams--------------------- 350 linear feet------- $125 per linear foot-- 43,750
Earth excavation.-- -'6,222 cubic yards. . $1 per cubic yard---- 5,2
Rock excavation----- - 15,511 cubic yards--- $4 per cubic yard---- 5-04
£ºfoundations---------- 24,000 square feet---- $0.40 per square foot
oncre
Mass reinforced------------- | 94,408 cubic yards -- $15 per cubic yard--- 1,415 lº
Superstructure and parapets, 1,226 cubic yards---- $30 per cubic yard--- º
Gates and machinery-----------!-------------------- º
Lift tank and machinery †: do------ º
Counterweights----- ------------ lºº
Chains------------ --- - º
Gantry and bridge - ----- -----------------

Elevator, pumps, and miscel- ----------------------

º
laneous equipment.
Total barge liſt----------------------------------------
Reservoir: -

Land º.º.7 acres--------

g
Building and structures------------------
Railroad relocation------
Highways and bridges.--------- --

Dikes and grouting, Ranges A, -----------------

B, and C. -

Cemetery relocation------------ ---------------

Total reservoir-------------------------
 MUSCLE SHOALS 341

'stimate of cost, Cove Creek Dam and initial transmission line to Wilson Dam—Con.
COVE CREEK DAM
Item Quantity Unit cost t Total

Feneral:

$1,046,000
1,614,000
200,000
750,000
- 150,000
Grading and planting-- 100,000
Garage--------------- 213,000
Office and clerical----------- 486,000
Superintendent and layout- 480,000
Engineering 827,048
Legal------ 106,083
Holidays-- ,000
Flood losses 100,000

Total, general $6,268, 131

34, 127,858.
Contingencies, taxes, insurance, and 3,412,785
interest during construction. -

Grand total cost of Cove 37, 540,643

Creek Dam.

INITIAL TRANSMISSION LINE TO WILSON DAM

Right of way----------------------- $500 per mile-------- | siz,000

Clearing---------------- $2,000 per mile------ 100,
Towers and extensions $1,000 each---------- | 1,750,000
Distribution and erection----- - - 218,750
Excavation for foundations--- 35,
Foundations-- *******--------- 140,000
Conductors--- - 8,580,000 pounds. $0.17 per pound----- 1,458,600
Distribution and stringing---- 1,500 miles------ $100 per mile-------- 150,000
Ground wires----------------- 1,029,600 pounds. $0.08 per pound----- 82,368
Distribution and stringing---- 500 miles------- $50 per mile--------- 25,000
Insulators in place------------ 210,000 units $3 per unit---------- 630,000
Insulator hardware----------- 10,500 Sets-- - $10 per set----------- 105,000
Carrier telephone equipment-------|---------------------- Lump sum---------- 15,000
Net total cost of initial trans-l-------------------------------------------- 4,834,718
mission line. -

Engineering, overhead, and con- |----------------------|---------------------- 1,208,679

tingencies 25 per cent.
Grand total cost of initial -------------------------------------------- $6,043,397
transmission line. -

Grand total cost of Cove ----------------------|---------------------- 43,584,040

Creek Dam and initial
transmission line.

ComPARIson of MAJOR FISKE's TENTATIVE ESTIMATE FOR Cove CREEK DAM WITH
Latest Figures

No detailed figures of Major Fiske's tentative estimate are on file. By anal

ogy from a rough breakdown of the total which Major Fiske made for another
Purpose it is possible to arrive at an approximation of the main features he con
sidered. To compare these figures with those contained in the detailed estimate
prepared by Major Watkins it is necessary to prorate the general and contingent
expenses of the latter among the main construction items. Based on such
methods the comparison is as follows:
Fiske Present
Item estimate estimate

Pam and spillway-------------------------------------------------------------- $5,000,000 || $12,140,000

Reservoir:
Flowage-------------------------------------------------------------------- 6,017,000
Highway relocation- ,000 3, 115,000
Railroad relocation. 000 3,685,000
Clearing-------------------------------------------------------------------- 000 2,433,000

8,000, 800 15,250,000

Power house-------------------------------------------------------------------- 7,000,000 6,600,000

Total power costs--------------------------------------------------------- 20,000,000 i 33,990, 000

Navigation facilities-------------------------------------------------------------
5,000,000 || 3,550,000
Grand total--------------------------------------------------------------- 25,000,000 37,540,000
342 MUSCLE SHOALS

Major COINER. I may say that this is all being published in House Document
No. 185. This is the report of Major Watkins, which is the second partial
report on the Tennessee River survey, and it is considerably more comprehensive
than the partial report of Major Fiske.
Mr. WRIGHT. You say this is a partial report?
Major COINER. Yes.
Mr. WRIGHT. And the Fiske report was partial?
Major COINER. Yes.
Mr. WRIGHT. This is partial?
Major COINER. Yes.
Mr. WRIGHT. When are we to know what it is going to cost?
Major COINER. The endeavor has been to transmit to Congress, as rapidly as
it was available the information developed by the survey, so that you might
know what was going on and how much more we had to do.
Mr. WRIGHT. You can appreciate, this has been going on for years and we
have reached the point where we want to legislate, and we want to legislate
intelligentlv, and we want to know the cost of this.
Major COINER. On Cove Creek, this is final. This is the final report on
Cove Creek.
Mr. WRIGHT. That is all.
Major COINER. There are some other elements of the survey of the Tennessee
River as a whole that have not been finished, but it is only a matter of a few
months.
Mr. HILL. Is the estimate at Dam No. 3 final? Is vour report on Dam No. 3
final?
Major COINER. As far as the c'osts are concerned, yes. Those are the final
costs on Dam No. 3. Now, you want these figures of cost for Cove Creek?
Mr. WRIGHT. Yes.
Major COINER. The main dam is $7,141,131.
The spillway is $1,8(51,875.
The power house, including the building and the machinery, is $4,903,457.
The navigation facilities fire S2, 034,516.
The reservoir, including the flowage rights, the land and the clearing of the
land where necessary, and the buildings, structures, and moving of rarlways, and
bridges and highways, is $11,318,745.
Mr. WRIGHT. What price did you estimate you would have to pay for the land?
Major COINER. The average price is $38.9i per acre.
Mr. WRIGHT. Very well.
Major COINER. That is for 54,525.7 acres.
Mr. MCSWAIN. You did not find what it was assessed for taxes on the books?
Major WATKINS. Yes; every plot of land was carefully gone over.
Mr. McSwAiN. What was it assessed for taxes, a dollar an acre?
Major WATKINS. I do not remember. Part of this is woodland.
Mr. McSwAiN. In some places they do not tax woodland at all.
Major COINER. In some places you would find it necessary to change the
location of railroads and highways. There are 9.46 miles of relocation of railroad
involved. That item is §2,734,149.
Mr W RIGHT. What is the mileage of highways?
Major COINER. The mileage of highways is not given here. The cost for
bridges and highways is $2,311,815.
f Mr. FISHER. Is the figure as an average from Cove Creek of from Clinton, in
the fixing of the railroads that would have to be built, and things of that kind,
close to the dam— is that figured from Clinton or Cove Creek.
Major COINER. This is the relocation of existing railroad lines.
i Mr. FISHER. Oh, yes.
Major COINER. Now, the necessary construction track to build the dam, that
is figured into the cost of the dam.
The construction railroads seems to be figured at $125,000. In addition to
the amounts stated above, Major Watkius' estimate includes $6,268,131 for
general construction costs, administration and engineering, and $3,412,785 for
-contingencies. The grand total in $37,540,643.
Mr. WRIGHT. Does that change in any way the installation at Cove Creek
Dam from the installation suggested by Major Fiske?
Major COINER. It is slightly lets, indicating that the economic installation
would not be quite as great as shown by Major Fiske's figures.
Mr. WRIGHT. Dam No. 2 is completed?
Major COINER. Completed.
 MUSCLE SHOALS 343

Mr. WRIGHT. In view of this comprehensive study which has been made of
the Tennessee River system, if Dam No. 2 had not been built, would you at this
time change the height of No. 2? Would it be built just as it IB, if it was to be
built now?
Major COINER. That is a rather difficult question to answer, because the
whole study has been based upon the assumption that Dam No. 2 was in there.
Mr. WRIGHT. I wanted to know if Dam No. 2 would fit in with this general
layout.
Major COINER. It fits in very well, as it is. Now, as to whether if Dam No. 2
had not been there and we were starting at the mouth of the river and going on up,
we would put No. 2 at exactly that height, it is difficult to say. That requires a
lot of study.
Mr. WIUQHT. Has it been necessary to make any repairs on Dam No. 2—the
dam itself?
Major COINER. Colonel Robins says there would not have been over 3 feet
difference, at the outside, if that dam was constructed now.
Mr. WRIGHT. Would it have been 3 feet higher or 3 feet lower?
Colonel RORINH. Higher.
Mr. WRIGHT. Have there been any repairs made on Dam No. 2?
Major COINER. Essentially nothing.
Mr. WRIGHT. Essentially nothing. Have you found any defects in it, in the
foundation, or anything about it?
Major COINER. No, sir.
Mr. W'RIGHT. It is all right?
Major COINER. All right.
Mr. WRIGHT. You have not found any leaks in it?
Major COINER. Well, yes; there were some places in the construction joints
that had to be sealed, but nothing but what you are apt to find in any sort of a
large construction of that kind.
Mr. WRIGHT. I am asking you because I have heard rumors that there were
defects about it, and I wanted to clear that up. I want to know whether it
stands as a completed proposition or a success.
Major COINER. Yes. If that be called a defect, there have been some
leakages through some of the construction joints, so that the water got down into
the inspection tunnel. It was not in any alarming quantities, but it was dis
agreeable to anyone who had to go through, inspecting.
Mr. WRIGHT. That has been remedied?
Major COINER. Yes.
Mr. WRIGHT. So that now it is a complete proposition and a success?
Major COINER. Absolutely.
Mr. WRIGHT. There is no trouble and there are no defects about it?
Major COINER. No, sir.
Mr. WRIGHT. It is a finished project?
Major COINER. It is.
Mr. WRIGHT. On Cove Creek, if the Government should not construct the
dam at Cove Creek, then the protection by the Government of other persons that
might build dams on the Clinch and the Tennessee Rivers would be regulated by
what the Federal Power Commission might do, acting under the Federal power
act?
Major COINER. It would.
Mr. WRIGHT. I will ask you as an expert if these are not the two provisions;
that the act is
Mr. McSwAiN. He could not be an expert on the act.
Mr. WRIGHT. This is applied every day. [Reading:/
"That the licensee shall maintain the proper works in a condition of repair
adequate for the purposes of navigation and for the efficient operation of said
works in the development and transmission of power, shall make all necessary
renewals and replacements, shall establish and maintain adequate depreciation
reserves for such purposes, shall so maintain and operate said works as not to
impair navigation, and shall conform to such rules and regulations as the com
mission may from time to tin e prescribe for the protection of life, health and,
property. Each licensee hercunr.'er shall he liable for all dan ages occasioned to
the property of other by the construction, maintenance, or operation of the pro
ject works or of the works appurtenant or accessory thereto, constructed under
the license, and in no event shall the United States be liable therefor."
That is one provision.
Major COINER. Yes.
344 MUSCLE SHOALS

Mr. WRIGHT. Now, continuing. [Reading:/

"That whenever any licensee hereunder is directly benefited by the construc
tion work of another licensee, a permittee, or of the United States of a storage
reservoir, or other headwater improvement, the commission shall require as a
condition of the license that the licensee so benefited shall reimburse the owner
of such reservoir or other improvements for such part of the annual charges for
interest, maintenance, and depreciation thereon as the commission may deem
equitable. The proportion of such charges to be paid by any licensee shall be
determined by the commission."
That provides for reimbursement; it provides for damages, and so forth; but
does it give the power commission, or is there any provision in the Federal water
power act, or is there any provision in the act, that gives the concern that con
structs a reservoir or dam power to regulate the water?
Major COINER. Yes.
Mr. WRIGHT. You think that it would fall under these provisions I have read?
Major COINER. Under the first one; I think so.
Mr. WRIGHT. So that that would be the only protection that these people
would have, would be what the Federal Power Commission might do for them
under the power to regulate?
Major COINER. Yes; the Federal Power Commission. As a matter of fact,
right now, in many of the licenses issued by the Federal Power Commission,
practically all that are on navigable streams, which come through the office of the
Chief of Engineers and come over my desk—that happens to be the desk that I
have down there— we recommend to the Federal Power Commission, and they
invariably follow our recommendations, the insertion in the license of a clause to
the general effect that the Secretary of War, if necessary, shall have the power to
regulate the discharge of water and the control of the pool in the interest of naviga
tion. That is all we arc concerned with at the present time on most of these
streams, the navigation; so that the Secretary of War has the right to regulate
the pool level, the amount that they can draw water down, in the interest of
navigation. Practically all the licenses issued to-day have such a provision in
them.
Mr. WRIGHT. In relation to regulating the navigation feature, it would neces
sarily regulate the power.
Major COINER. Yes. In such a special cane as this where power and navigation
are so inextricably mixed up, that provision would probablv have to be elaborated
a little bit, but 1 think essentially the same provisions would give adequate control.
Mr. WRIGHT. What would you say would be a proper charge for navigation on
Dam No. 3? How much of the cost of construction there ought to be charged to
navigation?
Major COINER. I would say $5,000,000.
Mr. WRIGHT. 85,000,000.
Major COINER. The question of what is an equitable charge for navigation is
largely a matter of opinion, and the best you can do is to base your opinion on
what appears to be reasonable in view of all the known facts.
Mr. WRIGHT. $38,000,000 being the cost of Dam No. 3, you think it would be
proper to take $6,000,000 off for navigation?
Major COINER. Yes.
Mr. WRIGHT. Now, how much for flood control?
Major COINER. That is even a more difficult question than that of navigation.
In navigation you have something to base it on. You can say it would be worth
about so much to canalize this river as a whole.
Mr. WRIGHT. Should there be anything taken off for flood control?
Major COINER. You put me in a rather an einbarassing position.
Mr. WRIGHT. I do not want to embarrass you, Major.
Major COINER. The question is this: The matter of equitable distribution of
costs, and what the United States should do in the direction of saving lives and
property of the people, and what part is really a local problem, is a proper matter
for the Congress to decide.
Mr. WRIGHT. I simply wanted to know whether the effect would benefit.
Major COINER. It would benefit. Of course, Dam No. 3
Mr. WRIGHT. And if so, about what estimate do you think ought to be placed
on that item?
Major COINER. Dam No. 3 is so far down the river that while it would have
some effect on the flood, its effect is nothing like that of some of the dams up the
river. It would have some effect in ameliorating flood conditions, but to give it
a monetary value, I would not like to give an off-hand opinion.
 MUSCLE SHOALS 345

Mr. WRIGHT. On Cove Creek, how much, if anything, should be charged off
there for navigation?
Major COINER. The estimate that has been made and the figure that has been
used is $5,000,000.
Mr. WRIGHT. $5,000,000 at Cove Creek?
Major COINER. Yes. What that was based on, I do not know. I have not
full details.
Mr. WRIGHT. Is anything contributed there for flood control?
Major COINER. Cove Creek would have a very appreciable effect on floods for
a considerable distance downstream. It fades out pretty well when you get
down to Dam No. 3. It is a hard question.
Mr. WRIGHT. But there is 400 miles between Cove Creek and there?
Major COINER. Yes.
Mr. WRIGHT. Now, going back for a minute to the Federal Power Commis
sion, as I understand the procedure, if an application is filed with the Federal
Power Commission for a permit, the commission is going to send it to the engi
neers of the War Department if it is on a navigable stream.
Major COINER. Yes.
Mr. WRIGHT. That is all, I believe.
Mr. MC.SWAIN. When the water would be released at Cove Creek, of course a
sluiceway would not be opened and the water allowed to run out, but the water
would l>e released through turbine wheels.
Major COINER. Yes.
Mr. McSwAiN. So that when the water was at the maximum height of 220
feet, there would be a great deal of power developed?
Major COINER. Yes.
Mr. McSwAiN. What is the total contemplated maximum installation at Cove
Creek?
Major COINER. One hundred and sixty-five thousand kilowatts.
Mr. McSwAiN. So that that takes care of the aggregate of primary power
there, and secondary power?
Major COINER. Yes.
Mr. McSwAiN. The maximum of primary power, 98 per cent, I believe you
say, is a little less than 9,000?
Major COINER. Yes; 8,700 horsepower.
Mr. McSwAiN. Eight thousand seven hundred horsepower?
Major COINER. That is run-of-river.
Mr. McSwAiN. I understand that is run-of-river; but you do go up to a maxi
mum of 165,000 kilowatts?
Major COINER. Yes; 220,000 horsepower.
Mr. McSwAiN. Two hundred and twenty thousand horsepower. Now, Major,
what device of navigation is contemplated to be installed? It is not the old-time
locks?
Major COINER. No. The device that is contemplated—that Major Wat kins
has figured on and has recommended—is what is known as a barge lift. It is
practically a hydraulic elevator for barges.
Mr. McSwAiN. Then, as a matter of fact, the loaded barges will be headed
down the river, will they not, and empty barges will come back up the river?
Major COINER. Under existing conditions the bulk of the traffic would be
downstream.
Mr. McSwAiN. That is, heavy cargoes, like coal and lumber and pig iron and
things of that sort; and it would certainly be light freight upstream?
Major COINER. Yes; the upstream movement would be relatively light.
Mr. McSwAiN. Yes. That is all, Mr. Chairman.
Mr. JAMES. Suppose that one concern at Dams Nos. 2 and 3 was incidentally
going into the power business, and then some other concern should get the
11 dams up there and Cove Creek, and they were also in the power business.
Could not the fellow up above make it embarrassing for the customers of the
fellow down below, if he wanted to?
Major COINER. It would be a possibility, unless there was some control on the
conduct of the man upstream.
Mr. JAMES. It would not only be possible, but it would be very probable,
would it not?
Major COINER. I doubt whether it would work out that way, Mr. James.
Major Watkins has studied that economic phase of it at considerable length,
and his studies indicate that it would pay everybody on the river—if there were
two companies operating or if there were three companies or a dozen companies
it would pay them in dollars and cents to operate the system as an interconnected
346 MUSCLE SHOALS

system, and they would really get more money out of it, if they worked the thing
to get the maximum benefit from each of the respective dams all the way along;
that it would really be a paying proposition in dollars and cents, much better
than if they tried any cut-throat tactics. Of course the upstream man can not
possibly develop power without letting water go, so that the downstream man is
bound to get some water. The man who has the power up above can not entirely
prevent the man below, even if he wanted to, from getting a very appreciable
amount of power; and the more power the upstream man develops, the more
water he has to let go. If the upstream man tried to play dog in the manger, he
would have saddled on him the heavy cost of all these storage projects up river,
from which he would not get much power at that place.
The advantage of a storage project is felt farther down the stream, as a rule.
Unless he came to some sort of an equitable agreement with the downstream
man, he would have to carry the cost of all the storage himself.
If, however, he did play the game with the downstream man, the downstream
man \vould carry part of the storage project costs of the upstream man; and I
really can not see how it would be possible for good business men to work the
thing in the way that you suggest.
Mr. JAMES. Well
Mr. HILL. Major, as you have well said, the engineers have been working on
this Tennessee River survey for a long time, have they not?
Major COINER. Yes.
Mr. HILL. I believe as far back as the Sixty-third Congress they made a
report known as House Document No. 20.
Then in the Sixty-fourth Congress there was House Document 1262.
In the Sixty-ninth Congress, first session, there was House Document 463.
All of those reports were on the development of power and navigation, and
incidentally flood-control phases of the Tennessee River.
In addition to that, on November 15, 1924, Major Tyler made a report par
ticularly on the estimated cost of Dam No. 3. I want to read here for the record,
and for your information too, and for the information of the committee, just
what he said. Major Tyler's report was dated November 15, 1924, and made a
recomputation of the estimated cost of Dam No. 3. He based his estimates on
"a 4-year period of construction, and largely on the cost of similar work at
Wilson Dam."
Of course we know that the work at Wilson Dam was done under the most
unfavorable conditions, at the highest peak, really, of war pressure. [Reading:/
"This estimate possibly is too high, yet every effort has been made to arrive at
a figure within which it can be built with certaiuty. The items for contingencies
may be excessive on so large a project, where foundation conditions have been
well exploded, and allowance to extra rock excavations has already been made."
In his estimates Major Tyler included such things as these. He went into the
greatest detail. He had an item of $2,490,000 for construction camps, and an
item of $2,071,000 for construction plant. He had about $600,000 for engi
neering and $2,316,000 for general expenses. This last item included an item
of $460,000 for holidays. Finally, he had a contingent item of $2,912,000 for
errors and omissions.
Mr. WURZHACH. What was the total?
Mr. HILL. His total was $32,500,000. That has been the understanding, I
believe, from the beginning. All these different reports they have made have
always estimated the cost of that dam at $32,500,000. As I say, that was
Major Tyler's estimate in this report, and he says he made perhaps an excessive
allowance.
Major COINER. Yes; and that fourth item that seemed to amuse you is really,
on a big project of that kind, a very appreciable thing.
Mr. HILL. The item for holidays is an appreciable item, is it?
Major COINER. Yes; because when you have a legal holiday with a large force
of men, all under pay, it mounts up to a large amount. You get no return in
work for that at all, and over a 4-year period, on a big construction job, your
holidays mount up to a lot.
Mr. WRIGHT. I do not believe you mean that you give them holidays your
self, but you mean legal holidays?
Mr. QUIN. You mean Congress gives them holidays?
Major COINER. Yes.
Mr. HILL. I take it that the Corps of Engineers do not grant these holidays?
Major COINER. No, sir.
Mr. HILL. During the past five years I think we have expended something like
$200,000 for the survey of the Tennessee River and tributaries that was appro-
! MUSCLE SHO.VLS 347

priated by Congress in 1923, $315,800, in 1925, and $275,000 in 1926. Am I

to understand that after all these years and the expenditure of all that money,
after all these different reports, we' now find that that estimate of $32,500,000
is wrong?
Major COINER. You must remember this, the estimate given by Major Tyler
is based on a different structure from the estimate Major Watkins now gives.
As I endeavored to explain to the committee yesterday, Major Tyler's estimate
was based on taking the dam proposed in the original Burgess report for the
improvement of Muscle Shoals, as I understand the matter, and modifying the
original cost estimate, based on the experience of the Muscle Shoals construction,
which of course was postwar construction instead of pre-war estimates, as the
Burgess estimates were.
These estimates were for a certain dam with a certain power installation.
The extensive surveys of the Tennessee River, to which you have alluded, have
shown that the fundamental basis of estimates should be changed. We should
have a higher dam, which involves more cost in the dam, and which involves
more flowage rights, the acquisition of larger territory for reservoir, and includes
a larger installation of power units with a corresponding increase in the size of
the power house and the number of main generators and auxiliaries you have
to buy, and electrical machinery is expensive. All those various items would
?o into this new estimate which were not in the Tyler estimate. I think the
Tyler estimate is a very excellent estimate of the structure he proposed to build.
I think that Major Watkins's estimate is equally an excellent estimate for the
structure he proposes to build. They are to fit different conditions.
Mr. HILL. But the Tennessee River, of course, is the same as it was when
Major Tyler and these other gentlemen made their estimate. Would it not have
been a mistake, then, for the Congress to have built Dam No. 3 as was proposed
.n these other reports?
Major COINER. I think that it would. I should qualify that to a certain extent.
Had the Congress built Dam No. 3 according to the dimensions contemplated
in the original Burgess report for Dams 1, 2, and 3, the rest of the system could
have been fitted to that-—to the dams that had been installed. It would have
meant a slight modification and probably an ultimate development not quite as
good as we would get this way.
Mr. HILL. It would not have been as good a development as you expect to
get this way?
Major COINER. No, sir; but it would have been possible to have fitted the rest
of the development to it, and it would have been pretty good, at that.
Mr. HILL. Would it have been a materially different thing?
Major COINER. Probably not very materially, because the rest of the scheme
could have been modified to fit. But the ultimate development would probably
have cost at least as much, and possibly a little bit more, and you would not have
quite the full benefit that you would get under this latest plan based on more com
plete information.
Mr. HILL. As to what degree, that might be a matter of opinion; but, never
theless, had we built that dam at the height estimated in the Burgess report, and
afterwards estimated for in these other reports, we would have made a mistake,
would we not?
Major COINER. I think it would have been a mistake.
Mr. HILL. Do you realize that this committee reported the Ford bill out of the
committee, providing for the construction of that dam, on those estimates, and
that the House of Representatives, by a very substantial majority, passed that
bill?
Major COINER: I do.
Mr. HILL. Providing for the construction of that dam?
Major COINER. Yes.
Mr. [I ii,i.. And of course the committee and the House of Representatives
acted on the reports from the engineers. How do we know, after all these long,
long years, that perhaps in future years you may not come in and say, " We have
gone over this thing again, and this dam ought not to be that high," or "It ought
to be a little higher, still? *'
Major COINER. It might be; and I think this whole thing shows more clearly
than it could possibly be brought out in any other way the great desirability of
making comprehensive studies of a river system before you start on it, where you
can. This shows the great wisdom of the Congress in adopting this legislation
for the study of the Tennessee basin as a whole rather than confining it to any one
particular part. It shows the wisdom of the adoption of that policy which was
348 MUSCLE SHOALS

started in 1925, and finally adopted in the last river and harbor act, of extending
surveys of this same general character particularly to all our navigable rivers.
Under House Document 308 of the last session the engineer department was
authorized to go into a majority of our streams throughout the country, and do
exactly this same thing; to work out what is the best plan for the development of
that stream, not for navigation alone, although giving that the preference, but
also for power and flood control, and for irrigation where irrigation is applicable.
The quicker we can get those surveys started and begin to get this information as
to what is the best thing for the system as a whole, the better off we are going to be.
Mr. HILL. I believe you said yesterday that the raising of the height of this
dam would not have any material effect on navigation.
Major COINER. The reason I said that is this. The upper end of the pool
runs into another rapid, and you have a pretty steep slope of the river at that
end of the pool. The raising of the lower end of the pool extends the slack water
but it does not go very far upstream, because it runs into this rapid and you
can not move you dam very much at the other end.
Mr. HILL. You are going to raise it 13 feet, are you not?
Major COINER. The normal pool level is
Mr. HILL. I am talking about the height of the dam. You are going to raise
it from 38 feet to 51 feet; is not that it?
Major COINER. The height of the dam, proper, considering it as a power
dam, is almost exactly 60 feet. We figure on a surcharge on this for flood con
trol purposes, and to assist the control of the river in time of flood by catching
the peak of discharges. That would also assist in maintaining your head for
power—it would give a greater head.
Mr. HILL. Let me ask you, what is going to be the height of this dam as you
propose it in your report? I thought it was going to be 51 feet. That is what
I got yesterday.
Major COINER. Major Watkins is more familiary with the details of these
studies than I am.
Major WATKINS. The maximum static height is 55.9 feet. The maximum
pool elevation above Wilson Dam pool would be at present 55.9 feet.
Mr. HILL. I am asking about the height of the dam from the botton to the
top of the concrete.
Major COINER. The concrete, of course, will extend above that. You will
have to get the detailed plans of the dam. We figure from one pool level to
another pool level; that is, what we have to lift over.
Mr. HILL. How did I get this 51 feet? As I understood it, 38 feet was to be
the height of that dam.
Major COINER. That is the height between the normal pool of the former
dam and the pool of the Wilson dam. Thirty-eight feet is the available head for
power. Now, with the new dam, that difference in the pool levels is 51 feet instead
of 38 feet.
Mr. HILL. Of course the raising of this dam is going to raise the pool behind
it; but it is not going very far back, is it; practically the same distance?
Major COINER. But the increase in the pool elevation does not go back pro
portionately to the increase in head.
Mr. HILL. Here is what I am getting at. Your pool is not to go back appre
ciably. That water has pot to go somewhere. It can not go straight up. It is
going to the sides, is it not?
Major COINER. You just take that much more water and impound it behind
your dam.
Mr. HILL. You say you are going to impound it. That raises your back water;
and that is not going further behind and it has got to go more on the sides.
It is going to mean considerably more flowage area?
Major COINER. Yes.
Mr. HILL. You have gone pretty thoroughly, I think, into this computation
of flowage.
Major COINER. Yes.
Mr. HILL. Are you familiar with what the engineers said in Document 1262
about the fact that if they raised this dam higher, it would destroy a great deal
of propertv and improved real estate?
Major COINER. That statement I know was made.
Mr. HILL. Do you think that statement is in error, and, if so, what facts do
you have to show that it is in error?
Major COINER. I will have to ask Major Watkius to answer that questioa in
detail. He has made a close economic study to see whether the increased height—
the increased power that you get from that—will justify the increased flowage
 MUSCLE SHOALS 349

cost, and he has come to the conclusion that it would justify the incurring of
these additional costs.
Mr. HILL. I am not so much interested in the cost, but there are a lot of
folks in Alabama, and if I vote to tuin a lot of water loose on them, then they
may come here, and I do not know what they will do. It has always been my
understanding, taken from House Document No. 1262, that if you raised that
dam. you would very likely flood the town of Decatur.
Major WATKINS. No, this will not flood the town, proper, so far as that is
concerned. There is no danger of that. But there is another feature which
comes into this thing, too. In the former design the question of flood control
had not been worked out, you see. Now, with the system as laid out you will
have a material effect on the flood height, so that you will not get a flood height
there when the dam is built, so great as the former dam anticipated. If Cove
Creek comes in, that will help to reduce the flood height. I have not decided
the thing, but I doubt whether the former flood, at No. 3, as the dam was designed
then, would have done any less damage; and then we have provided for a sur
charge for the control of the floods, to protect the property from floods.
Mr. HILL. You do not think, then, that the increase in height of this dam is
going to injure any of the folks down thcie?
Major WATKISS. No.
Mr. HILL. In other words, you arc not giving me, in this, only a partial,
offhand guess, but you are giving me what is an engineering fact, because you
have worked this thing out?
Major WATKINS. I have gone very carefully into this question of the flood
control that you can get there from spillways along the river. With that whole
series of dams you would increase the flood heights unless provision is made to
take care of the flood waters. In order to keep down the flood and increase your
power, and avoid overflowing of the land, theie is reservoir control and certain
spillway regulation provided in the plan. You see, under the Burgess plan we
had no system which would help to control the floods, whereas with this plan,
there will be other things in the river that will help.
Mr. HILL. Now, as to the question about these others up the river; we do not
know when they will be built.
Major WATKTNS. No; we do not.
Mr. HILL. Dam No. 3 will be built right away, and Cove Creek, you may
say, will be built right away. Are those people going to be subject to floods
from this river until these upper parts of the system are constructed? We have
no assurance that they will ever be built.
Major WATKINS. The dam is designed to provide for spillways to about the
same elevation as the crest of the former dam. I have decided on spillways for
two purposes. One is so that I can help in flood control by having an earlier
discharge. Answering your question, until these other dams are built vou will
have the same effect by using the spillways as from the former dam. Without
a spillway you could not.
Mr. HILL. Does your report go into that in detail?
Major WATKINS." Yes; I have gone into detail, and have given you the size
of the dam, and explained all about the question of flood control.
Mr. HILL. And you have worked it out as an engineering fact that you will
not flood any of these towns?
Major WATKINS. I have worked it out to show you what you can get.
Mr. HILL. And to also show, I guess, how much more flood acreage your main
dam will take?
Major WATKINS. Yes; that is all worked out.
Mr. HILL. Will this new dam back this water along up the river any?
Major WATKINS. It will back it up along the river.
Mr. HILL. Will that flood some farm land on the river?
Major WATKINS. It will flood a certain amount of farm land. The former
dam would have overflowed land in the lower sections. The increased height
of the flood charge will not greatly increase it, because it is about a bluff, anyway.
You take it at the upper end of the former pool, it would increase the overflow,
some, but to counteract that we have flood regulation by the spillways, and you
can cut it down, so that there should be no need to flood the land there, and it
will actually be less than from the former dam. The overflowage of the plain
should be less, especially when the system is in, than it is to-day.
Mr. HILL. You say that you can control that. Who is going to control that?
If some lessee or some third party comes there and he wants to use that dam to
his own maximum benefit, how are you going to control him?
101229—30 23 f
350 MUSCLE SHOALS

Major WATKINS. For the administration of navigation we have engineer

districts established. In the provisions for the construction of the dam you can
require that they operate the spillway to help the district engineer regulate the
flood control. That is a precaution that can very readily be provided, and under
State law you can require the same thing.
Mr. HILL. As I understand, you said you recommended the raising of the
height of this dam due to the fact that it was more economical from the stand
point of power.
Major WATKINS. It is worked out from the standpoint of water power, naviga
tion and flood control; but the power is one of the essential benefits, because you
get by surcharge, a great increase in power.
Mr. HILL. What do you figure that primary power there to be, about, 27,000?
Major WATKINS. That is the run of river power now. When you put in
storage reservoirs, you greatly raise this power. Furthermore, in the develop
ment of the project you would also put in steam auxiliaries, so that you can not
look upon the primary power now there as being the controlling power in any
wav whatever as to what you are going to develop at that dam.
Mr. HILL. You take that as a basis, the increase of 34 per cent, I believe you
said it was?
Major WATKINS. Approximately that much.
Mr. HILL. That would give you only 9,000 extra horsepower, at a cost of
about $5,500,000, which would be about $600 per horsepower, would it not?
Major WATKINS. As I stated, if you are going to develop your horsepower
where theee high dams cost so much, you can not count on the run of river pri
mary power alone. You will have to develop more power than the present pri
mary. The primary is a matter of economics that has nothing to do with what
any company having the dam would count on.
Mr. HILL. But is not the question of the power you are going to have there a
rather indefinite proposition? You can not tell when this river is going to be
developed. We have been building this Dam No. 3 for 10 years, have we not?
You do not know when the river is going to be developed.
Major WATKINS. You would not put up $32,000,000 for a dam and build it
just on this small amount of power. On that small amount of power that the
project would have, it simply would not pay. You have to develop more power
than the low prime would take.
Mr. HILL. The truth is that Dam No. 3 is such a poor power preposition
that it is the only one on the Tennessee River that no power company has applied
for?
Major WATKINS. I think perhaps one of the reasons is that it has been under
consideration ever since people have been applying for power. That is, it has
been under consideration by the committees in Congress for the Government to
build it.
Mr. HILL. Yes; but they have applied for Cove Creek, and that has been
under consideration by Congress. The truth of the business is that Dam No. 3
is a poor power proposition, is it not?
Major WATKINS. No.
Mr. HILL. That is what I have understood it to be, and that is why none of
the power companies that are grabbing everything they can here and there,
have not applied for that.
Major WATKINS. I have made economic studies on Dam No. 3. When you
develop storage up the river, that is enough to help in regulating power and
permit more power to be developed economically and install a certain amount of
steam, the studies indicate that it is a fairly good investment.
Mr. HILL. But right in that connection, can you tell us when you arc going
to get this developed?
Major WATKINS. My study indicates that the thing that the power develop
ment on the Tennessee need's is storage regulation to enable them to develop
economic power. 1 think they are going to go into storage soon. Then it will be
economic to develop a great deal of power at Dam No. 3 as soon as that goes in.
Mr. HILL. As soon as what goes in?
Major WATKINS. Cove Creek and the other projects there, especially those on
the Clinch.
Mr. HILL. You mean the three dams?
Major WATKINS. Yes. It would be possible to develop a large amount of
power with Cove Creek.
Mr. HILL. You have 9,000 horsepower there, and when the Cove Creek is
developed, then you think Dam No. 3 will become a good proposition?
 MUSCLE SHOALS 351

Major WATKINS. It will be possible to develop economically there, and much

larger. Now, when you get into the other projects on the Clinch system, it will
be necessary, from my study, to develop up around the average annual flow.
In other words, you can increase the installation greatly and develop a large
amount of power at Dam No. 3, enough to make it a good paying project.
Mr. HILL. Let me ask you this question. I believe the engineers have esti
mated that you can build about an 80,000-horsepower steam plant there for about
$6,000,000, can you not?
Major WATKINS. A steam plant to-day costs about $100 a kilowatt.
Mr. HILL. Will you translate that, please?
Major COINER. That is about $6,000,000 for 80,000 horsepower.
Mr. HILL. Keeping that in mind, it is an interesting fact to note that in the
past two months the Alabama Power Co., which of course is interested in getting
all the cheap power it can—they are in that business, and that is all right—have
gone into the Warrior coal fields in Alabama and started to put up a great steam
plant.
Major WATKINS. Yes.
Mr. HILL. And then you have to keep that in mind if your hydroelectric power
be worth anything, it has got to be certainly as cheap as the steam-plant power.
Major WATKINS. I have made an economic study of all the factors in develop
ing power, putting it in combination with steam on the projects all along the
Tennessee River from these various groups. I have made a rough estimate of the
system as a whole, and have worked out the output you could produce, and the
amount of steam installation you would require for each project, what it will cost,
and what the power will cost, etc., and have run it down to the possible economic
development you can get.
Mr. HILL. Have you got that worked out?
Major WATKINS. That is in my report.
Mr. HILL. In this report here?
Major WATKINS. In my report of partial survey that the committee has now.
Mr. HILL. You have got that worked out?
Major WATKINS. Yes.
Mr. HILL. Let me ask you one other question, and then I am not going to
detain you any longer. I have got some questions here that I am going to read
off to you, and you can take time in answering them, and put your answers in
the record. [Reading:/
"1. What capacity would a steam plant auxiliary at the Wilson Dam have to
have to equal the auxiliary value of the regulated flow from Cove Creek at the
Wilson Dam?
"An 80,000 horsepower steam auxiliary at Wison Dam would increase the
prime power at that project to approximately the same prime power as that pro
vided by the Cove Creek Reservoir, but it would not equal the regulation fur
nished by Cove Creek Reservoir because the Reservoir increases not only the
prime power but also the use factor.
"2. What capacity would a steam plant auxiliary at the Dam 3 have to have
to equal the auxiliary value of the regulated flow from Cove Creek at Dam 3?
"A 50,000-horsepower steam auxiliary at Dam 3 would increase the prime
power at that project to approximately the same prime power as that provided
by the Cove Creek Reservoir, but it would not equal the regulation furnished
by Cove Creek Reservoir, because the reservoir increases not only the prime
power but also the use factor.
"3. How much secondary power at Wilson Dam and how much secondary
power at Dam 3 will be made primary by the construction of other reservoir
regulating dams on the tributaries of the Tennessee, and on what tributaries arc
such reservoirs possible?
"Reservoirs other than Cove Creek, War Ridge, and Cumberland Gap, are
available on all major tributaries of the Tennessee, including the Emory, Holston,
French Broad, Nollichucky, Pidgeon, Little Tennessee, Little River, Hiwassee,
Elk, Bear, and Duck, which have been investigated by the survey, and it is
believed there are other sites available on the Soquateline, Paint Rock, and other
tributaries, which have not been investigated by the survey.
"The studies indicate that the amount of secondary power which would be
made primary by the operation of the reservoirs of the entire system, with normal
draw down, would be approximately as follows:
 352 MUSCLE SHOALS

Hydroprime, Hydroprime, Secondary

unregulated regulated 98 niadfi
96 per cent of per cent of primary
time time

/iQTStpOIf£' Horsepower Hort€pon-er

Dam N'o. 2 84 000 2WJ 000
Dam N'o. 3 37 500

"However, the reservoirs so greatly increase the use factor of the p^wer
projects that practically the entire stream flow at the projects may be economi
cally converted into power with the aid of a reasonable amount of auxiliary steam
power.
"4. When all possible reservoir regulation is obtained on the Tennessee by
building reservoir dams, how much of the secondary power at the Wilson Daiii
and how much of the secondary power at Dam 3 do" you estimate will finally Ix
possible to be made primary and can you estimate the total steam horsepower
installation that would be required at the Wilson Dam and Dam 3 to equal the
total secondary power made primary at Wilson Dam and Dam 3 when all of the
possible auxiliary regulating reservoirs are built on any of the tributaries of the
Tennessee?
"See answer to question 3. The amount of primary power at Dam 2 and Dam
3 and the regulated hydroprime power made possible by the use of the reservuin
of the entire system and auxiliary steam is approximately as follows:

Hydroprime, Hydroprime, Secondary

steam unreg steam regu made
ulated W per lated 98 per primary
cent of time cent of time

Honepotcer Horacpover Hontpevc'

Dam No. 2 84 000 4rt) 000 316 000
Dam No 3 37 600 -T- QU0 207 VI

"The amount of steam power at Dam 2 and Dam 3 which would be required
to equal the total secondary power made primary, when all possible regulating
reservoirs are built may be answered as follows: 176,000 horsepower at Dam 2 and
93,500 horsepower at Dam 3 would permit the same amount of secondary power
to be made primary at these sites, as would be actually made primary by the
reservoirs of the entire system, but this amount of steam power does not equal
the regulation provided by the reservoirs due to the fact that the reservoirs
so greatly increase the use factor at the project by converting high flow to low
flow, and by permitting flow above the prime at individual projects to be con
verted into prime power in the system, and due also to the fact that the studies
indicate that reservoir regulation can be furnished at much less cost than steam
regulation.
"5. With nitrate plant No. 2 steam plaut capacity increased from 80,000
horsepower to 120,000 and with as complete regulation of the flow of the river
from auxiliary reservoir dams as can be expected, what do you estimate would
be the maximum primary power at Dam 3 when the most complete regulation
of the How of the river is obtained from all possible auxiliary regulating reservoirs?
" With the steam plant at nitrate plant No. 2 increased to 120,000 horsepower
and with complete regulation of the river by reservoir, the maximum prime power
at Dam No. 2 would be 380,000 horsepower if the steam plant was used with
Dam 2 alone and the maximum prime power at Dam 3 would be 251,000 horse
power if the steam plant was used with Dam 3 alone.
"6. If, as I understand, your report indicates that power projects on the Ten
nessee may be regulated for less cost by storage than by steam auxiliary and
these reservoir auxiliaries are very much needed, can you give any information
about the capacities of other reservoirs on other tributaries than the Clinch?
"The capacities of reservoir with normal drawdown use! in the preliminary
reservoir operation on the several tributaries of the system, expressed in day
second-feet, which indicates the capacity for stream-flow regulation, and in
 MUSCLE SHOALS 353
kilowatt days, which expresses the potential capacity for power regulation, is as
follows:

Tributaries Day second- Kilowatt

feet days

Clinch L 643, 526 75 448,000

Emory- - - - - - - 115,000 2,964,000
678 618 43,578 000
449 453 45 762 000
180,546 22,812 000
Big Pigeon 145 765 19 060 000
Little River . - -- . 100,000 4 237,000
Liute Tennessee 416, 765 34, 414, 000
Hiwassee 575, 669 46 955, 000
Elk 92 470 3 037 000
Rear . 26 000 260,000
Buck 291,000 3,563,000

"Results obtained by the preliminary reservoir operation indicate that when

operating in the system it will pay to draw reservoirs down to a greater extent
than would be the case for reservoirs operated for individual power projects,
and that the capacity of the reservoirs may be economically increased approxi
mately 30 per cent by a drawdown greater than that normally used.
""7. In Major Fiske's report, as I understand it, he reported that the low flow
primary power at the Wilson Dam and Dam 3 would be just about doubled by
the regulation from Cove Creek. Does your report confirm Major Fiske on this
point?
"Major Fiske's preliminary report of 1926 stated that the low-flow primary
power at Wilson Dam and Dam No. 3 would be just about double, due to storage
reservoirs on the Clinch River system, which includes War Ridge and Cumber
land Gap as well as Cove Creek. Preliminary studies made by the Chattanooga
office since Major Fiske's departure confirm Major Fiske's estimates. Cove
Creek alone would increase the power about 50 per cent.
"8. Does your report show that a greater amount of secondary power would
be lifted to primary at the Wilson Dam and Dam 3 than Major Fiske reported,
and if so, how much?
"See answer to question No. 7.
"9. How much of the total installation proposed at the Wilson Dam power
station do vou estimate can be made primary power with both steam and reservoir
auxiliaries?
"The preliminary studies indicate that when the entire system of reservoirs
has been completed, approximately 460,000 horsepower primary output may be
economically developed at Dam 2 with the aid of steam auxiliary.
" 10. What is the total installation you recommend at Dam 3 expressed in
horsepower, and of the total installation at Dam 3 how much do you estimate
can be made primary power with both steam and reservoir auxiliaries?
"Preliminary studies indicate that when the entire system of reservoirs has
been constructed it will be possible to economically develop at Dam 3 approxi
mately 240,000 horsepower primary output with the aid of steam ausiliary.
The installation which should be provided at Dam 3 for this output would de
pend upon the load factor at which this power is to be furnished to the market
and the amount of regulation provided by storage. With the reservoir regula
tion covered by the partial report submitted to Congress and with a 50 per cent
load factor, the total installation which should be provided for the development
of this power at Dam 3 would be approximately 485,000 horsepower, of which
approximately 385,000 horsepower would be hydro aud 100,000 horsepower
would be steam. "
Can you give me most of the answers to those questions?
Major WATKINS. I think I can give you all of them.
Mr. JAMES. Suppose we have you get those in hand for us to-morrow.
Major WATKINS. I have prepared all these things, worked out for certain
combinations, if you will permit me to submit them in those combinations.
The first combination is a system based on Cove Creek, Kingston, Melton
Hill and Clinton, Hales' Bar aiid Dam No. 2. I have that system all worked
out.
354 MUSCLE SHOALS

Mr. JAMES. Mr. Hoffman would like to ask some questions, and I suggest
that we take a recess now until 10 o'clock to-morrow morning, and then let Mr.
Hoffman ask his questions.
Mr. HILL. I have one more question. When you set out in answer to Judge
Wright's questions the items of cost of Cove Creek Dam, set them out fully in
detail; for instance, for the transmission line in there, give that.
, Major WATKINS. The transmission line?
Mr. HILL. How much have you in there? Give that.
Major WATKINS. Yes.
Mr. HILL. How much is that?
Major WATKINS. $6,000,000.
Mr. HILL. Set that out in detail. I mean, do not say "Flowage rights, so
many places." Tell us where those flowage rights are, and the whole thing;
whether it is wooded land or farm land, and whether it is in Tennessee or in
Alabama or wherever it may be; give us all the information you have, will you?
Mr. JAMES. We will take a recess now until 10 o'clock to-morrow morning.
(Thereupon, at 1 o'clock p. m., the committee adjourned until to-morrow,
Thursday, March 1, 1928, at 10 o'clock a. m.)

HOUSE OF REPRESENTATIVES,
COMMITTEE ON MILITARY AFFAIRS,
Thursday, March 1. 1918.
The committee this day met, Hon. W. Frank James presiding.
- Mr. JAMES. The committee will come to order. We will proceed with the
testimony of Major Coiner.
STATEMENTS OF LIEUT. COL. THOMAS M. RORINS; MAJ. RICHARD T. COINER.
[ ^ ti . \ AND CAPT. HUGH P. ORAM, CORPS OF ENGINEERS
Mr. WRIGHT. On what height was the estimate of Major Fiske on the Cove
Creek Dam based?
Major COINER. Two hundred and twenty-five feet.
Mr. WRIGHT. And the estimate you are submitting here is based on 220 feet?
Major COINER. On 220 feet; yes, sir.
Mr. HOFFMAN. Major, the statement was made on Tuesday that the new
estimated cost on Dam No. 3; that is, the increase of $5,500,000 over the figures
previously given the committee by War Department engineers, would provide
for raising the dam and for the betterment of the entire Tennessee River project,
and that it would also increase the horsepower 34 per cent. That is the horse
power that can be developed at the project?
Major COINER. At the project; yes, sir.
Mr. HOFFMAN. Assuming that tin's bill we are now considering is enacted, and
that private enterprise takes over the operation of Muscle Shoals, would not the
leasing corporation be the real beneficiary of the improvement brought about by
this increased cost?
Major COINER. It will.
Mr. HOFFMAN. In your opinion, is that work contemplated by the increased
cost in the estimate absolutely essential for the development of the Tennessee
River as a whole?
Major COINER. No; it is not absolutely essential for the development of the
Tennessee River, but it is absolutely essential for the maximum development of
the river system as a whole. That is to say, you can get a reasonably satisfactory
development otherwise, but you will not get as good a development. In the long
run, you are not getting as great a return on your investment.
Mr. HOFFMAN. As a purely business proposition, would you say that this work
can be justified in the event that the private corporation making this proposal
would decline to assume the interest charges and the increased amount, and to
amortize that amount less an increased amount that properly could be deducted
for navigation and flood-control purposes?
Major COINER. That is looking at it from the viewpoint of the United States;
as a business investment by the United States, should we go in there and spend
five or six million dollars more than the lessee would be willing to pay a return on;
is that the proposition?
Mr. HOFFMAN. Yes.
 MUSCLE SHOALS 355
Major COINER. That introduces an element of uncertainty, and it is really
a little difficult to make a categorical answer to it. The lessee is going to profit
by the additional investment, anyway, and I should be inclined to say to the
lessee that we will not go ahead unless you are willing to carry this additional
expenditure.
Mr. HOFFMAN. The idea is that there is an increase of $5,500,000?
Major COINER. From which they would get a return.
Mr. HOFFMAN. Is that improvement contemplated by that increase so essential
to the development of the Tennessee River as a whole that we might be willing
to waive the income that might accrue by reason of the additional benefit to be
derived by a leasing corporation?
Major COINER. The whole plan is based on what is the proper economical
development of the Tennessee River from a business standpoint. I rather
doubt whether the United States could afford to put an additional expenditure
of $5,500,000 in there on which the lessee was not going to pay any return.
The value would be there all right, but the United States would have difficulty
in getting it out if nobody would pay for it. We would be just carrying that
additional charge on which we would not get a return.
Mr. HOFFMAN. Major, a statement was made on Tuesday that the power
developed at Cove Creek by reason of its distance from Muscle Shoals—is that
about 240 miles?
Major COINER. About that.
Mr. HOFFMAN. Could not be transmitted economically for actual fertilizer-
manufacturing purposes. And the statement was made that the power, how
ever, could be transmitted to the area that Muscle Shoals is feeding.
Major COINER. That statement, which I think I made myself, should be
qualified to a certain extent. It would be entirely feasible, practicable, and
economical—that is, the loss would not be so great as to make the operation
unduly costly—to transmit that power straight to Muscle Shoals, to the nitrate
plants, if that was the place where the power was wanted for use.
However, if Muscle Shoals were being operated as a power property, and the
power being transmitted to some industrial center, it might be that part of this
power from Cove Creek need not go back to Muscle Shoals. It might be sent
to some other place that the rest of the Muscle Shoals power was being sent to.
So you would not necessarily transmit that power to Muscle Shoals unless
that power was being used right there.
Mr. HOFFMAN. The cost stated yesterday would be about $6,000,000.
Major COINER. $6,000,000 for the transmission line; yes, sir.
Mr. HOFFMAN. The thing I want to get at is this. In order to reach a maxi
mum of profit or return from the Cove Crock investment, as a business propo
sition, a greater degree of profit could be realized in utilizing that power at
different points in the area that Cove Creek could supply rather than transmit
it up to Muscle Shoals to be used in the manufacture of fertilizer.
Major COINER. No; the greatest value of the power developed at Cove
Creek and at the three dams below in the Clinch River would be to use it during
the period of low flow of the river, when the output from the properties down
below at Muscle Shoals is at the lowest ebb, using this power from the upper
dams to fill in that gap. This would be using it really as an auxiliary instead
of the steam auxiliary, and probably also still use steam to a certain extent.
Part of the power of the system as a whole might possibly be used in the vicinity
of Knoxville or that general section up there. But you would really have to
consider the system as a whole to determine the exact use of the output from
any particular plant. I think that the greatest value of this power developed
at the upper works is in filling in the gaps in the supply from the lower plants.
Mr. HOFFMAN. When Judge Wright was questioning you yesterday I under
stood you to say that there had been no serious defects found in the Wilson
Dam construction since its completion?
Major COINER. That is correct.
Mr. HOFFMAN. In the hearing on the Boulder Dam proposition there was a
photograph introduced showing the erosion at the toe of the apron, instead of
following the overflow, as at Wilson Dam.
Major COINER. Yes; but that is not a structural defect in the dam. The
effect of the overflow is shown by that picture correctly. The overflow eroded
the material at the lower edge of the apron at the toe of the dam and some
corrective work had to be done to prevent its extending farther. That is really
a minor matter in a project of that kind.
Mr. HOFFMAN. Do you know anything about the cost of that work?
Captain ORAM. I should say it was in the neighborhood of $80,000.
356 MUSCLE SHOALS

Major COINER. That is really maintenance instead of construction cost.

Mr. HOFFMAN. There was a 10-foot retaining wall built there at the toe of the
apron?
Major COINER. Yes.
Mr. HOFFMAN. That is the work done by Colonel Tyler?
Major COINER. Captain Oram was right there at the time, and is entirely
familiar with the whole thing.
Mr. HOFFMAN. Is it true that it had cost over $180,000?
Captain ORAM. I can not be sure about that.
Mr. HOFFMAN. Will you get those figures and put them in the record?
Major COINER. Yes.
(The total cost was $87,778, including overhead charges.)
Mr. HOFFMAN. Have you any figures to show what the cost of repairs aggre
gated at the Wilson Dam in any one year, say in 1926 or 1927?
Major COINER. I remember that during the calendar year 1927—I happen to
have those figures in mind— for maintenance and operation the total cost was
$266,000.
Mr. SPEAKS. What proportion of that would be maintenance?
Major COINER. Relatively a small part.
Captain ORAM. It is very hard to say what the difference is on account of
buying so many spare parts during that time, that being the first year, but the
maintenance, I should say, would be about one-third and the operation two-thirds.
Major COINER. Captain Oram is the district engineer at Florence and is in
immediate charge of that work, and he says he would estimate that the operation
would be two-thirds of that figure and the maintenance one-third.
Mr. HOFFMAN. What was that figure?
Major COINER. $266,000 was the expenditure during 1927.
Mr. HOFFMAN. One-third you think could be properly chargeable to repairs?
Major COINER. Yes; if you call it repairs. It is upkeep.
Mr. HOFFMAN. I think "it is important for us to know that, because it is my
understanding that the limitation for repairs as established in the bill before us
is $35,000 in any one year, to be assumed by the leasing corporation.
Major COINER. As Captain Oram explained to me informally a considerable
part of the maintenance cost last year was taken up in the accumulation of spare
parts for different things, expenses that probably would not arise again. The
plant being so young they had not accumulated much of that material.
Mr. JAMES. "Can you put an itemized statement in the record showing what
the spare parts are and how much they have of them?
Major COINER. We can do that.
Operation and maintenance cost at Wilson Dam for calendar year 19H7
Operation $163, 389 Plant maintenance:
Labor $21,306
Supplies 8,294
Plant rental.. 10
29,610
Camp maintenance . 5,959
Repairs:
Labor 24,604
Material 2,296
Spare parts 300
Plant rental..
27,206
Spare parts purchased but not
used 13,000
Net opcrat ion costs 163,389 Net maintenance costs 75, 775
District office overhead 19, 305 District office overhead 7, 695
Total operation costs 1 82, 694 Total maintenance costs.. 83, 470
Operation 182, 694 Percent
Maintenance 83, 470
Maintenance costs were. 31.4
Operation and maintenance. 266, 164 Operation costs 6S. 6
 MUSCLE SHOALS 357

Mr. HOFFMAN. Do you know when the first examination was made of the
Wilson Dam after it was completed aud operating?
Major COINER. The first examination made of the dam?
Mr. HOFFMAN. Yes.
Major COINER. No, I can not say that because the whole structure is under
constant observation and inspection and is being gone over all the time. I do
not know that there ever has been a formal inspection of the properties.
Mr. HOFFMAN. There is no definite policy established for an inspection of the
work?
Major COINER. It is a constant matter. It is gone over all the time and the
condition of it is noted. If any little thing needs correction it is corrected right
then.
Mr. HOFFMAN. Is that done by men on the job?
Major COINER. That is done by the operating force that is right there.
Mr. HOFFMAN. You do not have separate inspections made?
Major COINER. No; we have never found that sort of thing necessary.
Mr. HOFFMAN. So far as you know, there is no immediate needs of repairs.
Would you say that the Army engineers feel satisfied about the rock structure
and the condition of the dam?
Major COINER. We do. I feel it is in very excellent shape.
Mr. HOFFMAN. At the time of the first examination of Dam No. 2, after its
completion and operation, did the benchmarks set in the downstream face of the
dam check as to elevation and alignment?
Major COINER. There are no benchmarks in the downstream face of the dam,
as they are not considered to be necessary in structures of this type.
Mr. HOFFMAN. If they were checked, did they show any variation in alignment
or level between the first and last test? How much?
Major COINER. There has been no movement of the dam either in line or level,
other than the slight seasonal movement of the individual blocks, or sections of
tbc dam between expansion joints, due to expansion and contraction with tem
perature changes.
Mr. HOFFMAN. Were the benchmarks along the crest of the dam checked
either on the roadway of the body of the structure, and did they disclose any
variation in alignment?
Major COINER. It has never been considered necessary to check the bench
marks on the roadway of the dam, for slight seasonal movements do occur in the
individual blocks of structures of this kind due to expansion and contraction with
temperature changes.
Mr. HOFFMAN. Was the water gaged in the inspection tunnel? How much
variation was found in the volume? How was the water gaged, and how often
in it done?
Major COINER. The leakage into the inspection tunnel, which is at a depth of
S9 feet below pool level and only 10 feet from the upstream face of the dam, came
through the vertical expansion joints between the individual blocks of the dam.
There are 115 such joints in the length of the inspection tunnel and the amount
of leakage varied with the seasonal temperature changes, which cause the dam to
expand aud contract and the joints to open and close. In the summer months the
flow was negligible but in the winter months it was necessary to pump con
tinuously to keep the water to a level which would make it possible to inspect the
relief piping and three-way valves of the spillway gates, a routine function by the
operating force. There has been no leakage and only very slight seepage through
the horizontal construction joints between concrete pour levels. The leakage in
the inspection tunnel at expansion joints has been effectively sealed by means of
6-inch holes drilled in the vertical plane of the expansion joints from the top of
the dam to bed rock and filled under pressure with hot asphalt. In the power
house section expansion-joint drains are provided by the design to carry the water
to the downstream face of the building and discharge it into the tailrace. During
the summer mouths when the joints close they are normally dry, but in the winter
months a small discharge can be observed when the outlets are not submerged
by high tail water. The leakage was not gaged to determine its absolute volume.
Mr. HOFFMAN. What was the cost of revetment work done by Colonel Tyler?
Major COINER. It must be realized that the expansion joint leakage in the
inspection tunnel has no connection with the revetment or retaining wall built
at the toe of the supplemental apron, 200 feet downstream from the toe of the
main dam section during the summer of 1926. This wall was built to repair the
damage caused by erosion and cost, including overhead, $87,778. The supple
358 MVSCLE SHOALS

mental apron was constructed after the completion of the dam section; is not a
part of the dam when considering stability and only serves the purpose of dis
sipating the energy of the spillway discharge.
Mr. HOFFMAN. "When was the revetment wall at the toe of the dam inspected
last?
Major COINER. During the low-water season of 1927.
Mr. HOFFMAN. How often is this done?
Major COINER. Yearly. During the low-water season.
Mr. HOFFMAN, (a) Was the stone upon which the revetment stands examined?
(b) Did it appear firm under the wall or was it loose or movable in places?
(c) About how much of the foundation under the revetment was rigid and solid?
Major COINER, (a) Yes. (b) It appeared firm, (c) All.
Mr. HOFFMAN. Did you examine the cracks in the revetment? Do they run
in a general vertical direction or more nearly horizontal?
Major COINER. No cracks were found in the revetment. There are, of course,
the vertical expansion joints placed at intervals of 25 feet between the sections
of the sections of the wall when it was constructed.
Mr. HOFFMAN. Did the cracks in body of dam seem to grow in length and
width? How often are they measured?
Major COINER. They are" no cracks in the body of the dam, other than the
vertical expansion joints.
Mr. HOFFMAN. Does the downstream face of other parts of the dam show
"weep" water? How much at any one place?
Major COINER. Very little other than gate leakage. It is an exceptionally
tight dam.
Mr. HOFFMAN. Does one section of the dam show more depreciation than
others?
Major COINER. No.
Mr. HOFFMAN. Does the concrete mass show blisters or bulges?
Major COINER. No.
Mr. HOFFMAN. Have fragments of concrete fallen out to any appreciable
degree? Are there more ruptures in some places than others?
Major COINER. No fragments of concrete have fallen out of the dam except as
stated at the toe of the 200-foot supplemental apron and there are no ruptures.
Mr. HOFFMAN. About how many days in a year are the spillways in operation?
Major COINER. On 289 days in the calendar year 1927 one or more spillway
gates were raised to discharge surplus water.
Mr. HOFFMAN. What is the extreme height of the revetment wall? Is it higher
in some places than others?
Major COINER. The extreme height of the revetment wall is 14 feet. It varies
in height from 6 to 14 feet.
Mr. HOFFMAN. Was all the stone exposed by erosion of uniform formation?
If not, where is the hardest rock and heaviest strata?
Major COINER. No. The hardest rock and heaviest strata were found under
lying the natural rock of river bed. The supplemental apron was constructed on
the natural river bed after removing all loose or shattered rock and was secured
by doweling with 1^-inch reinforcing rods, securely grouted with cement into
holes drilled in the river bed and extending into the concrete of the apron. The
retaining wall was founded on a lower hard dense stratum. It was secured by
doweling against sliding and was heavily reinforced.
Mr. HOFFMAN. Has the rock exposed by erosion the same general dip and
strike?
Major COINER. Yes.
Mr. HOFFMAN. Are there any streams of water issuing through, around, or
under the dam or through the underlying rock?
Major COINER. Except as stated in the answer to question 4, there is no
leakage that can be discovered through or under the dam. There is always »
certain amount of water which finds its way through the underlying rock fissures
in connection with all dams founded on limestone rock. To relieve the pressure
of this water on the foundations of the dams relief piping was provided in the
design.
Major COINER. On the south bluff about 100 yeards below the dam, a strewn
of water flowing from a spring in a high ravine, emerges over the cliff. I* '*
carried under the railroad track on the lower leavcl and into the river by a culvert
pipe 10 inches in diameter, which is ample. Although the flow from this sprmg
increased when the upper pool was formed the flow has remained practically
constant since that time and as the water is clear it is not considered a matter
of concern.
 MUSCLE SHOALS 359

HOFFMAX. Please give us your opinion as to the present condition of the

dam.
Major COINER. The dam is in excellent condition both as to concrete structures
snd machinery. Inspections of all parts of dam, power plant, and locks, are
made on a definite schedule as routine duties of the operating force. Minor
upkeep repairs are being made constantly to prevent any major troubles.
Mr. JAMES. Can you tell us about how many horsepower would be used for
manufacturing in the average size city that has some manufacturing?
Major COINER. I can not tell you offhand. I would have to get some figures
on that. You mean a city, say, of about 100,000 population—the ordinary city
that has some manufacturing and the usual utilities?
Mr. JAMES. Yes. Have you any idea about how much horsepower Washington
Major COINER. No; I have not.
(Major Coiner later gave an estimate of 40,000 kilowatts as the average annual
load for such a city, with a peak demand of about twice that amount.)
Mr. JAMES. The reason I wanted that information was because I wanted to
get an idea as to how far 78,000 horsepower would go if distributed among 12 or
13 States.
Major COINER. It would not go very far in a city of any appreciable size.
Mr. JAMES. Have you any applications down there for the War Department
X) furnish electricity to cities close to Muscle Shoals?
Major COINER. We have had two applications.
Mr. JAMES. What are the names of the cities?
Major COINER. The city of Muscle Shoals, which is immediately adjacent to
,he reservation, and the city of Sheffield have made application.
Mr. JAMES. How much is the city of Muscle Shoals asking for in horsepower?
Major COINER. They have not made any definite statement as to just what
heir demands would be. What they want is enough power to supply their needs.
Mr. JAMES. Have you any idea how much that would be?
Major COINER. We endeavored to arrive at somes ort of a figure to find out
what the demands would be. But we could not get anything at all satisfactory.
The city of Muscle Shoals is an embryo community. There are very few
>eople living there. I think we found there were 152 houses, as I recall, including
buildings of all kinds, dwellings stores and everything else. At that time we
figured that the demands from Muscle Shoals would be so very small that we
could not supply them from any one of our units; we could not afford to do it.
It would actually cost the Government more to run a unit especially to supply
the city of Muscle Shoals than we could possibly charge the people, in justice.
That is to say they could get the power cheaper from the power company than
the United States could furnish it to them in that small quantity from the size
of generators we have installed. It would mean the installation of a very small
generator, not to exceed 1,000 horsepower instead of 30,000 horsepower as we
have, before you could get to the point where your production costs would be
anything like what the people could afford to pay.
Mr. JAMES. How much is the city of Sheffield asking for?
Major COINER. My recollection is that their request was very similar to that
of Muscle Shoals. They asked for the privilege of buying power from the Wilson
Dam without stating how much power they wanted to get.
Mr. JAMES. How large a place is that?
Major COINER. I have never heard it stated, but as I remember the place I
should say the population is probably around twelve to fifteen thousand.
Mr. JAMES. What is the largest place of any size in the State of Mississippi,
the closest to Muscle Shoals?
Major COINER. The closest city is the city of Corinth. I do not know just
how much population Corinth has.
Mr. QUIN. It has about 20,000.
Major COINER. Then the next place is Meridian.
Mr. JAMES. How far is Corinth from Muscle Shoals?
Major COINER. It is probably about 60 miles.
Mr. JAMES. How much would it cost us to run a transmission line to take
care of them?
Major COINER. I will have to work that out. I think that Jackson is probably
the next city in Mississippi.
Mr. JAMES. How far is Jackson from Muscle Shoals?
Major COINER. Jackson is about twice as far as Corinth. I should say roughly
it is 120 or 125 miles.
360 MUSCLE SHOALS

Mr. JAMES. Will you put in the record a statement showing how much the
cost would be in that case?
Major COINER. Yes, sir.
Mr. JAMES. How far is Meridian from Muscle Shoals?
Major COINER. I can not tell you just what that distance is.
Mr. JAMES. Will you get that information and put it in the record, and also
put in the record what the cost would be?
Major COINER. Yes, sir.
Mr. MCSWAIN. Would it not be a good idea to have Major Coiner make a
map. with circles on the map representing certain distances from Muscle Shoals
and include on the map the names of the cities and the population of the cities
and the cost within certain ranges, starting, sav, with 50 miles and then going
to 75 miles, 100 miles, 125 miles, and 150 milest
Major COINER. We can do that very readily. Of course, in actually building
transmission lines to these places you would not route them straight from Muscle
Shoals to one particular city. You would run from one city to another and
double up wherever you could in order to cut down the cost transmission lines.
It would depend a little bit upon what city you were going to reach as to just
how you would run the transmission line.
Mr. JAMES. I think Senator Norris said he would have the power go to any
where from 6 to 13 States.
Major COINER. Senator Norris, in speaking about his bill on the floor of the
Senate, in response to a question as to what was his idea of an economic trans
mission distance, said he figured it at about 300 miles. Three hundred miles
is about the greatest distance that power has as yet been transmitted and then
only in very large blocks. That is to say, your losses are so great in transmitting
over extreme distances that it does not pay a power company to tiansmit power
great distances unless it can transmit a good deal of it.
Thre? hundred miles from Muscle Shoals would take in 14 States. It would
reach as far as Florida, Georgia, and the Carolinas and up into Virginia, and then
up into Indiana and Illinois, and over into Missouri and down on the west side
of the Mississippi to include a cornei of Louisiana. So 300 miles would take in a
pretty big stretch of country.
Mr. JAMES. Have you any idea how much Washington would use in the way
of horsepower?
Major COINER. The average annual rate for Washington is 65,000 horsepower.
Mr. JAMES. Then if we were to use any horsepower at all at Muscle Shoals
for the manufacture of fertilizer, how much power would there be left that
could be transmitted to these 13 States? All that could be transmitted to the
13 States would be about enough for a population about that of Washington.
That would not be very much for 13 States.
Suppose you figure out how much it would cost to build transmission lines,
based on 78,000 horsepower, so that we will have sonu- sort of an idea as to how
much we would have to invest in transmission lines to transmit the power down
there.
Major COINER. To divide that 78,0i)0 horsepower among all the States within
300 miles?
Mr. JAMES. Take any line at all that would use 78,030 horsepower in any direc
tion you want to move and figure out what you think would be the logical thing to
do iii distributing that power, and show how much it would cost to build and
transmit the lines for that. 9
The following transmission lines are suggested as possibilities:
To Memphis via Corinth, estimated cost S3, 000. 000
To Nashville via Columbia 2. 100,000
To Birmingham 2.000,000
To Chattanooga 2,600,000
It is believed that any two of the above systems could absorb the assumed
available power. The equitable distribution between States provided for in the
Norris bill is not followed very well, however.
Mr. WRIGHT. Speaking about transmitting power 300 miles, with the numerous
developments in the country now, it would not be practicable to try to do that,
would it? The proper thing would be to interchange the power, would it not?
Major COINER. Normally; yes.
Mr. WRIGHT. To have an interlocking system?
Major COINER. That is usually the economical way to do it, and that is usually
the way it is done, except in sections of the country where power plants are very
large and rather far apart.
 MUSCLE SHOALS 361
There have been cases out in California where power has been transmitted as
far as 300 miles, as a business proposition.
Mr. WRIGHT. But in the Southeast you do not know of any reason why it
should be transmitted 300 miles, do you?
Major COINER. Not the same power. What would be done in practice, prob
ably would be to feed it into the system on one side and feed it out on the other
side.
Mr. WRIGHT. And then let that system feed it into another?
Mr. JAMES. Senator Norris said he did not want the power company to get any
of it, and I was trying to figure out how much money we would have to spend
to keep that power from getting to the power companies. Of course, if we are
going to turn it over to the power companies then there will not be any reduced
prices to the ultimate consumer. Under his bill he states there is going to be cheap
power for the farmer, and to do that we can not be tied up with another power
company.
Mr. WRIGHT. I was speaking about the way it is done now.
Mr. QUIN. How much does it cost per mile to build a transmission line?
Mr. JAMES. Major Coiner is going to get those figures and put them in the
record.
Do you know how much nitrogen has been produced by the Atmospheric
Corporation of Syracuse, N. Y.?
Major COINER. I do not. I have read a lot of figures along those lines, but I
have not tried to keep them in my mind.
Mr. JAMES. Can you find out about that?
Major COINER. I think we can. I think it is of record.
Mr. JAMES. We had a hearing in 1926, and I notice that at that time Major
Burns stated that in a couple of years private industry would be making so much
nitrogen that we could practically tear down our nitrate plant No. 2 because we
ought not to be in competition with private industry. I notice he puts in the
Atmospheric Nitrate Corporation of Syracuse at 30 tons and the Ammonium Co.
at Niagara Falls at 16 tons, making a total of 46 tons. I understand since that
time some of the companies have gone out of business because they could not
make any money. I was wondering if vou could tell us about how many tons
of nitrogen are being manufactured now?
Major COINER. I can not, but I imagine I can find that out. I would not be
surprised if we could get those figures from the Ordnance Department, because
they keep pretty close track of that.
Mr. JAMES. You will find that reference on page 48 of the hearings of the joint
committee in 1926. You can put that information in the record.
Major COINER. Yes, sir.
Statvs of nitrogen fixation industry in the United States, Capacity of plants is
stated in short tons of A'//3

Present Eipected
Name of company Location 1926 time Jan. 1,
1929

30.0 32.0 eo. a

Niagara Falls, N. Y. 16.0 13.0 13.0
Seattle, Wash 2.5 3.0 3.0
Bells Chemical Co Charleston, W. Va--. (') (')
Mathieson Alkali Works 10.0 15.0 15.0
Niagara Falls, N. V.. 3.0 3.0 3.0
Charleston, W. Va 20.0 31.0 75.0
Peoria III 10.0 10.0
The Great Western Electrical Chemical Co Pittsburg, Calif . 1.5 1.5
100.0

Total - 82.0 108.5 280.5

1 Not known.

There is a big plant going up at Hopewell that will be coming in, I suppose, in
the next year, arid that will change matters appreciably.
Mr. JAMES. Mr. Bell said they arc not going to manufacture fertilizer, but they
are going to manufacture other things.
Mitjor COINER. They are.
Mr. JAMES. But that would not help us any.
362 MUSCLE SHOALS

Major COINER. I understood they were going to make fertilizer as an appreci

able part of their output. I am not in close touch with the nitrate products
business; it is just a matter of general information so far as I am concerned.
Mr. FISHER. Do you not think that a concern which has been making fertilizer
out of nitrogen would be able to make that cheaper than the concern at Hopewell,
who have never had any experience in manufacturing fertilizer? Do you not
think the output at Muscle Shoals under the Cyanamid Co. would be fertilizer
made by people that have had experience, whereas there is no present hope that
fertilizer will be made at Hopewell; and that plant is not even yet operating.
Do you not think that the figures from the officers of the Cyanamid Co. show
that they are making a profit now and are underselling other fertilizer concerns,
and that they could handle this business at Muscle Shoals, which is their natural
business, and make fertilizer there?
Major COINER. They should know a lot better than I do about that.
Mr. FISHER. All this talk about making nitrates cheaper in the future does not
affect the price of fertilizer to-day.
Mr. HILL. On yesterday you told us something about including in the esti
mates for the Cove Creek Dam a great hydraulic lift, or hydraulic lifts, to get the
barges over the dam.
What provision have you made in that connection, if any, at these three smaller
dams—Clinton, Morton Hill, and Kingston?
Major W ATKINS. They provide navigation facilities there. If I am not mis
taken, there is a 60-foot lift at Merton Hill.
Mr. HILL. A hydraulic lift?
Major WATKINS. I think so.
Major COINER. At Kingston there is a lock, at Merton Hill there is a barge
lift, and at Clinton there is a lock.
Mr. HILL. In the estimate of the cost for the three dams I think it was said
that it would be roughly about $20,000,000.
Major COINER. For the three dams.
Mr. HILL. All that in the cost of the dams?
Major COINER. Yes. Those are relatively low lifts, and the navigation struc
tures are relatively inexpensive. The lock at Clinton is estimated at $510,000.
Mr. HILL. Have you furnished the committee with a copy of that report?
Major COINER. The report is being printed right now. It is House Document
185, and it should be available in a day or two.
Mr. HILL. I think it will be some days before it is printed. I think in that
connection this committee perhaps has been more interested in this survey;
certainly it has had a more immediate interest in it than perhaps any committee
in the House, due to the fact that we have had this Muscle Shoals legislation,
having Dam No. 3 and the Cove Creek Dam in it. We passed several 'weeks
ago a formal resolution by unanimous vote requesting the Corps of Engineers
to send us a copy of this report, and it seems to me, as one member of this com
mittee, that we ought to have been furnished with a copy of the report.
You gentlemen have been very courteous about giving us testimony, but we
have had no report to study and we do not know what is in the report.
I understand it may be several weeks before the report is printed.
Major COINER. I may say that a very considerable part of this report is taken
up with the report on the geology of the Tennessee River Basin, which would not
be of any particular immediate interest to the committee.
Mr. HILL. I wish you could furnish us right away with a copy of your report.
The geological part of that report, as I understand it, just shows how much and
where deralium is to be found in that valley, and how much of this ore and that
ore is there, coal, iron, or copper.
Major COINER. There is a general economic survey of what the valley pro
duces and what it might produce and what traffic will develop in the future.
There is a great deal of matter of that kind in the report that has no immediate
bearing on the subject which the committee is studying right now.
Mr. HILL. Could you not furnish us right away with a copy of your report'.
Major COINER. The essential part of it?
Mr. HILL. Yes.
Major COINER. Yes; we could make photostat copies of that.
Mr. HILL. I move that we request the Corps of Engineers to make such
photostat copy, and that that report be made a part of the hearing.
The motion was agreed to. The report is House Document No. 185, Seven
tieth Congress, first session.
(Thereupon the committee adjourned.;
 MUSCLE SHOALS 363

FEBRUARY 1, 1927.
Hon. John M. MoRIN.
Chairman Committee on Military Affairs,
House of Representatives, Washington, D. C. -

DEAR MR. MoRIN: 1. I submit herewith information requested by a member

of the Military Affairs Committee on the 29th instant in connection with my
testimony at hearings on Muscle Shoals.
2. The primary water power at Dam No. 2, 100 per cent of time, from existing
records is 50,000 kilowatts, or 67,000 horsepower.
The primary water power 100 per cent of time and the capacity of the steam
plant with its present installation of 60,000 kilowatts combined give a primary
power 100 per cent of time of 110,000 kilowatts, or 147,000 horsepower.
The primary water power, 98 per cent of time, at Dam No. 2 is 67,000 kilo
watts, or 90,000 horsepower, which, combined with the 60,000 kilowatts steam
capacity, gives 127,000 kilowatts, or 170,000 horsepower.
3. The primary power at proposed Dam No. 3, 100 per cent of time, is 20,000
kilowatts, or 27,000 horsepower, and 98 per cent of time is 27,000 kilowatts, or
36,000 horsepower.
4. From the data now available relative to the proposed Cove Creek Reservoir
it is estimated that the 100 per cent primary power at Dam No. 2 will be increased
to 100,000 kilowatts, or 134,000 horsepower, by the regulation probably obtain
able.
The 100 per cent primary power at Dam No. 3 would also be increased by this
regulation to 40,000 kilowatts, or 54,000 horsepower.
5. The steam plant at nitrate plant No. 2 is built so as to permit the installa
tion of an additional 30,000-kilowatt unit.
6. With the estimated results obtainable from the Cove Creek storage the 100
per cent primary power at Muscle Shoals would be:
Horsepower
Dam No. 2.----------------------------------------------------- 134,000
Dam, No. 3.----------------------------------------------------- 54,
Steam--------------------------------------------------------- 120,000

Total---------------------------------------------------- 308,000
Very truly yours.
M. C. TYLER,
Lieutenant Colonel, Corps of Engineers.
ToTAL ExPENDITURE to JANUARY, 1929

Nitrate plant No. 1 (1,900-acre reservation).----------------- $12, 887, 941. 31

Nitrate B.' No. 2 (2,300-acre reservation).----------------- 67, 555, 355.00
Wilson Dam and power plant------------------------------ 47,000, 000.00
Total cost to date (not including maintenance charges) - 127,443, 296. 40
Addition AL ExpenDITURES

Additions to Dam No. 2 ---------------------------------- 8,000,000.00

Dam No. 3.---------------------------------------------- 43,035, 579.00
Cove Creek, in State of Tennessee, 300 miles above Muscle
Shoals------------------------------------------------ 37, 540, 643.00
Total.--------------------------------------------- 88, 576,222.00

Grand total investment----------------------------- 216,019, 518.40

NotE.-The above statement of costs of nitrate plants No. 1 and No. 2 are
taken from the report of the Secretary of War to the Speaker of the House, and
appear on page 5, Muscle Shoals hearings, Military Affairs Committee, House of
Representatives, 1922. The cost of Dam No. 2 to date is quoted from an Army
engineer's statement in the War Department 1930 appropriation bill hearings,
House Appropriations Committee, page 188. The proposed expenditures to be
made under the bill H. R. 8305 are taken from War Department estimates,
House of Representatives Document No. 185, Seventieth Congress, first session,
pages 77 and 99.
364 MUSCLE SHOALS

WAR DEPARTMENT,
Washington, April 18, 1930.
Hon. HARRY C. RANSLEY,
Acting Chairman Committee on Military Affairs,
House of Representatives.
DEAR MR. RANSLEY: Careful consideration has been given to the bill H. R.
744, transmitted with your letter of March 26, 1930, with a request for a report
thereon.
The bill is designed to authorize and direct the Secretary of War to execute
a lease, prescribed in detail, with the Air'Nitrates Corporation and the American
Cyanamid Co.
The instant bill is identical with S. 1302, except that it contains (see sec. 6
of the bill) a provision designed to grant to the State of Tennessee the right to
Eurchase Cove Creek Dam, a provision which does not appear in the Senate
ill.
Under date of March 27, 1930, a report upon S. 1302 was made to the chairman
of the Senate Committee on Agriculture and Forestry. That report was made
after S. 1302 had been studied by the Judge Advocate General, the Chief of
Engineers, and the Chief of Ordnance. It is believed that report meets the
request contained in your letter, and a copy thereof (in duplicate) is herewith
inclosed.
Sincerely yours,
F. TRUREE DAVISON,
Acting Secretary of War.

MARCH 27, 1930.

Hon. CHARLES L. McNAKY,
Chairman Committee on Agriculture and Forestry,
United States Senate.
DEAR SENATOR MCNARY: Careful consideration has been given to the bill
S. 1302, transmitted with your letter of January 4, 1930, with request for a report
thereon.
The foregoing bill sets forth the terms of a lease between the United States
and the Air Nitrates Corporation, wherein the corporation as lessee takes over
the Muscle Shoals development for a term of 50 years, and directs the Secretary
of War to execute such lease on behalf of the Government. While the proposed
bill grants to the lessee certain privileges in regard to acquiring licenses from the
Federal Power Commission on certain dam sites on the Clinch River, and to that
extent may be considered as a modification of the Federal water power act, it is
believed that the measure as a whole should be regarded as constituting new law.
By the terms of the lease the Government turns over to the lessee Dam No.
2 at Muscle Shoals after installing additional facilities that will give the dam the
maximum capacity of 600,000 horsepower. This dam as completed with the
necessary transmission lines provided for in the lease will represent a Government
investment of approximately $55,000,000. The Government is also to construct
and turn over to the lessee, as a part of the leased premises, Dam No. 3, with a
capacity of 250,000 horsepower, and representing a Government investment of
approximately $38,500,000, and the Cove Creek Dam ou the Clinch River, with a
capacity of 200,000 horsepower, representing a Government investment of approxi
mately " $36,000,000.
On the above properties the lessee is to pay certain rentals and amortization
charges, amounting in the case of Dam No. 2 to 4 per cent per annum on the
expenditures that were incurred in the construction of that dam subsequent to
May 31, 1922, and prior to January 1, 1928, and also annual amounts sufficient
if continued for 100 years to amortize on a basis of 4 per cent interest, compounded
annually, on the entire cost of the dam. There is a provision, however, that these
payments for the first six years after delivery of possession shall be but $200,000
per year, the balance of the payments being deferred to the end of the thirty-fifth
year of the lease. In the case of Dam No. 3 the rental is to be 4 per cent annually
of the cost of the dam, which is limited to $32,500,000 less $6,000,000, which is the
estimated cost of navigation facilities of this dam. There is also provided an
amortization charge similar in terms to that provided in the case of Dam No. 2.
It is also provided that these payments for the first three years from the delivery
of possession shall be but $160,000 per year, the balances being deferred until the
thirty-fifth year of the lease. In the case of the Cove Creek Dam, the rental
and amortization charges are arranged for on similar terms, but the cost figure
 MUSCLE SHOALS 365
•
upon which these payments shall be based is limited to $25,000,000, of which
$5,000,000 is for navigation facilities and not included in computing the rental
charge. It may be stated here that the War Department's best information as
to the estimated cost of this dam is $36,000,000, or $11,000,000 greater than
allowed for in the lease.
The foregoing power developments, which constitute that portion of the Muscle
Shoals project upon which the lessee pays rental and amortization charges, rep
resent a total Government investment of about $130,000,000. About $82,000,000
of this amount is yet to be expended by the Government if the lease is accepted.
The total capacity of these three dams "when finished will be over 1,000,000 horse
power, and it is the accepted opinion in the War Department that the return to
the Government on these properties, as provided for in the terms of the lease, is
entirely inadequate, and very substantially less than could be obtained through
the operation of these facilities by the Government. It might be stated here
that a careful computation of the terms of the lease as written in the bill shows a
return of not more than 2 per cent on the Government's investment in the power
properties alone.
By the terms of the lease the lessee is also granted the privilege of forming a
subsidiary corporation for the further development and distribution of power,
and this corporation when formed is to receive licenses from the Federal Power
Commission, if it so desires, to construct and operate three projected dams known
as the Senator Dam, Milton Hill Dam, and Clinton Dam, all to be located on the
Clinch River. This subsidiary corporation is to enjoy priority over other appli
cants in regard to the three projected dams mentioned, and is also to be relieved
of certain substantial obligations that ordinarily are borne by licensees of the
Federal Power Commission under the terms of the Federal water power act.
By the terms of the lease the lessee also takes over as a part of the leased
premises nitrate plants Nos. 1 and 2 in their entirety, including Waco Quarry,
which is an adjunct of plant No. 2. The lessee pays no rentals whatsoever for
these properties, but undertakes to produce ammonium phosphate at plant No. 2,
or such other plant as the lessee may see fit to construct for that purpose. This
product is to be distributed and sold to fertilizer users under the supervision of a
farm board which is created by the lease. While the lessee undertakes to
commence this production on a progressive scale, commencing with an annual
output of 40,000 tons, having a nitrogen content of not less than 10,000 tons, and
increasing this output from time to time, as provided, by the addition of similar
units until an annual production of 160,000 tons, having a nitrogen content of
40,000 tons, is reached, the lease contains a provision that fertilizer production
may be suspended whenever the satisfaction of market demands is assured,
though the maintenance in storage of an unsold quantity of such fertilizer mate
rial equal to 25 per cent of the annual capacity of the first unit established. This
seems to mean that the lessee is no further obligated in the matter of producing
fertilizer material at the nitrate plants taken over, than maintaining in storage
an unsold quantity of production sufficient to have a nitrogen content of 2,500
tons. Furthermore, this fertilizer material can not be sold for less than cost,
plus a net profit of 8 per cent to the lessee. The lease specifically provides that
the cost figure upon which the selling price must be based shall be the entire
manufacturing cost (including the power used) to which the following items are
added: Selling cost, insurance, taxes, research work, administrative and legal
expense, maintenance of plant, 10 per cent charged for depreciation and ob
solescence of all structures and facilities except those furnished by the United
States, 6 per cent on monthly balances of all expenditures for such construction
work, 6 per cent on the lessee's capital investment, the interest actually paid on
borrowed money, and the expenses of the farm board. When to this generous
list of cost items is added an 8 per cent profit, it is not difficult to foresee that
difficulties will arise in marketing the product. In fact, it is not too much to say
that the terms of the lease relating to fertilizer manufacture would so operate as to
keep the lessee almost continually in a position permitting the suspension of
production. If the above view of the situation is correct, or even approximately
so, the main purpose of the bill, to wit, the manufacture of fertilizer material
in large quantities and its distribution to farmers at reasonable prices, will have
failed. On the other hand, the American Cyanamid Co. will have succeeded
in keeping nitrate plant No. 2 out of operation, or practically so, and therefore
out of competition with its own plant at Niagara Falls, Ontario.
The War Department has plans calling for the use of the land in the reserva
tion of nitrate plant No. 1, situated west of Spring Creek. It is, therefore,
101229—30 24
 MUSCLE SHOALS

believed that this portion of said reservation should be omitted entirely from the
lease.
In view of the above discussion of the terms of this proposed bill, which are
based upon the formal proposal made by the American Cyanamid Co., I am con
strained to take the view that the lease, as written in the bill, is much too gen
erous to the lessee, and its enactment would be against the best interests of the
United States. I am also mindful of the fact that this proposed piece of legis
lation, or prior counterparts of same, already has the legislative record of having
been rejected at least five times by committees of Congress: Once by the Joint
Committee on Muscle Shoals, three times by the Military Affairs Committee of
the House, and once by your own committee.
Another matter that I believe should be discussed in regard to this bill is the
fact that if enacted it would constitute what might be termed a legislative lease.
That is to say, the lease itself becomes a part of our statute law. This fact, I
am advised and believe, presents a legal situation far different than a lease
negotiated between the War Department and a private party and written by
counsel. I refer particularly to the possible need for modifying provisions found
to be ill advised or unworkable. It might also work seriously against the inter
ests of the United States in case of future litigation involving the lease. I find
the following statement upon this point in a report upon H . ft. 8305 (a counter
part of the instant bill) rendered February 25, 1929, by the chairman of the
Military Affairs Committee of the House:
"As Congress under the Constitution has unlimited power in the disposition of
public property, no court could reform or relieve the Government from a foolish
or unwise contract directed by Congress itself relative to the disposition of
public property. Hence this contract should be clearly understood and care
fully studied, as once enacted into law the Government is without redress."
The foregoing comments may be summarized as follows:
(a) The financial return on the Government's expenditures for power develop
ment is inadequate.
(6) The lessee and its subsidiary are excepted from the provisions of the Federal
water power act.
(c) An insufficient guaranty is provided for quantity production of fertilizer
material.
(d) The bill is written in the form of a legislative lease.
Another serious objection to the bill, however, is that it does not secure to the
public the full benefits that should be obtained from the Government properties,
nor does it provide means whereby advancing discoveries of science can be system
atically applied to agricultural needs, and assure the development of the chemical
industry of the Tennessee Valley.
It is recommended that favorable action on the bill in its present form be not
taken.
The War Department is anxious to cooperate in every way for the disposal of
these Government properties and facilities, as a whole or in part, on any terms that
are fair to the public interest and which provide for their proper utilization to
meet the agricultural needs for fertilizer and the requirements for national defense.
It will gladly furnish any additional information that it can upon this bill that your
committee may request and will designate witnesses, if hearings are held upon the
bill and testimony of witnesses from the War Department is desired by your
committee.
Sincerely,
PATRICK J. HURLEY,
Secretary of War.
WAR DEPARTMENT,
Washington, April 18, 1930.
Hon. HARRY C. RANSLEY,
Acting Chairman, Committee on Military Affairs,
House of Representatives.
DEAR MR. RANSLEY: Careful consideration has been given to the bill H. R.
10132, transmitted with your letter of March 26, 1930, with request for a report
thereon. At my direction the bill has been studied by the Judge Advocate
General, the Chief of Engineers, and the Chief of Ordnance. To a large extent
the following report is based upon the result of that study.
The bill is designed to provide for the preservation, completion, maintenance,
operation and use of the United States Muscle Shoals project for war, navigation,
fertilizer manufacture, electric Dower Droduotion flood and farm relief and ia
 MUSCLE SHOALS 367
connection therewith the incorporation of the Farmers' Federated Fertilizer
Corporation and the lease to it of the project.
The bill contains provisions that in some degree affect the application of the
Federal water power act and the United States warehouse act to the operation of
the Muscle Shoals project. Generally speaking, its enactment would constitute
new law.
The plan of the bill may briefly be stated as follows:
The corporation is privately owned. Its authorized capital stock is 1,000,000
shares, all the voting stock of which must be owned and controlled by American
citizens. It is required to have $10,000,000 paid-in capital at the time the lease
is delivered.
The corporation pays certain rentals to the United States from the receipts of
its power sales, the rentals being based upon the sale of primary power only. If it
increases the capacity of the present power plants by installing additional units,
it is to pay the United States a rental on all the primary power generated by such
additional units and actually sold, to be computed upon a rental rate that has
not yet been inserted in the bill.
A subsidiary of the corporation has priority for 10 years in the construction
and operation" of 5 additional dams to be built upon sites mentioned in the bill,
such additional dams to be constructed and operated under the terms of the
Federal water power act.
The corporation is to manufacture fertilizers or fertilizer bases, as it may be
requested to do by a distributing company (an entirely separate organization to
be organized subject to the approval of the Federal Farm Board or the United
States Department of Agriculture). The maximum annual fertilizer production
is to be of such quantity as to have 50,000 tons of fixed nitrogen content; this
maximum quantity to be attained after the second year of the lease. There are
provisions for increasing this maximum production in proportion to the develop
ment of the power situation. The fertilizer so manufactured is to be charged for
at cost, the items entering into the computation of cost being set forth in the bill.
The product is to be stored in United States licensed warehouses, the warehouse
receipts being guaranteed by the United States, and having face value computed
upon the cost of the product as fixed by the terms of the bill. Such warehouse
receipts are to be offered for sale through the distributing company to farmers,
farmers' organizations, and the fertilizer trade. Federal banks are authorized to
accept such warehouse receipts as collateral security for loans up to 90 per cent
of the face value of the receipts. All power used in the manufacture of fertilizer
is to be free of rental.
The Treasurer of the United States is to set aside from the rentals received
equal annual amounts during the last 40 years of the lease, sufficient with 4 per
cent interest compounded annually thereon, to amortize the present appraised
value of the. entire Muscle Shoals project. There is also to be set aside from the
rentals received the sum of $100,000 per year as an emergency fund. The
balance of all rentals received is to constitute a fertilizer fund, which shall be
used as a general operating fund in the production of fertilizers.
It is befieved that the carrying out of the foregoing plan in accordance with
the bill's provisions would result in annual losses instead of income, which in the
last analysis would have to be borne by the Government. That is to say, a
situation would be created whereby even under the most favorable circumstances
the manufacture and distribution of fertilizers could only be maintaned through
annual expenditure of money by the Government, in addition to the rentals
received.
In undertaking the manufacture of fertilizers or fertilizer bases on such a scale
as is contemplated by the bill, the use of the cyanamide process can hardly be
avoided. This is due to the fact that this process is already installed at nitrate
plant No. 2, and is the only fixed nitrogen process now available to the Govern
ment. Nitrate plant No. 1 can hardly be considered a part of this picture, as it is
not in condition satisfactorily to turn out any fixed-nitrogen product on a com
mercial scale. In fact, the enormous capacity of nitrate plant No. 2 would almost
seem to render impracticable any plan for substituting a different process for the
cyanamide process.
In view of these considerations it has been assumed that the fertilizer product
that would be manufactured under the terms of the bill would be in the form of
cyanamide.
It is understood that the price trend of cyauamide, as a commercial article, has
been steadily declining since the war. The present market price of cyanamide is
$40 per short ton. If the purose of the bill is to lessen the price of fertilizer
material to the farmers of the country, it follows that the cyanamic'e manufactured
368 MUSCLE SHOALS

at Muscle Shoals under the terms of the bill would have to be sold to the consumers
at ft price less than $40 per ton. In 1926, in proceedings had by the American
Cyanamid Co. and the War Department, in arbitrating the royalty rate upon the
patents involved in the cyanamide process as installed at Muscle Shoals, the cost of
commercial cyanamide was stipulated to be $43.53 per ton. This stipulated cost
was based upon full capacity operation of nitrate plant No. 2, the cost increasing to
$49.93 if the plant were operated at one-half capacity. These figures include a
royalty to the American Cyanamid Co. of $5.75 per ton and are based upon hydro
electric power being supplied at 3 mills per kilowatt-hour. So far as the patent
situation is concerned, the royalty payments to the American Cyanamid Co. will
cease inside of about five years. It is believed, however, that the power charge
under the terms of the bill "would be substantially in excess of 3 mills per kilowatt-
hour, due particularly to the fact that the large steam plant at nitrate plant No. 2
would have to be used in conjunction with the hydropower of the dam. Further
more, there are several items of fertilizer cost specified in the bill that are not
included in the stipulated figures mentioned above. Another factor that enters
into this problem is the matter of skilled labor. In computing the stipulated
figures it was contemplated that the manufacturing would be done by workmen
skilled in the handling of cyanamide plants. The production under the present
bill would have to be conducted without this advantage. Furthermore, it must be
considered that nitrate plant No. 2 was built 12 years ago and does not include
any of the improvements that have been made in the manufacture of cyanamide-
during the past 12 years. From all of these observations it seems highly probable
that even omitting the royalty payment* to the American Cyanamid Co., the
proposed corporation would be faced with a manufacturing cost fully as great as
the ctipulated figures mentioned above. If this is so, a loss of approximately $3-
to $10 per ton (according to the amount of manufacture), would be incurred in
selling the product at its present market value. If cyanamide manufactured at
Muscle Shoals is to be sold to farmers at less than the present market value, these-
losses of course would be proportionately increased.
A study of the rental situation as set forth in the bill will show what moneys
are available for meeting any losses incurred in the manufacture of fertilizers.
Considering the power facilities that are now installed at Muscle Shoals, it is
found that the total effective primary power amounts to 122,500 kilowatts. The
latest engineering figures show the primary hydropower of Wilson Dam to be
66,000 kilowatts and the total primary power just mentioned includes the use
of the effective power of the steam plant in conjunction with the power generated
at the dam. The rental rate for primary power being $17.52 per kilowatt-year,
and the cost of steam operation necessary being estimated at $280,000 per year,
the total possible rentals receivable (under present power installations) would be
$1,866,200. The Government would only receive that much rental, however, if
all the available primary power were actually sold by the corporation and no-
power whatever was used for the manufacture of fertilizer. If nitrate plant
No. 2 was operated at its capacity it would require 90,000 kilowatts of power.
Therefore, while this plant was so running, there would be a loss of rentals amount
ing to $1,370,700. This would reduce the rentals actually received by the Gov
ernment to $495,500. The foregoing computations are based upon the known
prime capacity of the present power plants and the rental rate specified in the
bill. According to the bill's provisions there are two important deductions to be
made from the amount last mentioned before any moneys are available for the
fertilizer fund. These deductions arc $100,000 per annum for an emergency
fund and a sufficient amount to amortize the appraised value of the project in
40 years at 4 per cent interest compounded annually. If the Muscle Shoals
project were to be appraised at $60,000,000 (which is' believed to be fully war
ranted), the annual amortization charges would amount to $630,000 per year.
It is noted, however, that the amortization payments do not begin until after the
tenth year of the lease.
It is, of course, apparent that the foregoing situation would yield approximately
$400,000 per year to the Government, which would be available during the
first 10 years of the lease to reduce the cost of fertilizer. This amount, however,
credited against the cost of fertilizer could only achieve a reduction in cost of
less than $2 per ton. After the tenth year of the lease, however, the amortiza
tion charges alone would more than overbalance the rentals receivable and there
would be no funds whatever to aid in regulating the price of fertilizers.
It is true that the construction of the Cove Creek Dam and the installation
of an additional 30,000-kilowatt unit at the steam plant would materially alter
the situation. It is noted that under the terms of the bill the Cove Creek Dam
 MUSCLE SHOALS 369

may possibly be constructed and in operation in about five years after the com
mencement of operations under the lease. The influence of these two installa
tions would be to increase the primary power of the Wilson Dam to 112,000
kilowatts and the available steam power to 83,000 kilowatts, making the total
constant power available, 195,000 kilowatts. This would increase the total
possible rentals receivable to $2,978,900 and leave a balance of net rentals receiv
able of $1,604,600, after deducting the 90,000 kilowatts of power used by the
nitrate plant. On this basis there would be approximately $875,000 per annum
flowing into the fertilizer fund after deducting for the emergency fund and the
amortization payments. This sum would permit a maximum of approximately
$4 per ton to be credited against the cost of fertilizer. It is to be conceded that
this might reduce the cost of fertilizer produced at Muscle Shoals to $40 per ton,
the present market value, or slightly thereunder.
The foregoing review of the working out of the plan proposed in the bill seems
to raise grave doubts as to its practicability. It is believed that the rental for
the primary power is far too low, when it is considered that the lessee receives all
the secondary power of the Wilson Dam free of rental, in addition to the highly
lucrative franchises granted it in connection with power development in the
Tennessee Valley. Furthermore, it is believed that the cost items involved in
the fertilizer manufacture are much too liberal, and render it impossible to manu
facture eyanamide at Muscle Shoals, except by incurring serious losses for the
Government. For these reasons it is believed that the terms of the bill fall
short of securing to the public the full benefits that should be obtained from the
properties concerned.
The following comments are addressed to particular sections of the bill:
It is desirable that in any measure involving the disposition of the Muscle
Shoals project that that part of the reservation of nitrate plant No. 1 which is
situated west of Spring Creek be specifically excepted in any lease or sale of the
property.
There is a provision in section 5 of the bill which requires the corporation
to have $10,000,000 of paid-in capital at the time the lease is delivered. The
bill does not provide any time limit within which the corporation must make
this preparation.
Section 7 of the bill deals with the rentals that are payable by the lessee from
its power receipts. As has already been mentioned, it is believed that these
rentals are inadequate and fail to secure to the Government a proper return
on the property leased. The same section contains a provision that there
be deducted from the rentals a tribute to be fixed by the Federal Power Com
mission on account of upstream storage dams. It is believed that Dam No. 2
should be free from all such tributes in order that the greatest revenues pos
sible may be derived from it, as the income from this Government-owned dam
is to be used according to the plan of the bill in financing the farm relief pro
visions.
The same section also provides that deductions may be made from rentals
to cover payments to be made to the States of Alabama and Tennessee in lieu
of taxes. As no part of the Muscle Shoals project, as at present constituted,
lies within the State of Tennessee, it is not seen why any such payments should
be made to that State. Furthermore, so far as the question of making such
payments to the State of Alabama is concerned, it might bo mentioned that
the Attorney General, in an opinion rendered December 28, 1927, to the Sec
retary of War, reached the conclusion that the State of Alabama had ceded
political and legislative jurisdiction to the United States over the lands and
property at Muscle Shoals, and has no greater interest in the lauds, waters,
and water-covered areas of the project than it has in the District of Columbia.
Section 8 of the bill contains provisions relating to the recapture of the project
by the United States in a war emergency. There is a provision to the effect
that in such a case the United States is to pay the corporation for all losses
and damages sustained. It is thought this language is too broad and should
be modified so as not to require the Government to reimburse the corporation
for loss of profits. It is conceded, however, that such reimbursement should
include proper interest on the corporation's investments.
Section 9 contains provisions in relation to the matter of national defense.
The provisions relating to the maintenance of nitrate plant No. 2 at its present
capacity should specifically include a mention of the nitric acid plant. The
maintenance of the nitric acid plant at its present capacity is deemed a matter
-of considerable importance in the interest of national defense.
The further provision in this section, that the property shall be returned at
the end of the lease in good condition, is regarded as too general.
 370 MUSCLE SHOALS

The provision in this section for an emergency fund of $100,000 per annum
to take care of replacements made necessary by some catastrophic cause, is
regarded as unnecessary and as imposing a financial burden upon the Govern
ment that could be avoided. It is suggested that this risk could be covered
by insurance.
Section 10 of the bill contains the provisions relating to farm relief. Among
these provisions is the one establishing a fertilizer fund, which states that the
fund shall be a general operating fund in the production of fertilizer. The bill
does not clearly state how that fund should be handled. From the language used,
it probably would be handled by the corporation as the corporation is engaged
in the production of fertilizer. This fund constitutes the balance of rentals inuring
'to the Government after setting aside the amounts necessary for amortization
and emergency funds. It is thought that this fund should be handled exclusively
by some Government agency or the distributing company, and be used not for
the production of fertilizer, but for the sale and distribution thereof and the
regulation of the market price.
The statement on page 18 of the bill, that the present continuous power at
Dam No. 2 amounts to 240 kilowatts, is apparently a typographical error. The
present continuous power of this dam is approximately 66,000 kilowatts.
As has already been mentioned, it is believed that the cost items relating to
fertilizer production, as set forth in the bill, should be modified so as to make it
possible to produce fertilizers or fertilizer bases within the general market values
of the same. In this regard it is thought that the payment of 6 per cent interest
upon the working capital and investments of the corporation, and an additional
manufacturing fee of 6 per cent is too liberal. It is noted that added to the cost
items provided for in this section are the charge of 10 per cent for research work
and for educating the farmers, provided for in section 11, and the costs, com
mission fees, interest, etc., incident to storage, provided for in section 12. If
the 10 per cent item referred to were very materially reduced and the fertilizer
shipped from the plant to market without storage, it is believed that economies
would be practiced that would materially help the situation.
Section 10 also provides that the by-products of the nitrate plant belong to the
corporation, [t is believed that as the corporation incurs no risk in its manu
facture of fertilizer and pays no rental for the nitrate plants, that the by-products,
the sale of which would materially help the Government, should belong to the
Government. The further provision in this case that the corporation would have
the right to use the nitrate plants for its own purposes when the manufacture of
fertilizer is suspended, is regarded as being unnecessarily liberal to the corpora
tion. It is not seen why the corporation should have this right without paying a
fair rental for the use of the plants.
Section 1 1 provides for the organization of a distributing company and specifies
that it shall be organized subject to the approval of the Federal Farm Board or
the United States Department of Agriculture. It is believed that this might
result in a conflict of authority. Either the Federal Farm Board or the Depart
ment of Agriculture should be mentioned above as the authority for approving
the organization of this agency.
This section further provides that while the distributing company shall have
first call upon all fertilizer produced by the corporation, the production by the
corporation shall not be limited to the requirements of the distributing company.
This provision has been considered in connection with the provisions of section
12, wherein the Secretary of Agriculture is directed to issue warehouse receipts for
all fertilizers produced and placed in storage by the corporation, and specifies that
such receipts shall be guaranteed by the United States. It is thought that the
provisions taken together might have results prejudicial to the best interests of
the Government. If the warehouse receipts are to be guaranteed by the United
States, it is thought that such guarantees should be limited strictly to warehouse
receipts which cover production specifically requested by the distributing com
pany. There may be reasons impelling the distributing company from time to
time to desire that the fertilizer production be curtailed. The provisions of the
bill just referred to, seem to permit the corporation to continue the production of
fertilizer entirely beyond control of the distributing company, and compel the
United States to guarantee all warehouse receipts covering this production.
Guaranteeing of the warehouse receipts by the Government is tantamount to
guaranteeing the sale of the product, and under the provisions of the bill that are
being discussed the corporation would be in a position to manufacture and place
in storage quantities of fertilizer far beyond the ability of the distributing com
pany to dispose of, for the purpose of earning the manufacturing fee that is pro
vided for in section 10. The further provision in section 12, that the 'warehouse
 MUSCLE SHOALS 371

receipts shall be offered for Rale through the distributing company, contains no
provision safeguarding the Government's interest in such receipts. If these
receipts are guaranteed by the Government, it would seem to be necessary to
insert a provision that will protect the interests of the Government.
Section 14 requires the Government to reimburse the corporation for the
construction of navigation facilities and also requires the Government to bear
a portion of the expenses of the corporation in the acquisition of reservoir sites.
It also requires the Government to pay the cost of flowage rights for flood control
and for navigation channels in excess of five feet in depth in reservoirs. It
appears, therefore, from provisions of this section, that the Government will
pay heavily for any navigation and flood control works which may be constructed
by the corporation. The present projects under contemplation by the depart
ment provide for six foot channels in reservoirs, and therefore the figure of five
feet contained in this paragraph is objectionable.
Section 16 contains the provision whereby that portion of the corporation's
expenses, which is not in its nature directly allocated to any particular division
of the project, should be allocated to such division in ratio of the total expendi
tures in moneys in each such division. It is believed that any expenditure that
should properly be allocated to the manufacture of fertilizer could be easily
recognized, and it is thought that the provisions of section 16 might have the
result of imposing additional financial burdens upon the manufacture of fertilizer,
which as has been discussed, is already overburdened.
In view of all of the considerations herein outlined, I feel constrained to re
commend that favorable action upon the bill in its present form be not taken.
In thus setting forth my views upon the bill, it is no part of my intention to
cause your committee to believe that the War Department is opposed to the
broad general principle of properly utilizing the Government facilities at Muscle
Shoals. On the contrary, the suggestions made are intended to be constructive
in character and your committee may be assured that it is the desire of the War
Department to cooperate to the fullest extent in the matter of the disposal of
the Muscle Shoals project upon terms that will safeguard the public interest and
at the same time assure its proper utilization to meet the agricultural needs for
fertilizer and the requirements for national defense. The department will
gladly furnish any available information touching this bill that your committee
may request, and will designate witnesses, if hearings are held upon the bill and
the testimony of witnesses from the War Department is desired by your committee
Sincerely yours,
F. TRUREE DAVISON,
Acting Secretary of War.
WAR DEPARTMENT,
WASHINGTON, April 15, 1930.
The CHAIRMAN OF THE MILITARY AFFAIRS COMMITTEE,
House of Representatives.
DEAR MR. CHAIRMAN: In response to telephone request of the 14th instant for
a report on H. R. 11585, you are advised that the bill has been considered by the
department, and it is the understanding that the purpose of the bill is to grant
to the President of the United States authority to negotiate and consummate a
lease or leases of the Muscle Shoals project for a term not exceeding 50 years.
The bill describes in section 1, 11 aims which arc sought to be obtained by the
lease or leases.
If enacted, it will, of course, constitute new law.
The bill appears to be in general accord with the principle that the Government
should not enter into commercial competition with private industries, except
as an unavoidable incident to Government operations, required to meet its own
needs, and appears also to be in harmony with section 124 of the national defense
act.
If the committee shall consider the bill favorably, it may be advisable for pur
poses of clarification to make entirely clear that the property may be leased in
whole or in parts.
The department will be glad to furnish any available information touching
this bill that your committee may request, and will designate witnesses if hearings
are held upon the bill and the testimony of witnesses from the War Department
is desired by your committee.
Sincerely,
F. TRUREE DAVISON,
Acting Secretary of War.
372 MUSCLE SHOALS

[S. J. Res. 49, Seventy-first Congress, second sessionI

JOINT RESOLUTION To provide (or 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, and for
other purposes.
Resolved by the Senate and House of Representatives of the United States of A merica
in Congress assembled, [That for the purpose of maintaining and operating the
properties now owned by the United States in the vicinity of Muscle Shoals,
Alabama, in the interest of the national defense and for agricultural and industrial
development, and to aid navigation and the control of destructive flood waters
in the Tennessee River and Mississippi River Basins, there is hereby created a
body corporate by the name of the "Muscle Shoals Corporation of the United
States" (hereinafter referred to as the corporation). The board of directors first
appointed shall be deemed the incorporators and the incorporation shall be held
to have been effected from the date of the first meeting of the board. This
act may be cited as the " Muscle Shoals act of 1929."
[SEC. 2. (a) The board of directors of the corporation (hereinafter referred to
as the board) shall be composed of three members, not more than two of whom
shall be members of the same political party, to be appointed by the President,
by and with the advice and consent of the Senate. The board shall organize
by electing a chairman, vice chairman, and other officers, agents, and employees,
and shall proceed to carry out the provisions of this act.
-[(b) The terms of office of the members first taking office after the approval of
this act shall expire as designated by the President at the time of nomination,
one at the end of the second year, one at the end of the fourth year, and one at
the end of the sixth year, after the date of approval of this act. A successor to
a member of the board shall be appointed in the same manner as the original
members and shall have a term of office expiring six years from the date of the
expiration of the term for which his predecessor was appointed.
[(c) Any member appointed to fill a vacancy in the board occurring prior to the
expiration of the term fur which his predecessor was appointed shall be appointed
for the remainder of such term.
[(d) Vacancies in the board so long as there shall be two members in office
shall not impair the powers of the board to execute the functions of the corpora
tion, and two of the members in office shall constitute a quorum for the trans
action of the business of the board.
[(e) Each of the members of the board shall be a citizen of the United States
and shall receive compensation at the rate of $50 per day for each day that he
shall be actually engaged in the performance of the duties vested in the board,
to be paid by the corporation as current expenses, not to exceed, however, one
hundred and fifty days for the first year after the dtite of the approval of this
act, and not to exceed one hundred days in any year thereafter. Members of
the board shall be reimbursed by the corporation for actual expenses (including
traveling and subsistence expenses) incurred by them while in the performance
of the duties vested in the board by this act.
[(f) No director shall have any financial interest in any public utility cor-
porat,ion engaged in the business of distributing and selling power to the public
nor in any corporation engaged in the manufacture, selling, or distribution of
fixed nitrogen, or any ingredients thereof, nor shall any member have any interest
in any business that may be adversely affected by the success of the Muscle
Shoals project as a producer of concentrated fertilizers.
[(g) The board shall direct the exercise of all the powers of the corporation.
[(h) All members of the board shall be persons that profess a belief in the
feasibility and wisdom, having in view the national defense and the encourage
ment of interstate commerce, of producing fixed nitrogen under this act of such
kinds and at such prices as to induce the reasonable expectation that the farmers
will buy said products, and that by reason thereof the corporation may be a self-
sustaining and continuing success.
[(SEC. 3. (a) The chief executive officer of the corporation shall be a general
manager, who shall be responsible to the board for the efficient conduct of the
business of the corporation. The board shall appoint the general manager, and
shall select a man for such appointment who has demonstrated his capacity as
a business executive. The general manager shall be appointed to hold office for
ten years, but he may be removed by the board for cause, and his term of office
shall end upon repeal of this act, or by amendment thereof expressly providing
for the termination of his office. Should the office of general manager become
vacant for any reason, the board shall appoint his successor as herein provided.
 MUSCLE SHOALS 373

[(b) The general manager shall appoint, with the advice and consent of the
board, two assistant managers who shall be responsible to him, and through him,
to the board. One of the assistant managers shall be a man possessed of knowl
edge, training, and experience to render him competent and expert in the produc
tion of fixed nitrogen. The other assistant manager shall be a man trained and
experienced in the field of production and distribution of hydroelectric power.
The general manager may at any time, for cause, remove any assistant manager,
and appoint his successor as above provided. He shall immediately thereafter
make a report of such action to the board giving in detail the reason therefor. He
shall employ, with the approval of the board, all other agents, clerks, attorneys,
employees, and laborers.
L(C) The combined salaries of the general manager and the assistant managers
shall not exceed the sum of $50,000 per annum, to be apportioned and fixed by the
board.
[Sec. 4. Except as otherwise specifically provided in this Act, the corporation—
[(a) Shall have succession in its corporate name.
(b) May sue and be sued in its corporate name, but only for the enforcement
of contracts and the defense of property.
!(c) May adopt and use a corporate seal, which shall be judicially noticed,
(d) May make contracts, but only as herein authorized.
(e) May adopt, amend, and repeal by-laws,
(f) May purchase or lease and hold such personal property as it deems neces
sary or convenient in the transaction of its business, and may dispose of any such
personal property held by it.
t(g) May appoint such officers, employees, attorneys, and agents as are neces
sary for the transaction of its business, fix their compensation, define generally
their duties, require bonds of them and fix the penalties thereof, and dismiss at
pleasure any such officer, employee, attorney, or agent, and provide a system of
organization to fix responsibility and promote efficiency.
[(h) The board shall require that the general manager and the two assistant
managers, the secretary and the treasurer, the bookkeeper or bookkeepers, and
such other administrative and executive officers as the board may see fit to in
clude, shall execute and file before entering upon their several officers good and
sufficient surety bonds, in such amount and with such surety as the board shall
approve.
£(i) Shall have all such powers as may be necessary or appropriate for the
exercise of the powers herein specifically conferred upon the corporation, includ
ing the right to exercise the power of eminent domain.
iSEC. 5. The board is hereby authorized and directed—
f(a) To operate existing plants for experimental purposes, to construct, main
tain, and operate experimental plants at or near Muscle Shoals for the manufacture
of fertilizer or any of the ingredients comprising fertilizer for experimental pur
poses;
[(b) To contract with commercial producers for the production of such ferti
lizers or fertilizer materials as may be needed in the Government's program of
development and introduction in excess of that produced by Government plants.
Such contracts may provide either for outright purchase by the Government or
only for the payment of carrying charges on special materials manufactured at
the Government's request for its program;
[(c) To arrange with farmers and farm organizations for large-scale practical
use of the new forms of fertilizers under conditions permitting an accurate measure
of the economic return they produce;
[(d) To cooperate with National, State, district, or county experimental
stations or demonstration farms, for the use of new forms of fertilizer or fertilizer
practices during the initial or experimental period of their introduction;
[fe) The board shall manufacture fixed nitrogen at Muscle Shoals by the
employment of existing facilities (by modernizing existing plants), or by any
other process or processes that in its judgment shall appear wise and profitable
for the fixation of atmospheric nitrogen. The fixed nitrogen provided for in this
act shall be in such form and in combination with such other ingredients as shall
make such nitrogen immediately available and practical for use by farmers in
application to soil and crops.
[(f) Under the authority of this act the board may donate not exceeding 1
per centum of the total product of the plant or plants operated by it to be fairly
and equitably distributed through the agency of county demonstration agents,
agricultural colleges, or otherwise as the board may direct for experimentation,
education, and introduction of the use of such products in cooperation with practical
374 MUSCLE SHOALS

farmers so as to obtain information as to the value, effect, and best methods of

use of same.
[(g) The board is authorized to make alterations, modifications, or improve
ments in existing plants and facilities.
[(h) To establish, maintain, and operate laboratories and experimental plants,
and to undertake experiments for the purpose of enabling the corporation to
furnish nitrogen products for military and agricultural purposes in the most
economical manner and at the highest standard of efficiency.
[(i) The board shall have power to request the assistance and advice of any
officer, agent, or employee of any executive department or of any independent
office of the United States, to enable the corporation the better to carry out its
powers successfully, and the President shall, if in his opinion the public interest,
service, and economy so require, direct that such assistance, advice, and service
be rendered to the corporation, and any individual that may be by the President
directed to render such assistance, advice, and service shall be thereafter subject
to the orders, rules, and regulations of the board and of the general manager.
[(j) Upon the requisition of the Secretary of War or the Secretary of the Navy
to manufacture for and sell at cost to the United States explosives or their nitrog
enous content.
[(k) Upon the requisition of the Secretary of War the corporation shall allot
and deliver without charge to the War Department so much power as shall be
necessary in the judgment of said department for use in operation of all locks,
lifts, or other facilities in aid of navigation.
[(1) To produce, distribute, and sell electric power, as herein particularly
specified.
[(m) No products of the corporation shall be sold for use outside of the United
States, her Territories and possessions, except to the United States Government
for the use of its Army and Navy or to its allies in case of war.
[SEC. 6. In order to enable the corporation to exercise the powers vested in it
by this act—
[(a) The exclusive use, possession, and control of the United States nitrate
plants numbered 1 and 2 located, respectively, at Sheffield, Alabama, and Muscle
Shoals, Alabama, together with all real estate and buildings connected therewith,
all tools and machinery, equipment, accessories, and materials belonging thereto,
and all laboratories and plants used as auxiliaries thereto; the fixed nitrogen re
search laboratory, the Waco limestone quarry, in Alabama, and Dam Numbered 2,
located at Muscle Shoals, its power house, and all hydroelectric and operating
appurtenances (except the locks), and all machinery, lands, and buildings in
connection therewith, and all appurtenances thereof are hereby entrusted to the
corporation for the purposes of this act.
[(6) The President of the United States is authorized to provide for the trans
fer to the corporation of the use, possession, and control of such other real or
personal property of the United States as he may from time to time deem necessary
and proper for the purposes of the corporation as herein stated.
[SEC. 7. (a) The corporation shall maintain its principal office in the imme
diate vicinity of Muscle Shoals, Alabama. The corporation shall be held to be an
inhabitant and resident of the northern judicial district of Alabama within the
meaning of the laws of the United States relating to venue of civil suits.
[(b) The corporation shall at all times maintain complete and accurate books of
.accounts.
[SEC. 8. (a) The board shall file with the President and with the Congress, in
December of each year, a financial statement and a complete report as to the
business oi the corporation covering the preceding fiscal year. This report shall
include the total number of employees and the names, salaries, and duties of
those receiving compensation at the rate of more than $2,500 a year.
[(b) The board shall require a careful and scrutinizing audit and accounting
by the General Accounting Office during each governmental fiscal year of opera
tion under this act, and said audit shall be open to inspection to the public at
all times and copies thereof shall be filed in the principal office. of the Muscle
Shoals Corporation at Muscle Shoals in the State of Alabama. Once during
each fiscal year the President of the United States shall have power, and it shall
be his duty, upon the written request of at least two members of the board, to
appoint a firm of certified public accountants of his own choice and selection
which shall have free and open access to all books, accounts, plants, warehouses,
offices, and all other places, and records, belonging to or under the control of or
used by the corporation in connection with the business authorized by this act.
And the expenses of such audit so directed by the President shall be paid by the
board and charged as part of the operating expenses of the corporation.
 MUSCLE SHOALS 375

ISEC. 9. The board is hereby empowered and authorized to sell the surplus
power not used in its operations and for operation of locks and other works
generated at said steam plant and said dam to States, counties, municipalities,
corporations, partnerships, or individuals, according to the policies hereinafter
set forth, and to carry out said authority the board is authorized to enter into
contracts for such sale for a term not exceeding ten years and in the sale of such
current by the board it shall give preference to States, counties, or municipalities
purchasing said current for distribution to citizens and customers: Provided
further. That all contracts made with private companies or individuals for the
sale of power, which power is to be resold for a profit, shall contain a provision
authorizing the board to cancel said contract upon two years' notice in writing,
if the board needs said power to supply the demands of States, counties, or
municipalities.
[SEC. 10. It is hereby declared to be the policy of the Government to dis
tribute the surplus power generated at Muscle Shoals equitably among the States,
counties, and municipalities within transmission distance of Muscle Shoals.
[SEC. 11. In order to place the board upon a fair basis for making such con
tracts and for receiving bids for the sale of such power it is hereby expressly
authorized, either from appropriations made by Congress or from funds secured
from the sale of such power to construct, lease, or authorize the construction of
transmission lines within transmission distance in any direction from said Dam
Numbered 2 and said steam plant: Provided, That if any State, county, munici
pality or other public or cooperative organization of citizens or farmers, not
organized or doing business for profit, but for the purpose of supplying electricity
to its own citizens or members, or any two or more of such municipalities or
organizations, shall construct or agree to construct a transmission line to Muscle
Shoals, the board is hereby authorized and directed to contract with such State,
county, municipality, or other organization, or two or more of them, for the sale
of electricity for a term not exceeding thirty years, and in any such case the board
shall give to such State, county, municipality, or other organization ample time
to fully comply with any local law now in existence or hereafter enacted pro
viding for the necessary legal authority for such State, county, municipality,
or other organization to contract with the board for such power: Provided further,
That all contracts entered into between the corporation and any municipality
or other political subdivision shall provide that the electric power shall be sold
and distributed to the ultimate consumer without discriminition as between
consumers of the same class, and such contract shall be void if a discriminatory
rate, rebate, or other spedial concession is made or given to any consumer or
user by the municipality or other political subdivision: And provided further,
That any surplus power not so sold as above provided to States, counties, munici
palities, or other said organizations, before the board shall sell the same to any
person or corporation engaged in the distribution and resale of electricity for
profit, it shall require said person or corporation to agree that any resale of such
electric power by said person or corporation shall be sold to the ultimate con
sumer of such electric power at a price that shall not exceed an amount fixed
as reasonable, just, and fair by the Federal Power Commission; and in case of
such sale if an amount is charged the ultimate consumer which is in excess of the
price so deemed to be just, reasonable, and fair by the Federal Power Commission,
the contract for such sale between the board and such distributor of electricity
shall be declared null and void and the samj shall be canceled by the board.
[SEC. 12. Five per centum of the gross proceeds received by the board for the
sale of power generated at Dam Numbered 2. or from the steam plant located in
that vicinity, or from any other steam plant hereafter constructed in the State
of Alabama, shall be paid to the State of Alabama; and 5 per centum of the gross
proceeds from the sale of power generated at Cove Creek Dam, hereinafter pro
vided for, shall be paid to the State of Tennessee. Upon the completion of said
Cove Creek Dam the board shall ascertain how much excess power is thereby
generated at Dam Numbered 2, and from the gross proceeds of the sale of such
excess power 2\i per centum shall be paid to the State of Alabama and 2\{ per
centum to the State of Tennessee. In ascertaining the gross proceeds from the
sale of such power upon which a percentage is paid to the States of Alabama
and Tennessee the board shall not take into consideration the proceeds of any
power sold to the Government of the United States, or any department of the
Government of the United States used in the operation of any locks on the Ten
nessee River, or for any experimental purpose, or for the manufacture of fertili
zer or any of the ingredients thereof, or for any other governmental purpose. The
net proceeds derived by the board from the sale of power and any of the products
37& MUSCLE
manufactured by the corporation, after deducting the cost of operation, mainte
nance, depreciation, and an amount deemed by the board as necessary to with
hold as operating capital, shall be paid into the Treasury of the United States
at the end of each calendar year.
[Sec. 13. The Secretary of War is hereby empowered and directed to complete
Dam Numbered 2 at Muscle Shoals, Alabama, and the steam plant at nitrate
plant numbered 2, in the vicinity of Muscle Shoals, by installing in Dam Num
bered 2 the additional power units according to the plans and specifications of
said dam, and the additional power unit in the steam plant at nitrate plant num
bered 2: Provided, That the Secretary of War shall not install the additional power
unit in said steam plant until, after investigation, he shall be satisfied that the
foundation of said steam plant is sufficiently stable or has been made sufficiently
stable to sustain the additional weight made necessary by such installation.
[SEC. 14. It is hereby declared to be the policy of the Government to utilize
the Muscle Shoals properties for the fixation of nitrogen for agricultural pur
poses in time of peace.
[Sec. 15. The Secretary of War is hereby authorized, with appropriations
hereafter to be made available by the Congress, to construct, either directly or
by contract to the lowest responsible bidder, after due advertisement, a dam in
and across Clinch River in the State of Tennessee, which has by long usage become
known and designated as the Cove Creek Dam, according to the latest and most
approved designs of the Chief of Engineers, including its power house and hydro
electric installations and equipment for the generation of at least two hundred
thousand horsepowei , in order that the waters of the said Clinch River may be
impounded and stored above said dam for the purpose of increasing and regulating
the flow of the Clinch Rivei and the Tennessee River below, so that the maximum
amount of primary power may be developed at Dam Numbered 2 and at any and
all other dams below the said Cove Creek Dam.
[Sec. 16. In order to enable and empower the Secretary of War to carry out the
authority hereby conferred, in the most economical and efficient manner, he is
hereby authorized and empowered in the exercise of the powers of national defense
in aid of navigation, and in the control of the flood waters of the Tennessee and
Mississippi Rivers, constituting channels of interstate commerce, to exercise the
right of eminent domain and to condemn all lands, easements, rights of way, and
other area necessary in order to obtain a site for said Cove Creek Dam, and the
flowage rights for the reservoir of water above said dam and to negotiate and con
clude contracts with States, counties, municipalities, and all States agencies and
with railroads, railroad corporations, common carriers, and all public utility com
missions and any other pei son, firm, or corporation, for the relocation of railroad
tracks, highways, highway bridges, mills, ferries, electric light plants, and any and
all other properties, enterprises, and projects whose removal may be necessary in
order to carry out the provisions of this act. When said Cove Creek Dam and
transportation 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 Govern
ment 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 study
ing, 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
 MUSCLE SHOALS 377
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.
[U>) 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 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 impri
soned not more than five years, or both.
[SEC. 20. In order that the board may not be delayed in carrying out the
program autho, ized 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 S2,000,000 shall be made available with which to begin construc
tion of Cove Creek Dam during the calendar year 1930.
[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.
That the President of the United States (hereinafter referred to as the President) be,
nnd is hereby, authorized and empowered to appoint three eminent citizens of the
United States, one of whom shall he identified with agriculture, and these three shall
constitute a leasing board (hereinafter designated as the leasing board) for the purpose
of negotiating the contract or contracts hereinafter authorized, and the term of office
of all members of the leasing board shall etpire December 1, I9.il. The members of
said leasing board shall upon receiving notification oj their appointment take an oath
faithfully to perform the duties imposed by the provisions of this act, and upon the
filing of said oath toith the President, co-mmitsrions shall be issued to them, and there
upon the President shall set a time and place for their meeting, when the leasing board
shall organize.
The leasing board is hereby directed to appoint appraisers to appraise the United
Slates properties constituting the Muscle Shoals development, separating the same
into such parts as the leasing board may direct, and the value of each and all, as
determined by such appraisers, shall represent the present fair value of United States
properties involved, and shall, after approval by the leasing board, be final for all the
purposes of this act: Provided, That if two or more leases shall be under consideration
the leasing board may direct a rearrangement of the parts and a consequent reappraisal
thereof.
The leasing board shall give notice, for a reasonable time and in such manner as to
them shall seem most likely to insure the widest circulation, that they are ready to
entertain proposals for the leasing of the Muscle Shoals property hereinafter described,
and the leasing board shall furnish to any person on demand full information as to
the appraised value of said properties or any part thereof. The concurrence of at
least l\vv members of the leasing board shall be necessary for any action, except in the
case of the execution of a lease or leases which shall require the concurrence of all
members of the leasing board. If any member of the leasing board die, resign, or be
dismissed by the President for any cause whatsoever, the President shall fill the place
thus made vacant.
When the leasing board shall have negotiated a lease or leases for the Muscle Shoals
properties as hereinafter authorized they shall require an adequate performance bond
effective for the first five years of the lease or leases and shall then execute the said lease
or leases by signing their names thereto, and the lessee or lessees shall affix their
signatures thereto, and thereupon the draft of such lease or leases shall be submitted
to the President, who shall consider the same, and who, in not less than thirty days
nor more than sixty days after he shall receive the same, may approve of the same in
writing, and if the President shall so approve they shall forthwith become effective and
binding upon the Government of the United States and upon the le-ssee or lessees. But
if the President withhold his approval thereof, the leasing board shall have the right to
378 MUSCLE SHOALS

reopen negotiations, and if another draft of such lease or leases be agreed upon and
executed, then the same shall be submitted to the President, and the like proceedings
be had u'ith reference thereto.
Lease authorization—principles and limitations
Sec. 2. The said leasing board, subject to the approval of the President as herein
provided, is hereby authorized and empowered to enter into a contract or contracts on
behalf of the L nited States for the demise and letting for a tenure or tenures not in any
case to exceed fifty years of all or any of the properties of ihe United States generally
known and designated as the "Muscle Shoals development," including Dam Num
bered 2 (known also as Wilson Dam) and its electrical generating units, Waco Quarry,
nitrate plant numbered 2, nitrate plant numbered 1, except that portion of the reser
vation west of Spring Creek, steam power generating plants, and all structures, plants,
buildings, machinery, tools and equipment, franchises, rights, powers, and privileges,
including authority to exercise the right of eminent domain, for the construction,
maintenance, use, and operation thereof, as well as all lands, tenements, easements,
servitudes, rights of way, riparian rights and the appliances, fixtures, and appurte
nances thereunto belonging, trackage, transmission lines, telephone and telegraph lines,
supplies, and accessories, exclusive of locks for navigation purposes, such contract
or contracts to be based on the principles and limitations hereinafter set forth:
Nitrogen fertilizer bases and fertilizers
(a) The use of the United States properties adapted to the fixation of nitrogen
in the manufacture of fertilizer bases or fertilizers in time of peace for sale for
use in agriculture, and of explosives or the essential ingredients thereof in time
of war: Provided, That any and all contracts for the demise of any such properties
for the production of fertilizer bases or fertilizers shall contain a stiuplation that
there must be manufactured 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 provided further, That any and all such contracts shall contain a stipulation
requiring the lessee or lessees to produce within three years and six months from
the date such lease or leases shall become effective, such fertilizer bases or ferti
lizers containing not less than ten thousand tons of fixed nitrogen, and shall
require periodic increases in quantity of fixed nitrogen from time to lime as the
market demands may reasonably require, and such lease or leases shall provide
that such increases shall finally reach the maxinum production capacity of such
plant or plants as the leasing board may find to be economically adapted or sus
ceptible of being made economically adapted to the fixation of nitrogen, if the
teasonable demands of the market shall justify the same, except when the nitrogen
produced is required for national defense, or when the market demands for same
are satisfied by the maintenance in storage and unsold of such fertilizer bases
or fertilizers containing at least two thousand five hundred tons affixed 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 fertilizer bases or fertilizers shall thereupon be
resumed.
(b) The sale of such fertilizer bases or fertilizers shall be at a price to include
the cost of production and not exceeding 8 per centum profit on the turnover
produced, and the costs shall include whatever may be paid to the Government for
the use of that part of Government property employed by the lessee or lessees in
manufacturing such fertilizer bases or fertilizers and also not exceeding 6 per
centum on any capital invested by the lessee or lessees in improvements to existing
plants or in additional plants employed for such manufacturing purposes:
Provided, That there shall not be included as a part of the cost of producing such
fertilizer bases or fertilizers any royally for the use by such lessee or lessees of any
patent, patent right, or patented process belonging to the lessee or lessees, or in
which the lessee or lessee have any interest, or belonging to any subsidiary or
allied corporation, or belonging to or controlled by any officer or agent of the
lessee or of the lessees or of any such allied or subsidiary corporation, and if the
lessee or lessees should buy any patent, patent right, or patented process with the
hope and expectation of thereby reducing the cost of manufacturing such fertilizer
bases or fertilizers and/or of processing the same for agricultural purposes as
aforesaid, then such sum of money as shall be so paid by the lessee or lessees
shall be considered and treated in the accounting of the costs of such fertilizer
bases or fertilizers as investment in the nature of plant account, and not a.
 MUSCLE SHOALS 379

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 the cost
of such fertilizer bases and fertilizers there shall be appointed by the administrative
board a production engineer, and by the lessee or lessees another production en
gineer and by these a firm of certified public accountants and these three shall
proceed to ascertain and compute the cost of producing such fertilizer andfertilizers;
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 decisions shall be binding upon all parties for the year for
which the dertemination shall have been made. A copy of such audit and
decision shall be filed each year with the administrative board and by it preserved.
The expenses incident to this provision shall be paid by the lessee or lessees,
respectively, and shall be charged as an item in the cost of producing such
fertilizer bases and fertilizers. If such annual costs determination discloses
that any purchasers have paid a price for fertilizer bases or fertilizers in excess
of that allowable under this act, then the lessee or lessees affected shall refund
such excess to the respective purchasers.
(c) Credit shall be allowed against the cost of producing such fertilizer bases
or fertilizers in the amount of any profit on account of the sale of electric energy
during the period of any temporary suspension of the operation of the nitrogen
fixation or fertilizer plants, and in the amount of not to exceed 50 per centum
of any profit on account of the sale of electric energy made available for such
sale by reason of decreased electric energy requirements for the production of
each ton unit of fertilizer bases or fertilizers.
(d) Such sale of fertilizer boxes or fertilizers shall regard the widest practi
cable distribution, consistent with demand, and preference shall be given in such
sales first to farmers and cooperative organizations of farmers, second to States
or State agencies engaged in processing and mixing fertilizers for resale to
farmers, and these demands being supplied, such sale may then be made to
fertilizer manufacturers, mixers, or merchants.
(«) The lessee or lessees shall be required to carry on reasonably continuous
laboratory research to determine whether by means of electric-furnace methods
and industrial chemistry, or otherwise, there may be produced on a commercial
scale fertilizer compounds of higher grade and at lower prices than farmers
and other users of commercial fertilizers have in the past been able to obtain,
and to determine whether in a broad way the application of electricity and
industrial chemistry may accomplish for the agricultural industry of the Nation
what these forces and sciences have accomplished in an economic way for other
industries.
Use of electric energy by lessee
(/) The development of electrochemical, and/or ferro-alloy, and/or other
industries in addition to the fertilizer industry.
(g) The use of the primary and secondary electric energy produced by the
properties so leased, enlarged and constructed in the production of fertilizer bases
and/or fertilizers, and/or chemicals, and/or ferro-alloys, and/or other products:
Provided That no contract shall be made by any lessee with any person, firm, or
corporation for the sale of any surplus electric energy for use by the purchaser in the
fixation of nitrogen or manufacture of fertilizer bases or fertilizers, when such
person, firm, or corporation is a member of any group, or a party to any contract
or to any agreement express or implied, or to any understanding, arrangement,
or device or any kind whatsoever, which shall have as its purpose or effect the
fixing and maintaining of noncompetitive prices for nitrogen and/or nitrogen
products.
(h) The equitable allocation of surplus electric energy generated at Muscle
Shoals among the States within economic transmission distance.
Allocation and sale of surplus electric energy
(i) The sale and equitable allocation of primary surplus electric energy and/or
secondary surplus electric energy generated by the properties herein authorized
to be let, to such States, counties, municipalities, and political subdivisions as
may make demand and agree to pay a reasonable price therefor, and in case of
dispute as to allocation, price, or length of term of contract, the Federal Water
Power Commission is hereby authorized to determine the same. But except as
herein provided no part of the dam or dams now constructed or to be constructed
in connection with the Muscle Shoals project or any apparatus, either hydro or
380 MUSCLE SHOALS

steam, for the generation of electric energy shall be contracted to or operated by

any private power distributing company, subsidiary or allied corporation or
creation thereof, or any corporation subject to the same control, nor shall any lease be
assignable, without the consent of the President, and then not to such companies,
and in case of any sale in bankruptcy or insolvency proceedings of the assets of
any lessee or lessees no sale shall be made to any private power distributing
company, its subsidiary or allied corporation or creation thereof, or any corpora
tion subject to the same ownership or control in whole or in part: Provided,
however, That the sale of primary surplus electric energy or secondary electric
energy by contract or otherwise to any such power distributing company shall be
permitted for periods of not to exceed ten years: Provided further, That at no
time shall primary surplus electric energy or secondary electric energy be so sold
to such distributing companies until first the demands of States, counties,
municipalities, and political subdivisions, and second, demand of manufac
turing industries, have been satisfied, and then only for periods of not exceed ten
years: And provided further, That at any time prior to two years before the
expiration of such contracts any State, county, political subdivision, or manu
facturing industries shall have prior right to contract for such electric energy
when it shall become available.
Cove Creek Dam and Dam Numbered 3
(J) The construction, through the medium of a holding corporation or other-
'wise, of a dam in and across Clinch River in the State of Tennessee upon the
dam site known as Cove Creek, shall be required by the terms of any lease or leases,
and the construction, through the medium of such holding corporation or otherwise,
of Dam Numbered 3 in and across the Tennessee River upon a site approximately
fifteen miles upstream from Dam Numbered 2 may be authorized by the terms of any
lease or leases, so as to produce the maximum primary power at Dam Numbered 2,
and to improve navigation on the Tennessee River, and to increase the facilities
of flood control, and the President shall have the authority to issue a license or
licenses for the construction and operation of the said dam or dams subject in all
other respects to the provisions of the Federal water power act of 19%0, as amended:
Provided, That if the leasing board shall find upon investigation that the cost of
construction of the Cove Creek Dam, or Dam Numbered 3, and of its or their
operation for the improvement of navigation and flood control on the Tennessee
River, will be in excess of what will be a reasonable cost of same for power pur
poses, the President may then issue a license or licenses on condition to be
expressed in the license or licenses that the United States will reimburse the
licensee or licensees in an amount deemed by the leasing board as a necessary
contribution to the cost of said project for navigation improvement and flood
control by applying annually until paid against such amount the proceeds
obtained from the lease or leases of the hydropower plant at Dam Numbered 2,
and application of the proceeds accruing from the lease or leases of the said
hydropower plant for such purposes is hereby authorized.
Forfeiture and recapture
(k) The right of temporary recapture by the United States by order of the
President in the event of war for the purpose of producing explosives or ingredi
ents thereof, but if the Government shall exercise this right it shall pay to the
lessee or lessees such fair and reasonable actual damages as it or they may suffer
by reason of such taking but not including profits or speculative damages, and
the amount of such actual damages shall be fixed in proceedings instituted by
in the United States Court of Claims by the lessee or lessees in accordance with
the rules and regulations prescribed by that court for such proceedings, and said
court is authorized to consider such proceedings as though instituted by depart
mental reference and may render final judgment.
(I) Permanent recapture by the United States of any or all existing properties
so leased, and all rights and interests connected therewith, together with any
additions or improvements thereon, in the event of failure by any lessee or lessees
to comply with and to carry out the terms of said lease or leases, except that
neither the said Cove Creek Dam when constructed; nor Dam Numbered 3 if
and when constructed, nor any or all interests therein shall be subjected to recap
ture under the provisions of this subsection. Suit for permanent recapture
may be instituted at the direction of the administrative board hereinafter author
ized by the Attorney General in the name of the United States, in any district
 MUSCLE SHOALS 381
court of the United States having jurisdiction of the lessee, or of any one of two
or more lessees affected by such suit.
(m) No lease shall be made to any person or firm except to American citizens
nor to any corporation unless the majority stock of same be owned and controlled
by American citizens, and any lease shall provide that if at any time the majority
stock of the lessee or the lessee corporation shall cease to be under the ownership
and control of American citizens, then all rights under such lease shall immedi
ately cease, and the United States by order of the President shall have the right
of reentry and recapture without any compensation whatever to the lessee on any
account whatsoever.
Maintenance for national defense
(n) To maintain in United States nitrate plants numbered 1 and 2, located
at Sheffield, Alabama, and Muscle Shoals, Alabama, respectively, the buildings
and equipment therein installed for the production of nitnc add by the oxidation
of ammonia and for the production of ammonium nitrate from ammonia and
nitric acid, said buildings and equipment to be maintained in an up-to-date
condition so that they will be at all times ready for immediate operation in the
event of a national emergency, and further such lease or leases shall provide
that the administrative board, or its representative or representatives, shall at all
times have access to the operations of the plants, laboratories, and the records
thereof, in order that they may be kept fully informed as to the status of the fixation
of nitrogen and the manufacture of nitrogenous products in their bearing on
national defense and agriculture, but such information shall be confidential to
the administrative board and shall not be made public.
Settlement of disagreements
(o) In the event that the leasing board, with the approval of the President, shall
execute lease contracts with two or more lessees, there shall be included in each
of said leases identical provisions binding each such lessee to cooperate with the
other lessee or lessees in setting up a joint board of control, or authorizing such
lessees to organize a holding corporation, the voting stock of which shall be
exclusively owned by such lessees, with power and authority to decide upon and
to control the allocation among themselves of the electric energy generated and
all other matters in connection therewith: Provided, That such lessee or lessees,
board of control, or holding corporation shall deliver free of charge to the United
States at any point on the grounds to be designated by the Secretary of War such
electric energy as may be necessary for the operation of locks, navigation facili
ties, and lighting at and in the vicinity of the several dams involved in such leases.
(p) In any or all lease contracts there shall be incorporated identical pro
visions for the adjustment of all kinds of disagreements, either among the several
lessees or between the several lessees or any one of them and the United States,
and any adjustment made thereunder shall be subject to review in any United
States district court as then constituted, subject to the law then applicable to
change of venue, except that the right of temporary recapture by the President in
the event of war shall be summary and not subject to the provisions of this section
nor to any process of any court.
Rental and amortization payments
(g) The payment annually to the United States for the term of the lease or
leases of a sum which at 4 per centum per annim compounded over a period
of fifty years will insure repayment to the United States of the appraised valua
tion of the properties leased, except that the lessee or lessees of nitrate plant
numbered 1 and nitrate plant numbered 2 shall not be required to make pay
ments to amortize the appraised valuation of said plants as long as they or
either of them may be employed by the lessee or lessees for the fixation of nitrogen
for agricultural purposes. -
(r) A fair rental for the use of the properties leased to be paid by the lessee
or lessees at such times and in such amounts as the leasing board shall deter
mine to be fair and reasonable and in such determination consideration shall
be given to such secondary hydraulic power as may be rendered primary power
by the use of the auxiliary steam plant or plants, and such other secondary
hydraulic power as shall be ascertained to be available.
101229—30 25
 382 MUSCLE SHOALS

Sec. 3. If prior to December 1, 1931, the leasing board, with the approval of the
President, shall have executed a contract or contracts for the letting of the properties
based on the principles, directions, and limitations enumerated herein, then with
respect to the dam to be constructed by the lessee or lessees or by a joint board of
control or a holding corporation or otherwise, at the site on the Clinch River, known
as Cove Creek, by way of amplifying and amending the provisions of the Federal
water power act of 192O, as amended, under the terms of which the lessee is or the
lessees are to construct the 'said dam, the following provisions shall apply:
(a) The cost of said dam to the licensee and to the United States shall be amortized,
at least in part, by the collection of a reasonable royalty from all hydroelectric power
projects now existing or to be constructed on the Tennessee or Clinch Rivers down
stream from the Cove Creek Dam: Provided, That the amount of said royalty shall
be in proportion to the advantages accruing to such downstream hydroelectric projects
from the construction and operation of said Cove Creek Dam and shall be determined
by the Federal Power Commission in cooperation with the appropriate agency of the
State in which said dam may be situated, and in event of disagreement between these
agencies the President shall appoint a competent engineer who shall act as arbiter
and whose decision shall then be final.
(6) At the expiration of the license for the construction and operation of said dam
at the Cove Creek site the State of Tennessee shall have the right to recapture the inter
ests of the lessee or lessees and licensee or licensees in said dam and appurtenant
structures, including hydroelectric generating equipment, but exclusive of any barge
lift or navigation appliances, by paying the lessee or lessees or licensee or licensees
therefor an amount equal to the net investment, as defined in said Federal water power
act of 1920, as amended, made by said lessee or lessees and licensee or licensees in
said dam and appurtenant structures: Provided, That in the event the State of
Tennessee shall exercise the right hereby conferred, the State of Tennessee and its
agents shall hold and operate the same in the interest of the development of the maxi
mum primary power at Dam Numbered 2 and of navigation, and subject to the pro
visions of the Federal water power act of 1920, as amended, to the same extent as if
the same were held and operated by the United States or a licensee thereof.
Sec. 4- In order to enable and empower the lessee or lessees, the licensee or licensees,
through a holding corporation or otherwise, to carry out the authority hereby conferred
in the most economical and efficient manner, said lessee or lessees, licensee or licensees,
holding corporation, or other agency is or are hereby authorized and empowered, in
aid of national defense and of navigation, and in the control of the flood waters of the
Tennessee and Mississippi Rivers, constituting channels of interstate commerce, to
exercise the right of eminent domain in the State or States where the properties affected
thereby are situated, and to condemn all lands, easements, rights of way, and other
area necessary in order to obtain a site for said Cove Creek Dam and/or Dam Num
bered 3, and the flowage rights for the reservoir of waters above said dam or dams, and
to negotiate and conclude contracts with States, counties, municipalities, and all
State and county agencies, and with railroads, railroad corporations, common carriers,
and all public utilities, and any other person, firm, or corporation, for the relocation
of railroad tracks, highways, highway bridges, mills, ferries, electric-light plants,
and any and all other properties, enterprises, and projects, whose removal may be
necessary in order to carry otit the provisions of this act, and the United States District
Court for the Eastern District of Tennessee shall have and exercise exclusive jurisdic
tion of all suits and proceedings in condemnation for the purpose of acquiring all
lands, properties, and rights necessary and/or proper to carry out the provisions of
this Act, and the proceedings in such suits or proceedings shall conform as nearly as
may be practicable to suits at law in such court.
Sec. B. All plants, buildings, machinery, and equipment installed by and at the
expense of the lessee or lessees, situated upon the property owned by the United States,
except such machines and equipment as may be installedfor the purpose of completing ,
modernizing, or replacing worn out or defective parts of the dam, electrogenerating
equipment or nitrate plants, shall be subject to all of the laws of the State in which
they may be situated and the State and political subdivisions in which they may be
situated shall have the power to levy and collect taxes in accordance with the normal
procedure for the levying and collecting of taxes on such classes of property.
Sec. 6. The leasing board shall keep an accurate record of all its proceedings and
shall report from lime to time either orally or in writing to the President, as he shall
require, and the leasing board shall file a final report in writing which shall be trans
mitted by the President to thc Congress. The members of the leasing board shall be
entitled to the actual expenses of travel and subsistence and to a per diem compensa
tion for their services at the rate of $50 a day while actually engaged in the performance
afthe duties herein imposed, to be paid upon vouchers signed by a member of the leasing
bna^d designated for that purpose.
 MUSCLE SHOALS 383

Sec. 7. The President and/or the leasing board hereby is authorized to employ such
consultants and secretarial and clerical help as he and/or they may deem necessary
and desirable to assist him and/or them in the execution of the powers herein conferred,
and the President is authorized to detail to the leasing board from the executive depart
ments such personnel as he may deem advisable.
Sec. 8. In the event that the properties embraced in any lease shall be recaptured by
the United States or any lessee shall apply to the President for a change in any stipu
lation of any lease on the ground that compliance with any such stipulation has become
impracticable because of changed economic conditions and/or the development of new
scientific and industrial process or processes, the President may appoint a board of
three eminent citizens, one of whom shall be identified with agriculture, who, after
public notice and full hearing, may negotiate and execute new leases on such proper
ties recaptured or may change the stipulation of any existing lease, subject to the
approval of the President within not less than thirty days and not more than sixty
days after the draft of such lease or the recommendation* of the board as to such change
in the stipulations of existing leases shall have been submitted to him: Prodded,
That in negotiating such lease or leases or in making such change in an existing lease
the board shall consider the principles herein enumerated and shall be bound by the
limitations herein set forth, but shall have no authority to alter the requirements as
to quantity and quality production of fertilizer bases or fertilizers.
Sec. 9. If prior to December 1, 1931, or if under the provisions of section 8 hereof,
the leasing board, subject to the approval of the President, shall have negotiated and
executed a lease or leases under the provisions of this act, then for the purpose of
administering such lease or leases and of securing full performance by the lessee or
lessees of all obligations imposed upon him or them by the terms thereof, the Secretary
of War, the Secretary of Agriculture, and the Secretary of Commerce shall constitute
a board, which shall be charged with such administrative duties and shall be known
as the Muscle Shoals Administrative Board (herein referred to as the administrative
board^ The administrative board shall meet at least once each year, and oftencr as
they may determine, or upon call of the President, or any two members thereof, and
shall keep records of all proceedings, and shall make annual report to the President,
who shall transmit said report to the Congress.
Sec. 10. All appropriations necessary for carrying out the provisions of this act
are hereby authorized.
Sec. 11. The several provisions of this act are hereby declared to be separable, and
in the event that any provision of this act shall be held to be invalid it shall not invali
date the remainder of the act: and in such event the President, as he deems best for all
parties concerned, may revise the terms of such lease or leases as may be affected by
the holding of invalidity.
Sec. 12. No lease or leases shall be made under this act for any part of the Gov
ernment power generating properties herein set out unless at the same time there
be or previously has been or have been executed and approved a lease or leases requir
ing the manufacture of fertilizer bases or fertilizers as provided in subsection (a) of
section 2 and if by December 1, 1931, the leasing board, with the approval of the Presi
dent, shall have been unable to negotiate and execute a lease or leases he shall notify
Congress and thereafter all authority under this act shall cease.
Amend the title so as to read: "Joint resolution to authorize the letting of
the Muscle Shoals properties on certain terms and conditions, and for other pur
poses."

[House Report No. 1430, Seventy-Brat Congress, second sessionI

The Committee on Military Affairs, to whom was referred the
joint resolution (S. J. Res. 49) for the utilization of the properties at
Muscle Shoals, having carefully considered the same, report thereon
with the recommendation that it do pass with the following amend
ment:
Strike out all after the enacting clause and insert the following in
lieu thereof:
A. THE AMENDED JOINT RESOLUTION
That the President of the United States (hereinafter referred to as the Presi
dent), be, and is hereby, authorized and empowered to appoint three eminent
citizens of the United States, one of whom shall be identified with agriculture,
384 MUSCLE SHOALS

and these three shall constitute a leasing board (hereinafter designated as the
leasing board) for the purpose of negotiating the contract or contracts herein
after authorized, and the term of office of all members of the leasing board shall
expire December 1, 1931. The members of said leasing board shall upon re
ceiving notification of their appointment take an oath faithfully to perform the
duties imposed by the provisions of this act, and upon the filing of said oath with
the President, commissions shall be issued to them, and thereupon the President
shall set a time and place for their meeting, when the leasing board shall organize.
The leasing board is hereby directed to appoint appraisers to appraise the
United States properties constituting the Muscle Shoals development, separating
the same into such parts as the leasing board may direct, and the value of each
and all, as determined by such appraisers, shall represent the present fair value
of United States properties involved, and shall, after approval by the leasing
board, be final for all the purposes of this act: Provided, That if two or more
leases shall be under consideration the leasing board may direct a rearrangement
of the parts and a consequent reappraisal thereof.
The leasing board shall give notice, for a reasonable time and in such manner
as to them shall seem most likely to insure the widest circulation, that they are
ready to entertain proposals for the leasing of the Muscle Shoals property here
inafter described, and the leasing board shall furnish to any person on demand
full information as to the appraised value of said properties or any part thereof.
The concurrence of at least two members of the leasing board shall be necessary
for any action, except in the case of the execution of a lease or leases which shall
require the concurrence of all members of the leasing board. If any member of
the leasing board die, resign, or be dismissed by the President for any cause
whatsoever, the President shall fill the place thus made vacant.
When the leasing board shall have negotiated a lease or leases for the Muscle
Shoals properties as hereinafter authorized they shall require an adequate per
formance bond effective for the first five years of the lease or leases and shall then
execute the said lease or leases by signing their names thereto, and the lessee or
lessees shall affix their signatures thereto, and thereupon the draft of such lease
or leases shall be submitted to the President, who shall consider the same, and
who, in not less than thirty days nor more than sixty days after he shall receive
the same, may approve of the same in writing, and if the President shall so approve
they shall forthwith become effective and binding upon the Government of the
United States and upon the lessee or lessees. But if the President withhold his
approval thereof, the leasing board shall have the right to reopen negotiations,
and if another draft of such lease or leases be agreed upon and executed, then the
same shall be submitted to the President, and the like proceedings be had with
reference thereto.
LEASE AUTHORIZATION PRINCIPLES AND LIMITATIONS

SEC. 2. The said leasing board, subject to the approval of the President as
herein provided, is hereby authorized and empowered to enter into a contract or
contracts on behalf of the United States for the demise and letting for a tenure
or tenures not in any case to exceed fifty years of all or any of the properties of
the United States generally known and designated as the " Muscle Shoals develop
ment," including Dam Numbered 2 (known also as Wilson Dam), and its electri
cal generating units, Waco Quarry, nitrate plant numbered 2, nitrate plant
numbered 1, except that portion of the reservation west of Spring Creek, steam
power generating plants, and all structures, plants, buildings, machinery, tools
and equipment, franchises, rights, powers, and privileges, including authority
to exercise the right of eminent domain, for the construction, maintenance, use,
and operation thereof, as well as all lands, tenements, easements, servitudes,
rights of way, riparian rights and the appliances, fixtures, and appurtenances
thereunto belonging, trackage, transmission lines, telephone and telegraph lines,
supplies, and accessories, exclusive of locks for navigation purposes, such contract
or contracts to be based on the principles and limitations hereinafter set forth :
NITROGEN FERTILIZER RASES AND FERTILIZERS

(a) The use of the United States properties adapted to the fixation of nitrogen
in the manufacture of fertilizer bases or fertilizers in time of peace for sale for
use in agriculture, and of explosives or the essential ingredients thereof in time of
war: Provided, That any and all contracts for the demise of any such properties
for the production of fertilizer bases or fertilizers shall contain a stipulation that
there must be manufactured annually at least a prescribed amount of nitrogenous
 MUSCLE SHOALS 385

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
provided further, That any and all such contracts shall contain a stipulation re
quiring the lessee or lessees to produce within three years and six months from the
date such lease or leases shall become effective, such fertilizer bases or fertilizers
containing not less than ten thousand tons of fixed nitrogen, and shall require
periodic increases in quantity of fixed nitrogen from time to time as the market
demands may reasonably require, and such lease or leases shall provide that such
increases shall finally reach the maximum production capacity of such plant or
plants as the leasing board may find to be economically adapted or susceptible
of being made 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 same are satis
fied by the maintenance in storage and unsold of such fertilizer bases or fertilizers
contarning at least two thousand five hundred tons of fixed nitrogen, but when
ever 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 manu
facture of such fertilizer bases or fertilizers shall thereupon be resumed.
(b) The sale of such fertilizer bases or fertilizers shall be at a price to include
the cost of production and not exceeding 8 per centum profit on the turnover
produced, and the costs shall include whatever may be paid to the Government
for the use of that part of Government property employed by the lessee or lessees
in manufacturing such fertilizer bases or fertilizers and also not exceeding 6 per
centum on any capital invested by the lessee or lessees in improvements to existing
plants or in additional plants employed for such manufacturing purposes: Pro
vided, That there shall not be inleuded as a part of the cost of producing such
fertilizer bases or fertilizers any royalty for the use by such lessee or lessees of
any patent, patent right, or patented process belonging to the lessee or lessees,
or in which the lessee or lessees have any interest, or belonging to any sub
sidiary or allied corporation, or belonging to or controlled by any officer or agent
of the lessee or of the lessees or of any such allied or subsidiary corporation, and
if the lessee or lessees should buy any patent, patent right, or patented process
with the hope and expectation of thereby reducing the cost of manufacturing
such fertilizer bases or fertilizers and/or of processing the same for agricultural
purposes as aforesaid, then such sum of money as shall be so paid by the lessee
or lessees shall be considered and treated in the accounting of the costs of such
fertilizer bases or fertilizers 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 the cost
of such fertilizer bases and fertilizers there shall be appointed by the adminis
trative board a production engineer, and by the lessee or lessees another produc
tion 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 bases
and fertilizers; 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 decisions 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 administrative board and by it
preserved. The expenses incident to this provision shall be paid by the lessee
or lessees, respectively, and shall be charged as an item in the costs of producing
such fertilizer bases and fertilizers. If such annual cost determination discloses
that any purchasers have paid a price for fertilizer bases or fertilizers in excess of
that allowable under this act, then the lessee or lessees affected shall refund
such excess to the respective purchasers.
(c) Credit shall be allowed against the cost of producing such fertilizer bases
or fertilizers in the amount of any profit on account of the sale of electric energy
during the period of any temporary suspension of the operation of the nitrogen
fixation or fertilizer plants, and in the amount of not to exceed 50 per centum of
any profit on account of the sale of electric energy made available for such sale
by reason of decreased electric energy requirements for the production of each
ton unit of fertilizer bases or fertilizers.
(d) Such sale of fertilizer bases or fertilizers shall regard the widest practicable
distribution, consistent with demand, and preference shall be given in such sales
first to farmers and cooperative organizations of farmers, second to States or
State agencies engaged in processing and mixing fertilizers for resale to farmers,
and these demands being supplied, such sale may then be made to fertilizer
manufacturers, mixers, or merchants.
 MUSCLE SHOALS

(e) The lessee or lessees shall be required to carry on reasonably continuous

laboratory research to determine whether by means of electric-furnace methods
and industrial chemistry, or otherwise, there may be produced on a commercial
scale fertilizer compounds of higher grade and at lower prices than farmers and
other users of commercial fertilizers have in the past been able to obtain, and to
determine whether in a broad way the application of electricity and industrial
chemistry may accomplish for the agricultural industry of the Nation what these
forces and sciences have accomplished in an economic way for other industries.
USE OF ELECTRIC ENERGY RY LESSEE

(f) The development of electrochemical, and/or ferro-alloy, and/or other

industries in addition to the fertilizer industry.
(g) The use of the primary and secondary electric energy produced by the
properties so leased, enlarged, and constructed in the production of fertilizer bases
and/or fertilizers, and/or chemicals, and/or ferro-alloys, and/or other products:
Provided, That no contract shall be made by any lessee with any person, firm,
or corporation for the sale of any surplus electric energy for use by the purchaser
in the fixation of nitrogen or manufacture of fertilizer bases or fertilizers, when
such person, firm, or corporation is a member of any group, or a party to any
contract or to any agreement express or implied, or to any understanding,
arrangement, or device of any kind whatsoever, which shall have as its purpose
or effect the fixing and maintaining of noncompetitive prices for nitrogen and/or
nitrogen products.
ALLOCATION AND SALE OF SURPLUS ELECTRIC ENERGY

(h) The equitable allocation of surplus electric energy generated at Muscle

Shoals among the States within economic transmission distance.
(i) The sale and equitable allocation of primary surplus electric energy and/or
secondary surplus electric energy generated by the properties herein authorized to
be let, to such States, counties, municipalities, and political subdivisions as may
make demand and agree to pay a reasonable price therefor, and in case of dispute
as to allocation, price, or length of term of contract, the Federal Water Power
Commission is hereby authorized to determine the same. But except as herein
provided no part of the dam or dams now constructed or to be constructed in
connection with the Muscle Shoals project or any apparatus, either hydro or
steam, for the generation of electric energy shall be contracted to or operated by
any private power distributing company, subsidiary or allied corporation or crea
tion thereof, or any corporation subject to the same control, nor shall any lease be
assignable, without the consent of the President, and then not to such companies,
and in case of any sale in bankruptcy or insolvency proceedings of the assets of
any lessee or lessees no sale shall be made to any private power distributing
company, its subsidiary or allied corporation or creation thereof, or any corpora
tion subject to the same ownership or control in whole or in part: Provided, how
ever, That the sale of primary surplus electric energy or secondary electric
energy by contract or otherwise to any such power distributing company shall
be permitted for periods of not to exceed ten years: Provided further, That at no
time shall primary surplus electric energy or secondary electric energy be so sold
to such distributing companies until first the demands of States, counties, munici
palities, and political subdivisions, and, second, demands of manufacturing indus
tries, have been satisfied, and then only for periods of not to exceed ten years:
And provided further, That at any time prior to two years before the expiration
of such contracts any State, county, political subdivision, or manufacturing
industries shall have prior right to contract for such electric energy when it shall
become available.
COVE CREEK DAM AND DAM NUMRERED 3
(j) The construction, through the medium of a holding corporation or other
wise, of a dam in and across Clinch River in the State of Tennessee upon the
dam site known as Cove Creek shall be required by the terms of any lease or
leases, and the construction, through the medium of such holding corporation or
otherwise, of Dam Numbered 3 in and across the Tennessee River upon a site
approximately fifteen miles upstream from Dam Numbered 2 may be authorized
by the terms of any lease or leases, so as to produce the maximum primary power
of Dam Numbered 2, and to improve navigation on the Tennessee River, and to
increase the facilities of flood control, and the President shall have the authority
 MUSCLE SHOALS 387

to issue a license or licenses for the construction and operation of the said dam
or dams subject in all other respects to the provisions of the Federal water power
act of 1920, as amended: Provided, That if the leasing board shall find upon in
vestigation that the cost of construction of the Cove Creek Dam, or Dam Num
bered 3, and of its or their operation for the improvement of navigation and
flood control on the Tennessee River, will be in excess of what will be a reasonable
cost of same for power purposes, the President may then issue a license or
licenses on condition to be expressed in the license or licenses that the United
States will reimburse the licensee or licensees in an amount deemed by the
leasing board as a necessary contribution to the cost of said project for naviga
tion improvement and flood control by applying annually until paid against
such amount the proceeds obtained from the lease or leases of the hydropower
plant at Dam Numbered 2, and application of the proceeds accruing from the
lease or leases of the said hydropower plant for such purposes is hereby authorized.
FORFEITURE AND RECAPTURE

(k) The right of temporary recapture by the United States by order of the
President in the event of war for the purpose of producing explosives or ingredi
ents thereof, but if the Government shall exercise this right it shall pay to the
lessee or lessees such fair and reasonable actual damages as it or they may suffer
by reason of such taking but not including profits or speculative damages, and the
amount of such actual damages shall be fixed in proceedings instituted in the
United States Court of Claims by the lessee or lessees in accordance with the rules
and regulations prescribed by that court for such proceedings, and said court is
authorized to consider such proceedings as though instituted by departmental
reference and may render final judgment.
(1) Permanent recapture by the United States of any or all existing properties
so leased, and all rights and interests connected therewith, together with any
additions or improvements thereon, in the event of failure by any lessee or lessees
to comply with and to carry out the terms of said lease or leases, except that
neither the said Cove Creek Dam when constructed, nor Dam Numbered 3 if
and when constructed, nor any or all interests therein, that shall have con
structed Cove Creek Dam and/or Dam Numbered 3 shall be subject to recapture
under the provisions of this subsection. Suit for permanent recapture may be
instituted at the direction of the administrative board hereinafter authorized by
the Attorney General in the name of the United States, in any district court
of the United States having jurisdiction of the lessee, or of any one of two or more
lessees affected by such suit.
(m) No lease shall be made to any person or firm except to American citizens
nor to any corporation unless the majority stock of same be owned and controlled
by American citizens, and any lease shall provide that if at any time the majority
stock of the lessee or the lessee corporation shall cease to be under the ownership
and control of American citizens, then all rights under such lease shall imme
diately cease, and the United States by order of the President shall have the right
of reentry and recaptive without any compensation whatever to the lessee on
any account whatsoever.
MAINTENANCE FOR NATIONAL DEFENSE
(n) To maintain in United States nitrate plants numbered 1 and 2, located at
Sheffield, Alabama, and Muscle Shoals, Alabama, respectively, the buildings and
equipment therein installed for the production of nitric acid by the oxidation of
ammonia and for the production of ammonium nitrate from ammonia and nitric
acid, said buildings and equipment to be maintained in an up-to-date condition
so that they will be at all times ready for immediate operation in the event of a
national emergency, and further such lease or leases shall provide that the admin
istrative board, or its representative or representatives, shall at all times have
access to the operations of the plants, laboratories, and the records thereof, in
order that they may be kept fully informed as to the status of the fixation of
nitrogen and the manufacture of nitrogenous products in their bearing on national
defense and agriculture, but such information shall be confidential to the adminis
trative board and shall not be made public.
SETTLEMENT OF DISAGREEMENTS

(o) In the event that the leasing board, with the approval of the President,
shall execute lease contracts with two or more lessees, there shall be included
in each of said leases identical provisions binding each such lessee to cooperate
388 MUSCLE SHOALS

with the other lessee or lessees in setting up a joint board of control, or author
izing such lessees to organize a holding corporation, the voting stock of which
shall be exclusively owned by such lessees, with power and authority to decide
upon and to control the allocation among themselves of the electric energy
generated and all other matters in connection therewith: Provided, That such
lessee or lessees, board of control, or holding corporation shall deliver free of
charge to the United States at any point on the grounds to be designated by the
Secretary of War such electric energy as may be necessary for the operation of
locks, navigation facilities, and lighting at and in the vicinity of the several
dams involved in such leases.
(p) In any or all lease contracts there shall be incorporated identical provisions
for the adjustment of all kinds of disagreements, either among the several lessees
or between the several lessees or any one of them and the United States, and
any adjustment made thereunder shall be subject to review in any United States
district court as then constituted, subject to the law then applicable to change of
venue, except that the right of temporary recapture by the President in the event
of war shall be summary and not subject to the provisions of this section nor to
any process of any court.
RENTAL AND AMORTIZATION PAYMENTS

(q) The payment annually to the United States for the term of the lease or
leases of a sum which at 4 per centum per annum compounded over a period of
fifty years will insure repayment to the United States of the appraised valuation
of the properties leased, except that the lessee or lessees of nitrate plant numbered
1 and nitrate plant numbered 2 shall not be required to make payments to amor
tize the appraised valuation of said plants as long as they or either of them may
be employed by the lessee or lessees for the fixation of nitrogen for agricultural
purposes.
(r) A fair rental for the use of the properties leased to be paid by the lessee or
lessees at such times and in such amounts as the leasing board shall determine
to be fair and reasonable and in such determination consideration shall be given
to such secondary hydraulic power as may be rendered primary power by the use
of the auxiliary steam plant or plants, and such other secondary hydraulic power
as shall be ascertained to be available.
SEC. 3. If prior to December 1, 1931, the leasing board, with the approval of
the President, shall have executed a contract or contracts for the letting of the
properties based on the principles, directions, and limitations enumerated herein,
then with respect to the dam to be constructed by the lessee or lessees or by a
joint board of control or a holding corporation or otherwise, at the site of the
Clinch River, known as Cove Creek, by way of amplifying and amending the
provisions of the Federal water power act of 1920, as amended, under the terms
of which the lessee is or the lessees are to construct the said dam, the following
provisions shall apply:
(a) The cost of said dam to the licensee and to the United States shall be
amortized, at least in part, by the collection of a reasonable royalty from all
hydroelectric power projects now existing or to be constructed on the Tennessee
or Clinch Rivers downstream from the Cove Creek Dam: Provided, That the
amount of said royalty shall be in proportion to the advantages accruing to such
downstream hydroelectric projects from the construction and operation of said
Cove Creek Dam and shall be determined by the Federal Power Commission in
cooperation with the appropriate agency of the State in which said da:n may be
situated, and in event of disagreement between these agencies the President
shall appoint a competent engineer who shall act as arbiter and whose decision
shall then be final.
(b) At the expiration of the license for the construction and operation of said
dam at the Cove Creek site the St.ate of Tennessee shall have the right to recapture
the interests of the lessee or lessees and licensee or licensees in said dam and appur
tenant structures, including hydroelectric generating equipment, but exclusive
of any barge lift or navigation appliances, by paying the lessee or lessees or licensee
or licensees therefor an amount equal to the net investment as defined in said
Federal water power act of 1920, as amended, made by said lessee or lessees and
licensee or licensees in said dam and appurtenant structures: Provided, That in
the event the State of Tennessee shall exercise the right hereby conferred, the
State of Tennessee and its agents shall hold and operate the same in the interest
of the development of the maximum primary power at Dam Numbered 2 and of
navigation, and subject to the provisions of the Federal water power act of 1920,
as amended, to the same extent as if the same were held and operated by the
United States or a licensee thereof.
 MUSCLE SHOALS 389

SEC. 4. In order to enable and empower the lessee or lessees, the licensee or
licensees, through a holding corporation or otherwise, to carry out the authority
hereby conferred in the most economical and efficient manner, said lessee or
lessees, licensee or licensees, holding corporation, or other agency is or are hereby
authorized and empowered, in aid of national defense and of navigation, and in
the control of the flood waters of the Tennessee and Mississippi Rivers, con
stituting channels of interstate commerce, to exercise the right of eminent domain
in the State or States where the properties affected thereby are situated, and to
condemn all lands, easements, rights of way, and other area necessary in order
to obtain a site for said Cove Creek Dam and/or Dam Numbered 3, and the flow-
age rights for the reservoir of waters above said dam or dams, and to negotiate
and conclude contracts with States, counties, municipalities, and all State and
county agencies, and with railroads, railroad corporations, common carriers, and
all public utilities, and any other person, firm, or corporation, for the relocation
of railroad tracks, highways, highway bridges, mills, ferries, electric-light plants,
and any and all other propertiesv enterprises, and projects, whose removal may
be necessary in order to carry out the provisions of this act, and the United
States District Court for the Eastern District of Tennessee shall have and exer
cise exclusive jurisdiction of all suits and proceedings in condemnation for the
purpose of acquiring all lands, properties, and rights necessary and/or proper to
carry out the provisions of this act, and the proceedings in such suits or pro
ceedings shall conform as nearly as may be practicable to suits at law in such
court.
SEC. 5. All plants, buildings, machinery, and equipment installed by and at
the expense of the lessee or lessees, situated upon the property owned by the
United States, except such machines and equipment as may be installed for
the purpose of completing, modernizing, or replacing worn out or defective parts
of the dam, electrogenerating equipment or nitrate plants, shall be subject to all
of the laws of the State in which they may be situated and the State and political
subdivisions in which they may be situated shall have the power to levy and
collect taxes in accordance with the normal procedure for the levying and collect
ing of taxes on such classes of property.
SEC. 6. The leasing board shall keep an accurate record of all its proceedings
and shall report from time to time either orally or in writing to the President, as
he shall require, and the leasing board shall file a final report in writing which
shall be transmitted by the President to the Congress. The members of the
leasing board shall be entitled to the actual expenses of travel and subsistence
and to a per diem compensation for their services at the rate of $50 a day while
actually engaged in the performance of the duties herein imposed, to be paid upon
vouchers signed by a member of the leasing board designated for that purpose.
SEC. 7. The President and/or the leasing board hereby is authorized to employ
such consultants and secretarial and clerical help as he and/or they may deem
necetsary and desirable to assist him and/or them in the execution of the powers
herein conferred, and the President is authorized to detail to the leasing board
from the executive departments such personnel as he may deem advisable.
SEC. 8. In the event that the properties embraced in anv lease shall be recap
tured by the United States or any lessee shall apply to the President for a change
in any stipulation of any lease on the ground that compliance with any such
stipulation has become impracticable because of changed economic conditions
and/or the development of new scientific and industrial process or processes, the
President may appoint a board of three eminent citizens, one of whom shall be
identified with agriculture, who, after public notice and full hearing, may negotiate
and execute new leases on such properties recaptured or may change the stipu
lation of any existing lease, subject to the approval of the President within not
less than thirty days and not more than sixty days after the draft of such lease
or the recommendations of the board as to such change in the stipulations of
existing leases shall have been submitted to him: Provided, That in negotiating
such lease or leases or in making such change in an existing lease the board shall
consider the principles herein enumerated and shall be bound by the limitations
herein set forth, but shall have no authority to alter the requirements as to quan
tity and quality production of fertilizer bases or fertilizers.
SEC. 9. If prior to December 1, 1931, or if under the provisions of section 8
hereof, the leasing board, subject to the approval of the President, shall have
negotiated and executed a lease or leases under the provisions of this act, then
for the purpose of administering such lease or leases and of securing full per
formance by the lessee or lessees of all obligations imposed upon him or them
by the terms thereof, the Secretary of War, the Secretary of Agriculture, and the
Secretary of Commerce shall constitute a board, which shall be charged with such
administrative duties and shall be known as the Muscle Shoals administrative
390 MUSCLE SHOALS

board (herein referred to as the administrative board). The administrative

board shall meet at least once each year, and oftener as they may determine, or
upon call of the President, or of any two members thereof, and shall keep records
of all proceedings, and shall make annual report to the President, who shall
transmit said report to the Congress.
SEC. 10. AH appropriations necessary for carrying out the provisions of this
act are hereby authorized.
SEC. 11. The several provisions of this act are hereby declared to be separable,
and in the event that any provision of this act shall be held to be invalid it shall
not invalidate the remainder of the act; and in such event the President, as he
deems best for all parties concerned, may revise the terms of such lease or leases
as may be affected by the holding of invalidity.
SEC. 12. No lease or leases shall be made under this act for any part of the
Government power generating properties herein set out unless at the same time
there be or previously has been or have been executed and approved a lease or
leases requiring the manufacture of fertilizer bases or fertilizers as provided in
subsection (a) of section 2 and if by December 1, 1931, the leasing board, with
the approval of the President, shall have been unable to negotiate and execute a
lease or leases he shall notify Congress and thereafter all authority under this act
shall cease.
Amend the title so as to read: "Joint resolution to authorize the letting of the
Muscle Shoals properties on certain terms and conditions, and for other purposes."

B. DESCRIPTION OF PROPERTIES
Dam No. 2 (Wilson Dam) and power plant $47, 000, 000
Nitrate plant No. 1 : A plant for the manufacture of ammonium nitrate by the
so-called synthetic process of nitrogen fixation. It is equipped to produce 8,000
tons of nitrogen in the form of 22,000 tons of grained ammonium nitrate per year
and was constructed during 1917-18. The reservation covers about 1,900 acres,
is situated in Colbert County, Ala., is bordered on the northeast by the town of
Sheffield and on the northwest by the Tennessee River. (A detailed description
of the process and operation of the plant may be found on p. 185 of the hearing in
the Seventy-first Congress.)
Cost of nitrate plant No. 1
Chemical plant. - - . $7,134,785.00
Shops 314,076.00
Power house 1, 271, 665. 23
Land (1,900 acres) 615, 127. 20
Village (temporary and permanent houses) 2, 526, 276. 28
Public works (lights, water, roads, etc.) 1,026,011. 60
Total cost 12, 887, 941. 31
Nitrate Plant No. 2: A plant for the manufacture of ammonium nitrate by the
so-called cyanamid process equipped to produce 40,000 tons of nitrogen in the form
of 110,000 tons of ammonium nitrate per year. The reservation covers 2,306
acres situated on the south bank of the Tennessee River about 1 mile below
Muscle Shoals. Construction began in January, 1918, and operation in October,
1918. (A detailed description of the process and operation may be found on
page 186 of the hearing on Muscle Shoals in the Seventy-first Congress.)
Cost of Nitrate Plant No. 2
Chemical plant $35, 984, 090. 55
Shops 2,696,481. 30
Power house (60,000-kilowatt steam power plant) 12, 326, 392. 23
Land (2,306 acres) 237, 711. 00
Village (temporary and permanent houses) 3, 121, 193. 31
Public works (water, electricity, roads, railroads, etc.) 8, 843, 007. 88
Waco quarry 1,302,962.88
Total cost (including Waco quarry and power plant) 64, 511, 838. 89
 MTJSOLE SHOALS 391
9

C. FOREWORD
For more than a decade Congress has sincerely and earnestly been
attempting to dispose of the Muscle Shoals property either by way
of a sale of portions of the property and the letting of the remaining
portions or by way of the letting of all the properties. The difficulties
inherent in formulating a legislative lease, together with other factors
of less importance have been largely responsible for the failure to
make proper disposition of the properties.
But whatever may have been the causes for failure, by the spring
of this year the Congress was confronted with either authorizing
Government operation of the Muscle Shoals properties, or authorizing
an agency of the United States to negotiate a lease subject to certain
principles and fixed limitations.
Inasmuch as all possible means for negotiating a satisfactory
lease for the disposal of Muscle Shoals had not been availed of, the
committee at this time was not disposed to espouse legislation which
would authorize operation of the properties by the United States.
It, therefore, concluded that the only legislation which it can now
enthusiastically recommend is one authorizing an agency of the
Government to negotiate and execute a lease or leases. Senate
Joint Resolution 49, as amended, embodies in its language this con
clusion of the committee.
It authorizes the negotiation of a lease or leases. It itself does not
pretend to be a lease. Whereas a lease should be drawn in such
language as to make provisions for all eventualities and in such terms
as to bind the lessee or lessees with respect to all details, an authoriza
tion to negotiate a lease or leases, on the contrary, should be merely
an enumeration of the principles and limitations which must later
be rephrased in legal language and incorporated in the lease or leases
negotiated. It is urged that in criticising the proposed legislation this
distinction will be borne always in mind.
The many conflicting opinions with respect to the proper utilization
of the Muscle Shoals property, the many local interests which have
been in the past and are now being focused on Muscle Shoals legisla
tion, the speed with which science is developing and proving new
methods for accomplishing old purposes, the necessity for sufficient
flexibility to meet new processes as they may be within the span of
the next half century, have all combined to increase the difficulties
implicit in drafting legislation which will meet all of the conflicting
opinions and all of the necessities of the situation.
Although it is not expected that the proposed bill will meet with
the approval of all, it is, nevertheless, held that so far as it is humanly
possible, due recognition has been given to conflicting opinions, to
the local interests, and to the requirements for flexibility, and that
the proposed legislation will do more than has heretofore been pro
posed for the production of fertilizer, for the development of industries,
and for the protection of the rights of States.
For the purpose of clarity the bill will be explained in two different
ways. First, by way of enumerating its general objectives and under
each individual objective by way of presenting an explanation of
each relevant provision of the bill ; and second, by way of explaining,
the bill chronologically section by section.
392 MUSCLE SHOALS

D. EXPLANATION OF THE GENERAL OBJECTIVES OF THE BILL

I. LEASING ROARD

It was thought that rather than impose on the President the duty
of negotiating a lease or leases it would be wiser to authorize him to
appoint a board of three eminent men, one of whom must be identified
with agriculture, which should undertake to perform the duties which
he himself might be too busy to properly perform. It was thought,
however, that any lease negotiated and executed by the board should
not become effective until the President should have given his approval.
It was believed that the board should hold office only until December
1, 1931, which is the extreme limit of time in which a lease or leases
may be made. It was thought that inasmuch as the board is to be a
temporary one, terminating on December 1, 1931, confirmation of its
members by the Senate should not be required, and that should con
firmation be required the result would be failure to negotiate and
execute a lease or leases because of the following reasons :
1. The board would probably not be confirmed until the short
session of Congress, which convenes in December, if it would then be
confirmed.
2. Should the board not be organized until December, 1930, there
would remain less than 12 months in which there must be made—
(a) An appraisal of the properties;
(b) A determination of the contributions by the United States to
the construction of Cove Creek on account of improvements to navi
gation and control of the floods of the Tennessee River;
(c) A scientific determination of the properties, as a matter of fact
adaptable to or susceptible of being made adaptable to the production
of fertilizer;
(d) By the lessee, the necessary corporate structures;
(e) By the lessee, the necessary financial arrangements;
(/) Then by the board a lease or leases ; and
(g) Finally, after a lapse of at least 30 days, action by the President.
3. Less than 12 months is not sufficient time in which these many
purposes may be accomplished.
It was believed that whatever lease or leases may be negotiated
and executed by the board must be approved by the President in
writing in not less than 30 days nor more than 60 days after the
lease or leases shall have been presented to him for his approval.
The time limitation imposed upon his approval was made with the
thought in mind that during the 30-day period in which his approval
must be withheld, those who may feel that the proposed lease or
leases will not be in the public interest may give expression to their
views.
It was thought that action of the board in approving a lease
should be a unanimous one.
Section 1 carries these thoughts into effect.
II. THE NEGOTIATION AND EXECUTION OF MORE THAN ONE LEASE

It was thought that more than one lease might be more advisable
than a single one, because it was believed that better terms could
be made through authority to lease the property in parts rather
than as a whole.
 MUSCLE SHOALS 393

If the authority to let were limited to a single lessee it was thought

that there would be but a few industrial organizations which would
be in position to contract for the properties.
It was thought that smaller but reliable industrial concerns should
have the privilege of leasing whatever portions of the property
might to them seem to be desirable.
Sections 1 and 2 carry these thoughts into effect.
It was appreciated, however, that in authorizing more than one
lease there might be created the situation in which one lessee might
have a contract for the power generating equipment, which seems to
be the most desirable portion of the properties, and that it might be
more difficult to let the remaining portions. To meet this danger it
is specifically provided in subsection O of section 2, page 23, that
should more than one lease be made all lessees shall be bound, by the
terms of their leases, to set up a joint board of control, or shall be
permitted to organize a holding corporation for the purpose of gen
erating and allocating among themselves electric energy and of deter
mining the price to be paid by them.
It was further appreciated that in authorizing the execution of more
than one lease there might be let solely the electric generating equip
ment without provision for the production of fertilizer bases or
fertilizer.
It is believed that this undesirable situation will be prevented by
the provision of section 11, which provides that no lease shall be made
on the electric generating equipment until one or more have been
made which require the production of fertilizer.
It is our conviction that subsections 0 of section 2 and that sec
tion 11 meet the possible undesirable situations above referred to
and it is our hope that in the negotiation of leases the board will so
combine the various lessees in a corporate entity that each lessee will
obtain a proportionate interest hi the generating equipment and that
in effect there will be but one lease negotiated for it.
III. TENURE OF THE LEASE OR LEASES

It was thought that the tenure of the lease or -leases should be

limited to not more than 50 years.
IV. FLEXIRILITY

It was felt that in view of the speed with which industrial proc
esses change and the rapidity with which more efficient economic
methods are developed, the lessee should not be bound to the use
of any particular process and, further, that should economic condi
tions change or should there be developed new and more economic
processes not possible of application by the lessee at Muscle Shoals
there should be some procedure by which the stipulations in a lease
or leases affected may be changed. It was thought that should a lessee
apply for a change in any stipulation the President should be given
the authority to appoint a board of three to hear the claims of the
lessee and to approve, subject to the written approval of the Presi
dent, the lessee's request should his claims be found to be correct.
In order, however, that objections to the claims of the lessee may
be presented it was believed that the board should give public notice,
hold a full hearing, that the approval of the President should not be
394 MUSCLE SHOALS

given until 30 days after the recommendation of the board shall have
been in his hands, but that the board should not have the authority
to so change a stipulation as to nullify the requirements with respect
to the production of fertilizer or with respect to the fixed limitations
incorporated in the bill. Section 8 carries these thoughts into effect.
V. AUTHORITY TO LEASE PROPERTIES FORFEITED

It was thought that in the event of permanent recapture of any

portions of the properties leased the President should have the
authority to appoint a board of three eminent citizens, of which one
must be identified with agriculture, to negotiate and execute such
lease, that any lease negotiated and executed should be acted on by
the President in not less than 30 and not more than 60 days. Sec
tion 8 carries this thought into effect.
VI. PERMANENT ROARD OF ADMINISTRATION
It was thought that there should be a permanent board to consist
of the Secretary of War, the Secretary of Agriculture and the Secre
tary of Commerce to administer the leases after they shall have been
negotiated and executed, and except with respect to all matters per
taining to the distribution of electrical energy among political sub
divisions and other matters properly falling within the jurisdiction
of the Federal Power Commission, to determine all matters of fact
which might arise such as for example the reasonable market demands
for fertilizer. Section 9 carries this thought into effect.
VII. TAXING POWER OF STATES

It was felt that the States should have the right to levy and collect
taxes on all improvements other than those installed for the purpose
of modernizing or replacing equipment now owned by the United
States or for the purpose of completing any unfinished plant now
owned by the United States. Section 5 carries this thought into
effect.
VIII. PURPOSES OF LEASE OR LEASES

The lease or leases authorized to be negotiated and executed are

to accomplish the following purposes :
1. Fertilizer production
(a) Subsection (a) of section 2 provides that the properties of
the United States adapted to the fixation of nitrogen must be used
for the manufacture of fertilizer bases or fertilizers hi time of peace
and of explosives in time of war. There are, however, two pro
visos, the first of which directs the board to stipulate hi any lease
or leases that there must be produced annually a certain amount of
nitrogenous plant food which can be directly applied to the soil. The
amount, however, is not specified in the bill but is left to the board
to determine. The second of the two provisos directs the board to
stipulate in any lease or leases that within the first three and one-half
years there must have been produced an amount of fertilizer bases
or fertilizer which will contain a minimum of 10,000 tons of nitrogen
and that thereafter, as the market demands may require, there must
 MUSCLE SHOALS 395

be periodic increases in the production of nitrogen contained in

fertilizer bases or fertilizers until the maximum capacity of the plant
or plants adapted to the fixation of nitrogen shall have been reached
and that, further, should the market demands not require such a
production of nitrogen the lessee or lessees may temporarily reduce
or cease production, but must keep on hand in storage for sale fer
tilizer bases or fertilizer containing at least 2,500 tons of nitrogen
and that, further, when the amount in storage shall have fallen below
2,500 tons, then the production of nitrogen must be renewed up to
the maximum capacity of the plants, should the market demand
require such maximum production.
The board is to decide what plants either are or can by a reasonable
investment, be made capable of economically producing nitrogen for
fertilizer bases or fertilizers.
As the result of an ultra conservative analysis of this subsection it
must be concluded that the minimum production of fertilizer bases
or fertilizer during the first three and one-half years will amount to a
quantity containing 10,000 tons of nitrogen of which a certain per
centage must be in a form which can be directly applied to the soil
regardless of market demands, and that thereafter, should the
market demand be slight, there must be produced fertilizer bases or
fertilizer in an amount sufficient to maintain in storage for sale at
least 2,500 tons of nitrogen and, in addition, regardless of market
demands, a certain annual amount of fertilizer containing nitrogen
which can be directly applied to the soil.
In this connection it should be emphatically stated—
That in the Ford offer, even after the United States had been
committed to an expenditure of at least $30,000,000, there was not
the requirement that fertilizer bases containing 2,500 tons of nitrogen
be kept in storage for sale nor was there a requirement that there
be annually produced regardless of market demand a quantity of
fertilizer which could be directly applied to the soil. Under the Ford
offer the amount of nitrogen for fertilizer purposes to be produced
was to be controlled by the market demand and cost of production.
The maximum production of 40,000 tons was therefore meaningless
unless market conditions demanded the production of that amount
and unless the operation were profitable.
That under the offer of the American Cyanamid Co. even after
the United States had been committed to an expenditure of more
than $50,000,000 the production of fertilizer bases or fertilizer con
taining nitrogen was to be only an amount sufficient to keep in storage
for sale 2,500 tons of nitrogen unless the market demanded a greater
production. Under the Cyanamid Co.'s offer the maximum pro
duction of 40,000 tons of nitrogen was contingent entirely on market
demand, and was therefore meaningless unless market conditions
demanded the production of that amount.
That under the proposed legislation there must be produced
during the first three and one-half years, regardless of market con
ditions, fertilizer bases or fertilizer containing 10,000 tons of nitrogen
and thereafter an amount of fertilizer bases or fertilizer sufficient to
keep in storage at least 2,500 tons of nitrogen should market demands
not require the production of a greater quantity, and throughput the
lease regardless of market demand an amount of fertilizer which can
be applied directly to the soil. Under the proposed legislation there
is to be no charge on the United States Treasury.
396 MUSCI^E SHOALS

Even as a result of this ultraconservative analysis it must, there

fore, be concluded that the proposed legislation offers a more certain
production of fertilizer than any heretofore considered and that it
imposes no financial burden on the United States.
As a result of an optimistic analysis of this section, assuming
both nitrate plant No. 1 and nitrate plant No. 2 to be leased and
adapted to the production of fertilizer, and assuming the market
demands to be such as to call for fertilizer in amounts equal to the
annual maximum productive capacity of the plants, fertilizers con
taining at least 48,000 tons of nitrogen will be annually produced
on the Muscle Shoals Reservation. But this amount does not in
clude such tonnage of fertilizers as may be produced by lessees
operating elsewhere. Information has been received that a pros
pective lessee contemplating operations in Birmingham may pro
duce annually fertilizer containing at least 40,000 tons of nitrogen.
On a basis 01 an optimistic analysis it must therefore be concluded
that there may be produced annually fertilizer containing at least
88,000 tons of nitrogen.
As a result of much expert testimony there is some doubt as to the
economic feasibility of operating plant No. 2 for the production of
fertilizer bases or fertilizer. But should it be held to be infeasible
of operation for such purposes there still remain plant No. 1 to be
renovated and operated, and there still remain plants operated by
lessees elsewhere than on the reservation with a consequent annual
production of fertilizer containing a probable minimum amount of
48,000 tons of nitrogen.
(6) It was thought that in the interest of fertilizer, one member of
the board authorized to negotiate an original lease or leases, one
member of the board authorized to release properties recaptured, and
one member of the board which may be subsequently temporarily
created to hear an application of a lessee with respect to a change in
stipulations in its lease should be identified with agriculture. The
language of section 1 and section 8 carries this thought into effect.
(c) It is not contemplated that a lease or leases on the electric
generating equipment shall be effective until one or more shall have
een made which will require the production of fertilizer. The
language of section 12 is intended to make this thought effective.
(d) It is contemplated that the lessee or lessees who shall be re
quired to produce fertilizer shall be likewise required to carry on
continuous research. Subsection (e) of section 2 carries this thought
into effect.
(e) There were considered two methods by which the price of fer
tilizer might be fixed : First, by way of permitting the lessee to make
a certain per cent on his capital investment, and, second, by way of
permitting him to make a certain per cent on the cost of producing
his product. Except in the case, which is an abnormal one, in
which the annual cost exceeds the capital investment, the method of
fixing a price based upon the cost of production is more favorable to
agriculture. It was therefore decided that a profit in the amount of
8 per cent of the cost of production should be the method by which
the price of fertilizer should be fixed.
That interest at the rate of 6 per cent on the capital invested by
the lessee should be a permissible cost charge, but that royalties on
patents owned by the lessee or lessees should not be permissible cost
charges. Subsection (b) of section 1 carries this decision into effect.
 MUSCI^E SHOALS 397

(/) There were two methods considered for the determination of

the annual cost of production: The first contemplated the appoint
ment by the administration of a firm of certified public accountants
who should audit the books in cooperation with a firm of certified
public accountants to be appointed by the lessee and, in the event of
disagreement between the two, the appointment by the two of a third
firm to act as arbiter and to render final decision. The second, con
templated the appointment of a production engineer by the adminis
tration board and the appointment of another production engineer
by the lessee or lessees, both of which were to appoint a firm of certi
fied public accountants and, in the event of disagreement, the two
production engineers were to appoint a third to act as arbiter and to
render final decision.
Inasmuch as it was thought that a certified public accountant
merely makes an audit and exercises little if any judgment with
respect to the justice of a charge, while a production engineer, al
though he makes no audit, does exercise judgment with respect to
the propriety of charges, and inasmuch as it was believed that ample
provision should be made against improper charges for the purpose of
padding cost of production, it was decided that the latter of the two
methods for determination of cost of production should be employed.
The language of subsection (b) of section 2 carries this decision
into effect.
(g) It was thought that inasmuch as the determination of the cost
of producing fertilizer would not be made until the end of the year,
there should be provision for refund to purchasers of fertilizer in the
event that such purchasers had paid a price for fertilizer in excess of
actual determination of cost. The language of the last sentence of
subsection (b) of section 2 carries this thought into effect.
(A) It was thought that there should be granted a credit against
the cost of producing fertilizers in the amount of any profit accruing
from the sale of hydroelectric energy made available for such sale
by reason of temporary suspension of the production of fertilizer,
and it was further thought that should there be developed a process
which would reduce the amount of electrical energy necessary to
produce a ton-unit of fertilizer, the percentage not to exceed 50 per
cent of the profit accruing from the sale of such electrical energy so
made available for such sale should be credited against the cost of
producing fertilizer. The actual percentage in this event, which is
to be credited against the cost of fertilizer is to be left to the board
to fix in its negotiations.
The language of subsection (c) of section 2, carries these thoughts
into effect.
(i) It was thought that the sale of fertilizer should cover as wide a
geographical area as might be consistent with demand; that the
farmers themselves or organizations of farmers should have the
prior right to purchase fertilizers ; that then such State organizations as
might be engaged in distributing fertilizers or in mixing them should
have subsequent prior right to the purchase of fertilizers produced
by the lessee ; and that finally if there were any surplus fertilizer not
purchased by either farmers or farmers organizations or State agencies,
it then might be sold to fertilizer manufacturers. The language of
subsection (d) of section 2 carries this thought into effect.
101229—30 26
398 MUSCLE SHOALS

(k) It was thought that the board In making leases should have in
mind the development of the fertilizer industry either at Muscle
Shoals or elsewhere.
The language of subsection (f) of section 2 carries this thought into
effect.
(I) It was thought that electrical energy produced at Muscle
Shoals should be used by the lessee or lessees in the production of
fertilizer either at Muscle Shoals or elsewhere, and thereafter in the
production of other commodities. It was further thought that the
power to be developed at Muscle Shoals should not be sold by any
lessee to any person, firm, or corporation engaged in the production
of fertilizer who might be a party to an agreement, implied or other
wise, for the purpose of fixing the price of fertilizer.
The language of subsection (g) of section 2 carries this thought
into effect.
It was thought that, in the interest of fertilizer, nitrate plant No. 1
and nitrate plant No. 2 should be exempted from an amortization
payment.
The language of subsection (q) carries this thought into effect.
CONCLUSIONS WITH RESPECT TO FERTILIZER

When it is recollected that during the span of the last half century
modes of traveling have been completely revolutionized by the
development of the internal-combustion engine, and by the appli
cation of steam energy to great locomotives, that we are now manipu
lating means of transportation in the air in three dimensions, whereas
formerly we were confined to the ground and to two ; when it is recalled
that only within the last 50 years the incandescent globe has brought
light where darkness feebly penetrated by rays from oil lamps existed
before, he who prognosticates that new arts and sciences will not be
developed within the span of the next five decades is more than a
prophet; he is a fool. It must therefore be concluded that it is not
beyond the realm of probability that within the next 50 years processes
now applicable for the production of fertilizer will become inapplicable.
Should this prove to be the case it would obviously be the height of
folly to operate Muscle Shoals for an uneconomic purpose.
But, even though viewed ultra conservatively, only a small amount
of fertilizer may be actually produced at Muscle Shoals, the determi
nation of the cost of production, and, therefore, the basis for sound
judgment with respect to the justification for prices charged by other
fertilizer producers will be of very material assistance to the agricul
tural industry.
But it is believed that the organization of a board which requires
one member to be identified with agriculture; that the requirements
that fertilizer bases or fertilizer containing at least 10,000 tons of
nitrogen must be produced in the first three and one-half years ; that
thereafter there shall be periodic increases until the maximum pro
ductive capacity of the plants shall have been reached if the market
demands require such production; that the requirement, which regard
less of market demand, compels the annual production of nitrogenous
plant food capable of direct application to the soil in an amount to
be fixed by the board; that the requirements that no lease for elec
trical equipment shall be made until one shall have been made which
requires the production of fertilizers; that the requirement that
 MUSCLE SHOALS 399

research work be continuously carried on; that the provisions with

respect to fixing prices; that the requirement that there shall be
-allocated against the cost of fertilizer profit on account of sale of
certain power; that the provision with respect to the prior right of
farmers and farmers' organizations to purchase fertilizers; that the
direction that the electrical energy generated shall be used by the
lessee first in the production of fertilizer; that the prohibition against
sale by the lessee of power to fertilizer producers who may be a party
to a price-fixing agreement; that the exemption of nitrate plants Nos.
1 and 2 from the burden of amortization payments will, all taken
together, accomplish more for agriculture than any other suggested
Muscle Shoals legislation which heretofore has been considered by
the Congress.
2. The development of industries
It was thought that the Muscle Shoals project should be dedicated
to the building up of the industries of the Tennessee Valley, that the
greatest benefit which could be derived by the geographical area hi
which the properties are situated would be the use of the energy to
be generated from Muscle Shoals in the benefication of the rich
mineral and other resources within a reasonable distance of the
Muscle Shoals properties and that a person, firm, or corporation con
templating operation or actually engaged in operation elsewhere than
on the Muscle Shoals reservation should be given the opportunity of
becoming a lessee for a part of the generating equipment.
The language of subsection (f) and subsection (g) of section 2,
together with the last proviso of subsection (i) which gives a manu
facturing industry the preference right to purchase from a lessee
surplus power after the demands of political subdivisions have been
met all carry this thought into effect.
8. Construction of Cove Creek Dam and Dam No. 3
With respect to Cove Creek, it was thought that if the maximum
advantage were to accrue from the operation of the Muscle Shoals
property the construction and operation of the Cove Creek Dam
must be required by the lessee or lessees. It was further thought
that in the interest of controlling floods and improving navigation,
both of which are synonymous with approximately doubling the
primary hydroelectrical energy which can be generated at Muscle
Shoals, the construction of Cove Creek must be required. And it was
thought that the constructibn of Dam No. 3 should be optional with
lessee or lessees. It was further thought that the cost of constructing
Cove Creek Dam and of Dam No. 3 might be greater than their power
possibilities might justify, and that inasmuch as the United States
had an interest hi the improvement of navigation and in the control
of floods it would be proper that the United States make a contribution
;in the form of annual remittal of the proceeds from the lease of Muscle
Shoals until the amount to be contributed on account of the improve
ment of navigation and the control of floods accruing from the con
struction and operation of the Cove Creek Dam and of Dam No. 3
should have been paid, and that the board should fix the amount of such
-contribution; that the dam or dams should be constructed under the
terms of the Federal water power act, and that to avoid dual responsi
bility the President, inasmuch as he is authorized to give final approval
400 MUSCLE SHOALS

to a lease or leases, should issue to the lessee or lessees a license or

licenses.
Subsection (j) of section 2 carries this thought into effect. In this
connection it should be stated that the provisions of the Federal
water power act require the licensee to begin construction of a project
within the time limit specified in the license, but in no event later
than two years after the issuance of tho license.
It was thought that inasmuch as the construction and operation of
Cove Creek Dam will result in improvement of navigation, control of
floods, and doubling the primary power, not only at Wilson Dam,
but also at many different dam sites between Cove Creek and Muscle
Shoals, it would be proper that the cost of Cove Creek Dam both to
the lessee or lessees as well as to the United States in the event that it
make some contribution on account of navigation and control of
floods, should be amortized at least in part by the collection of a
royalty from all power projects constructed below Cove Creek. It
was also thought that the United States, because of its interest in
the waters of the Tennessee River arising out of its right to improve
and maintain navigation, and the State of Tennessee by virtue of its
ownership of the beds of the Tennessee River and of its right to
control the use and appropriation of waters, should jointly determine
the amount of royalty to be collected from power projects constructed
below the Cove Creek Dam.
Section 3 and subsection A thereof carries this thought into effect.
It was further thought that the State of Tennessee at the expira
tion of the license for the construction and operation of Cove Creek
Dam should have the right to acquire the interests of the lessee or
licensee and that, should the State of Tennessee exercise the right to
acquire Cove Creek Dam, it should operate it in the interest of devel
oping the maximum primary power at Dam No. 2 and of navigation
under the provision of the water power act.
The language of subsection (b) of section 3 carries this thought into
effect.
4- Preferences to surplus power and prohibition against leasing to
private power companies
It was thought that States, counties, municipalities, and polit
ical subdivisions should have the right to contract with the lessee for
the purchase of surplus electrical energy not required by the lessee or
lessees; that no part of the dam or dams or generatmg equipment
should be leased to any private power distributing company or any
of its subsidiaries or creations, but that in the event there were surplus
power unsold to municipalities or industries the private power dis
tributing companies should have the right to contract with the lessee
for the purchase of such power for periods of not to exceed 10 years,
and that at any tune prior to two years before the expiration of such
contracts with private power distributing companies political subdivi
sions should have the right to enter into contract for the purchase of
power to become available at the expiration of the 10-year contracts.
It was thought that in the event of conflict between applications of
political subdivisions for power, that in the event of a disagreement
between the lessee and political subdivision with respect to the length
of the contract for the sale of electrical energy, or in the event of one
applicant offering to pay to the lessee a higher rate for power than
 MUSCLE SHOALS 401

another, the Federal Power Commission should have the authority

to settle all such disagreements. It was thought that the maximum
period of time in which power should be sold to private power com
panies should be 10 years, by virtue of the fact that the lessee could
obtain a higher price for power sold under a 10-year contract than
he would be able to obtain for power sold under a contract for a
shorter period.
Subsections (h) and (i) of section 2 carry this thought into effect.
5. Amortization and rental payments
It was thought that there should be paid to the United States
annually a sum which compounded at 4 per cent over a period of half
a century would reimburse the United States for the appraised valua
tion of the properties except that of nitrate plants No. 1 and No. 2,
as long as they are being used for the production of fertilizers. It
was thought that inasmuch as a large portion of the properties
had been built during the war period when prices were high and that
inasmuch as certain of the properties constructed and equipment
installed then have not only depreciated in value but to some extent
have become obsolete, the more logical basis on which to predicate
amortization would be on appraised valuation as of to date rather
than actual investment.
Section 2, subsection (q), carries this thought into effect.
It should be understood, however, that the sum is not a large one
which compounded at 4 per cent over a period of 50 years will amortize
an amount even as large as $70,000,000.
It was thought that in addition to the amortization payment the
lessee should pay a reasonable rental for the use of the properties,
and it was thought that the amount of that rental should be left to the
board in its negotiations, for the reason that should Congress attempt
to fix a rental at a given sum, such a stipulation might either pre
vent the making of a lease or prevent the board from obtaining as
high a rental as it might otherwise obtain.
Section 2, subsection (r), carries this thought into effect.
6. Maintenance for National Defense
It was thought that the lessee should be compelled to maintain
in good condition those properties necessary to national defense.
Section 2, subsection (N), carries this thought into effect.
7. Temporary recapture
It was thought that by order of the President, the United States
in the event of war should have the right to temporarily recapture
the properties and that should it exercise this right it should pay the
lessee actual damages, not including profits or speculative damages,
and that the Court of Claims should fix the amount of such damages.
Section 2, subsection (k), carries this thought into effect.
8. Permanent recapture
It was thought that in the event of default under any lease or
leases by order of the permanent board the United States should
have the right to recapture the properties leased to anv lessee so
402 MUSCLE SHOALS

defaulting, together with additions and improvements and interests

in other leases. But inasmuch as Cove Creek is to be recaptured or
may be recaptured by the State of Tennessee at the end of the license,
and inasmuch as both the State of Tennessee and the United States
under the Federal water power act have the right to condemn Cove-
Creek Dam, it should be excluded from permanent recapture by the
United States in event of default by the lessee.
Subsection (1) of section 2 carries these thoughts into effect.
E. EXPLANATION, SECTION RY SECTION
Section 1 authorizes the President—
1. To appoint a board of three eminent citizens.
2. After the members of the board have taken an oath to perform"
the duties imposed by Senate Joint Resolution 49, to issue com
missions to them and to designate the time and place of their meeting.
3. To fill any vacancy made on the board by reason of death, resig
nation, or dismissal by the President.
4. To approve in writing or withhold his approval within not less
than 30 days and not more than 60 days any of lease or leases negotiated
and executed by all members of the board and submitted to him.
It directs the board after its organization—
1. To appoint appraisers which shall appraise the properties of
the United States situated at Muscle Shoals so as to determine the
present fair value for industrial purposes of all of the properties as
well as of as many separate portions of the property as it may deem
advisable and necessary.
2. To give notice for a reasonable time that they are prepared to
entertain proposals for the letting of the Muscle Shoals properties.
3 To furnish any person on demand information with respect to the
appraised value of the properties.
4. When their signatures have been affixed to any lease or leases
negotiated to transmit such lease or leases to the President for his
approval.
It authorizes the board—
1 . When it shall have negotiated such lease or leases for the Muscle
Shoals property to execute the same by affixing their signatures.
2. In the event the President withholds his approval to reopen
negotiations.
It provides that the lease or leases to be effective must bear the
signature of all of the members of the board and the signature of the
President.
Section 2 authorizes the board, subject to the approval of the
President, to let for a tenure of not to exceed 50 years all or any of the
properties of the United States known as the Muscle Shoals develop
ment, together with structures, buildings, tools, franchises, privileges,
appurtenances, and so forth, exclusive however of locks for navigation
purposes and .enumerates the principles and limitations on which the
board shall negotiate a lease or leases.
The limitations are as follows :
1. Those in subsections (a), (b), (c), (d), (e), and the proviso in (g),
all of which deal with the production of fertilizer, quantity and quality
of fertilizer, the research work which must be conducted by the lessee,
the maximum price which the lessee may ask for the fertilizer he
has produced and the determination of that price, the distribution of
 MUSCLE SHOALS 403

and priorities for the sale of fertilizer and the prohibition against the
sale by the lessee of surplus electric energy to any person, firm, or
corporation who is a party to an understanding the purpose of which
is to fix the price for nitrogen and nitrogen products.
2. Subsection (j), which makes it mandatory upon lessee or lessees
to construct the Cove Creek Dam and makes it optional with it or
them to construct Dam No. 3, which authorizes the President to
issue a license under the terms of the Federal water power act, which
provides that the board may authorize contributions to the cost of
constructing Cove Creek Dam when constructed and to the cost of
constructing Dam No. 3, if constructed, on account of improvement
to navigation and the control of floods, and which provides that such
contributions, if any, shall be made by applying annually against
them until paid the amounts received from the lessee or lessees of
the hydroelectric power plant at Dam No. 2.
3. Subsection (q) which requires the payment annually of a sum,
which compounded at 4 per cent per annum, will insure the repay
ment to the United States of the appraised valuation of the properties
leased, except nitrate plant No. 1 and nitrate plant No. 2, the ap
praised valuation of which .shall not be amortized by the payment of
an annual amortization sum.
4. Subsection (r) which requires that the board shall provide for
the payment of a fair rental at such time and in such amounts as it
shall determine.
3. That portion of subsection (i) which prohibits the letting of any
hydro or steam electric generating equipment to any private power
distributing company, and that portion of subsection (i) which
limits the period of time over which surplus electric energy may be
sold to private power distributing companies, and that portion of
subsection (i) which gives to political subdivisions its preferential
right to contract for surplus electrical energy.
6. Subsection (o) which makes it mandatory that there shall be
included provisions in each lease, in the event that more than one
lease is made, which shall bind each lessee to cooperate with the other
in a joint board of control or to organize a holding corporation for the
purpose of operating the electric generating equipment, allocating
among themselves the power and fixing the price to themselves.
7. Subsection (n) which requires the lessee or lessees to maintain
in good condition that portion of the properties installed for the pro
duction of nitric acid, ammonium nitrate and that the permanent
board shall have access to the operation of the plant laboratories
and records of the lessee or lessees.
8. Subsection (k) which provides that the United States shall have
the right of temporary recapture in the event of war.
9. Subsection (1) which provides for the permanent recapture by
the United States of the properties leased in the event of failure of
lessee or lessees to comply with the terms of the lease or leases.
10. Subsection (p) which make it mandatory that there shall be
included in all leases provisions for the adjustment of all kinds of
disagreements.
The principles are as follows :
1. The letting of leases so as, under the provisions of subsection
(f), to bring about the maximum production of fertilizer and, in
addition, the development of all kinds of industries, and so as, under
the provisions of subsection (g), to encourage the use by the lessee
404 MUSCLE SHOALS

of electric energy generated by the Muscle Shoals property, either on

the Muscle Shoals reservation or elsewhere, first hi the production
of fertilizer and then in the production of other manufactured prod
ucts. It is intended that a lessee need not conduct his industrial
operations on the Muscle Shoals reservation.
2. The equitable allocation of surplus electric energy generated
at Muscle Shoals among the States within economic transmission
distance, as provided in subsection (h). This is to be construed to
mean that with respect to the surplus electric energy there shall be
an equitable allocation either to States or to industries within tho
States which are within economic transmission distance of the Muscle
Shoals generating station.
Section 3 provides the method by which the Cove Creek Dam is to
be amortized and confers upon the State of Tennessee the right of
recapture at the expiration of the license for the construction and
operation of Cove Creek Dam.
The Federal water power act of 1920 provides that the amount
of royalty to be charged against a licensee benefiting from upstream
development of another licensee is to be determined by the Federal
Power Commission, except, by construction, that if the State in which
the applicant for a license contemplates the construction of a project
has enacted legislation requiring the payment of a royalty, then by
virtue of the provision of the Federal water power act, which requires
an applicant to produce documentary evidence of his compliance with
State laws governing the use and appropriation of waters, the State
independent of the Federal Power Commission shall determine the
amount of royalty to be paid, in addition to the amount fixed by
the Federal Power Commission.
The Federal water power act grants to the State in which a licensee
has constructed a project and to the United States the power of con
demnation and grants to the United States the right to recapture the
project of the licensee at the expiration of the license. It is probable
that the Federal water power act may be construed to mean that a
State in which the project of a licensee is situated may at the expira
tion of the license recapture the project.
The provisions of this section which deal with the Cove Creek Dam,
if they do not in effect amend the Federal water power act of 1920, do,
at least, clarify it in the following respects :
1. By way of providing that the proper agency of the State of
Tennessee, acting jointly with the Federal Power Commission, shall
fix the amount of royalty.
2. By way of giving to the State of Tennessee the right to acquire
the project of the licensee at the expiration of the license.
Section 4 grants to the lessee or lessees the right to condemn such
properties as may be necessary, including flowage rights, for the
construction of Cove Creek Dam and Dam No. 3, and confers upon
the United States District Court for the Eastern District of Tennessee
jurisdiction of all suits and proceedings in condemnation.
Section 5, as heretofore explained on page 12, gives the State of
Alabama the right to tax certain properties not owned by the United
States.
Section 6 provides that the board must keep an accurate record of
all its proceedings, and that the members shall be entitled to $50
per day by reason of performance of the duties imposed upon them
by the provisions of Senate Joint Resolution 49. Inasmuch as suffi
 MUSCLE SHOALS 405

cient confidence was reposed in the board to lease Government prop

erties of the magnitude of Muscle Shoals, and inasmuch as it is
intended that the members of the board shall be eminent citizens,
and inasmuch as the board may be required to sit for approximately
the entire period of their terms of office, namely, until December 1,
1931, it was thought inadvisable and inconsistent to impose a limita
tion to the number of days the board should be permitted to sit and
for which the members of the board should be permitted to draw pay.
Section 7 provides that the President or the board may employ
secretarial, clerical help, and such consultants as may be deemed
necessary in carrying out the provisions of the act, and it authorizes
the President to detail from the executive departments certain
personnel.
Section 8, as heretofore explained, sets up a method by which a
stipulation may be changed because of unforeseen developments, but
excludes from the scope of any such change any stipulation applying
to any one of the limitations previously enumerated in. this report,
and as heretofore explained sets up a procedure by which properties
forfeited may be relet.
Section 9 creates a board of administration to consist of the Secre
tary of War, the Secretary of Agriculture, and the Secretary of Com
merce, whose duties shall be to administer the lease or leases and to
compel the lessees to fulfill the provisions of their respective leases.
Section 10 authorizes the appropriations necessary to carry out the
provisions of the act. In this connection, it is estimated that the
maximum drain on the Treasury of the United States to carry out
the provisions of the act will be $100,000.
Section 1 1 provides that if any one provision of the act is held to
be invalid the remainder provisions shall nevertheless not be invali
dated and authorizes the permanent board to revise the terms of a
lease which may be affected by a determination of invalidity.
Section 12 provides that no lease for the generating equipment shall
be executed and approved until a lease or leases providing for the
production of fertilizer, as specified in subsection (a) of section 2,
as heretofore explained, shall have been made and provides further
that in the event of inability to execute and approve any such leases
prior to December 1, 1931, then all authority and power to execute
leases shall terminate.
F. THE STIPULATIONS IN THE LEASE AUTHORIZATION COMPLY SUB
STANTIALLY WITH THE PRINCIPLES EMRODIED IN THE FORMER
MUSCLE SHOALS POLICY OF THE COMMITTEE
Wo recognize that the proposal to delegate authority to negotiate
and execute a lease contract or contracts for the Muscle Shoals proper
ties is a departure from the general policy which the committee has
heretofore followed, but the stipulations contained hi this proposal
will require the board to substantially comply with the principles
which the committee adopted on January 13, 1928, to govern its
actions in the consideration of any legislation for the disposition of
the Muscle Shoals development. These principles and the stipu
lations or provisions of the lease authorization which comply with
them are as follows:
1. That the property shall at all times be subject to the absolute right and
control of the Government for the production of nitrates or other ammunition
components or munitions of war. and that nitrate plant No. 2 or its equiva
406 MUSCLE SHOALS

lent, or such other nitrogen fixation plant or plants adjacent or near thereto
as may be constructed, must be kept available therefor by the purchasers,
lessees, or users of the property.
The first principle is fully met in subsection (k) of section 2, which
provides that nitrate plants Nos. 1 and 2, together with their equip
ment, shall be maintained in an up-to-date condition so that they will
be at all times ready for immediate operation in the event of a national
emergency, and it is furthermore provided that the Secretary of War
and the Secretary of Agriculture shall have full access to the plants
and the records thereof, that they may be kept fully advised as to
the status of the fixation of nitrogen and the manufacture of nitro
genous products hi their relationship to national defense and agri
culture.
2. That the purchasers, lessees, or users of the property shall be obligated in
the strictest terms to manufacture and offer for sale to the American public fer
tilizers in time of peace of a volume not less than 40,000 tons annually within 15
years of the commencement of the term of the lease and at prices and of kinds
calculated to be attractive to the American farmer.
The second principle is substantially met in subsections (a), (b),
and (c) of section 2 of the lease authorization, which provide that
the properties adapted to the fixation of nitrogen for use in agricul
ture shall be used for such purpose. The lessee or lessees would be
required to produce within three and one-half years from the effec
tive date of the lease or leases fertilizer bases or fertilizers containing
not less than 10,000 tons of fixed nitrogen, with periodic increases
until the maximum production capacity of such plant or plants as
the board may find to be economically adapted or susceptible of being
made economically adapted to the fixation of nitrogen, if the reason
able demands of the market shall justify it. The present production
capacity of nitrate plants 1 and 2 is 48,000 tons of fixed nitrogen, and
if the board finds these plants economically adapted to the fixation
of nitrogen, it means that this amount will be produced annually
after the plants are in full operation. Electric energy produced at
Muscle Shoals may also be made available for the manufacture by a
lease of fertilizer bases or fertilizer elsewhere and in addition to that
produced at the plants now constructed as already discussed in the
report. Section 12 also provides that no lease or leases shall be made
for any part of the power generating properties unless the lease is
also executed requiring the manufacture of fertilizer bases or fertilizers,
as provided above.
Subsection (c) of section 2 provides that the fertilizer bases or fertil
izers shall be sold at a price to include the cost of production and not
exceeding 8 per cent profit on turnover produced, and machinery is
set up for determining the cost of production, which will prevent the
padding of costs, such as has not been done in any other proposed
legislation.
3. That any proposal for the purchase, lease, or use of the Muscle Shoals
property of the United States Government must be for the entire property.
While the lease authorization would permit multiple leases, the
principle involved in this requirement is substantially met by the
stipulation requiring that if two or more lease contacts are made there
shall be formed a joint board of control or holding company, and by
the provision preventing the leasing of the generating properties until
a lease has been arranged for production of fertilizer bases or fertilizer?
as provided in subsection (a), section 2.
 MUSCLE SHOALS 407

4. In the consideration of any offer for Muscle Shoals that it be a prerequisite

that such offer contain a stipulation that the lessee, operating agency, or owner,
as the case may be, be required to return to, or account for, to the Govern
ment either in cash or by way of reduction in the price of the fertilizer manu
factured, the profits from the sale of power which would have been used in
the manufacture of fertilizer in case there had been no discontinuance in the
manufacture thereof; that the manufacture of fertilizer may be discontinued
only when there shall be such excess accumulation of fertilizer stocks as shall
be in excess of the reasonable or prospective demands for such fertilizer, and
such manufacture shall be resumed upon reduction to a reasonable degree of
such accumulated stock of fertilizer.
This principle is met in subsection (d), section 2, which provides:
Credit shall be allowed against the cost of producing such fertilizer bases or
fertilizers in the amount of any profit on account of the sale of electric energy
during the period of any temporary suspension of the operation of the nitrogen
fixation or fertilizer plants.
Subsection (a), section 2, also provides that the manufacture of
fertilizer bases or fertilizers may be discontinued only when there
remains unsold in storage a quantity of such fertilizer bases or fer
tilizers containing at least 2,500 tons of nitrogen, but whenever the
stock in storage falls below this amount production must be resumed.
5. That any bid must contain such forfeiture or penalty provision as will
protect and safeguard the interests and rights of the Government on account
of any failure of the lessee, operating agency, or owner, as the case may be,
to fully keep and perform its obligations and undertakings under the contract.
The fifth principle is met by subsection (b) of section 2, which
provides for a permanent recapture by the United States of any or all
existing properties which may be leased, together with any additions
or improvements thereon in the event of failure of any lessee or lessees
to comply with and to carry out the terms of their contracts.
G. CONCLUSION
Your committee feels in view of the complex political atmosphere
surrounding Muscle Shoals legislation, in view of the many conflicting
interests with respect to it, and in view of the impossibility of prog
nosticating future industrial processes, that the proposed legislation
for the disposition of the United States properties at Muscle Shoals
is the very best that can be formulated. It believes further that its
enactment into law will result in benefits to agriculture, the develop
ment of industries, the improvement of navigation and, in short
added impetus to an already initiative industrial era in the valley of
the Tennessee River.
It respectfully urges favorable consideration of its recommendation.

[House Report No. 1430, Part 2, Seventy-first Congress, second sessionI

VIEWS OF REPRESENTATIVE McSwAiN

I regret my inability to give my unqualified approval at this time
to the bill which has been reported by the committee, being substan
tially the same bill which was formulated by the subcommittee of
five of which I was a member. The other members of the subcom
mittee understand fully my attitude. Our difference is fundamental
and relates to what should be the controlling principles underlying
408 MUSCLE SHOALS

such a bill. These differences may be summarized generally as

follows :
1. As to permitting the property to be subdivided and leased to
two or more different lessees. In my opinion the property is a unit,
and should be let to only one person, firm, or corporation.
2. As to the temporary nature of the board which is not confirmed
by the Senate. In my judgment the board should be a continuing
body and be confirmed by the Senate, and even if the property should
be leased, should exist for the purpose of supervising the performance
of the lease, thus insuring that the interests of the public, and especially
of agriculture, are protected and that the provisions of the lease are
carried out by the lessee.
3. As to the absence of sufficient definiteness and certainty in the
specifications and limitations governing the formulation of a lease
and the performance of the provisions of the lease. The require
ments as to the fixation of nitrogen and as to the processing of such
fixed nitrogen into the form of fertilizer, such as can be directly
applied to the soil and to crops, should not only be definite as to the
amount to be prepared during the first period, which in the bill is
three and one-half years, but the law should specify exactly the
increases to be made in production and the successive periods of time
in which such exact increases must be made, provided the market
demand justifies, and for this reason among many other reasons the
continuing presence of an official body such as the board is necessary.
4. The absence of an alternative provision of the same general
nature as that which passed the Senate. It should be provided
that unless a satisfactory lease with a responsible person, firm, or
corporation should be made within one year after the act becomes
law, then the same board which has been trying to negotiate a lease,
should proceed to put the plant to work in the fixation of nitrogen
and in altering and adding to the plant so as to process such fixed
nitrogen for use as a fertilizer. The bill should also provide that if
the board should at any time after commencing the operation of the
plant have an offer to lease the same, then it should consider such
offer, and if the board should be able to agree upon a lease and should
execute it, then the possession and control of the property should
pass as a going concern to the lessee, with the minimum of interruption
to the business.
REASONS FOR MY DISSENT
I do not believe that the property can be advantageously and
wisely—having in view its purpose for national defense and for agri
culture—leased to more than one person, firm, or corporation. The
plant was built as a unit; its arrangement, its service systems, such
as water and sewerage, railroad tracks, and lighting wires, all con
template one management, and to divide the same up into two or
more parts will lead to confusion, collision, and consequent failure
for at least some of the lessees. It is too much to expect of human
nature that there should be cooperation and joint action among two
or more lessees upon the same ground, dealing with the same property,
and, especially, receiving power from the same source. Since in
equality of control and management would lead to deadlocking, and
since predominance of control in one, would lead to despotism and
oppression, it is too much to expect thoughtful business men to invest
 MUSCLE SHOALS 409

the necessary millions of capital under conditions so unpromising.

One or more of the lessees will get the advantage over the others,
and thus at least a part of the properties will be surrendered to the
Government, and such part will amost certainly be nitrate plants
No. 1 and No. 2. When these plants are no longer operated, then the
power necessary for their operation is released to the other lessee,
or to the board of control, or to the holding corporation which is
dominated by such other lessee and thus the project is one-sided and
incomplete.
THE BOARD SHOULD RE PERMANENT

Only by means of a permanent board, appointed by the President,

but confirmed by the Senate, can the public interest be constantly
watched after and protected. If the property be leased, then the
maximum number of days per year for which the board can collect a
per diem may be easily limited so as to not be burdensome. By hav
ing a continuing body we are assured of three persons kept constantly
familiar with all the problems connected with the Muscle Shoals
project, whether under lease or under Government operation, and this
board will be in a position to say and decide whether or not the law
is being observed, and the provisions of the contracts of letting lived
up to by the lessee. There is need for the board as the representative
of the public and especially of agriculture in connection with the
cheapest possible production of nitrogenous plant food. The greatest
problem in agriculture to-day is, aside from the marketing problem,
that of artificial fertilizers at reasonable prices. In order to accom
plish this end it is necessary to free the farmer from the strangle hold
of Chilean monopoly over nitrate of soda. Likewise, it is necessary
to demonstrate to the farmer and to the world the cost of producing
synthetic nitrogen adapted as a plant food. Chilean nitrates, con
trolled by a natural monopoly, whose existence is guaranteed by the
Chilean Government which controls the production and marketing
of sodium nitrate and imposes an export duty upon the same is the
standard by which the manufacturers of synthetic nitrogen through
out the world gage and fix their prices. It is admitted that there is a
world-wide trust or agreement called a cartel, amounting to a monop
oly in the production and sale of nitrogen products.
During the last 50 years the farmers of America have paid to the
Chilean Government in the form of export duty about $265,000,000.
In addition they paid for the charges of transport from the west coast
of South America to the east coast of North America about $280,-
000,000. Thus, they have paid as charges, which should now be
absolutely unnecessary, more than $500,000,000 for what represents
no value whatever, but is tribute paid to a natural monopoly located
several thousand miles from our farms and fields. Since science has
discovered that over every acre of land there are many tons of nitrogen
which by scientific process may be converted into plant food just as
good and effective as the natural Chilean nitrate of soda, we should do
everything in our power to shake off the grip of Chilean monopoly
and to overthrow the power of the world trust. Strange as it might
seem, there are some people who are glad for the Government to help
industry by protective tariffs, and to help banks by governmental
machinery, and to help railroads by guaranteeing returns upon invest
ment, and to do this the Government itself prevents cutthroat
410 MUSCLE SHOALS

competition, and to spend hundreds of millions, aggregating through

out our history billions of dollars, in improving rivers and harbors as
agencies of commerce, in order to make commerce more profitable for
certain cities and certain classes of individuals. In manv other ways
that I might mention the power of law exerted by the Federal Govern
ment has been employed to help certain kinds of business. But
stranger still, some of these very people that take governmental aid
as above indicated to be a matter of course, in fact a practice so long
standing that they regard it as a right on their part to demand such
Government aid, and a duty on the part of the Government to give
such aid, yet these very people are so afraid that the Government will
do something for the American farmer that they seem utterly indif
ferent to what the Chilean Government has done and is doing to the
American farmer.
INSUFFICIENT SPECIFICATIONS AND LIMITATIONS IN THE RILL

From the beginning of the Muscle Shoals project in 1916, when by

the terms of the law the property was dedicated to national defense
in time of war and to the production of nitrates or other products
useful in the manufacture of fertilizers, there have been certain funda
mental and prevailing principles governing the action of the com
mittee, of the Congress, and controlling the public opinion of the
country. The first formal expression of these ideas bears date of
April 24, 1922, and is as follows:
MUSCLE SHOALS
COMMITTEE ON MILITARY AFFAIRS,
HOUSE OF REPRESENTATIVES,
April 34, 1922.
It is the judgment of this subcommittee that any proposition for the purchase,
lease, or use of the Muscle Shoals property of the Government of the United
States shall be based upon the following as fundamentals and essentials:
1. That the property shall at all times be subject to the absolute right and
control of the Government for the production of nitrates or other ammunition
components of munitions of war, and that nitrate plant No. 2 must be kept
available therefor by the purchasers, lessees, or users of the property.
2. That the purchasers, lessees, or users of the property shall be obligated in,
the strictest terms to the manufacture and sale to the public of fertilizers in time
of peace.
3. That any proposal for the purchase, lease, or use of the Muscle Shoals
property of the United States Government must be for the entire property
except the so-called Gorgas plant and the transmission line therefrom.
FRANK L. GREENE.
JOHN F. MILLER.
RICHARD WAYNE PARKER
(So far as it goes).
PERCY E. QDIN.
WILLIAM C. WRIGHT.
The next expression of these principles is found in the majority-
report of the commission appointed by President Coolidge on
March 26, 1925. The concluding statement of the majority of that
commission is as follows:
CONCLUDING STATEMENT

It is the mature judgment of the undersigned members of the inquiry that th&
Muscle Shoals property is primarily a part of our national defense and we are
convinced that this view is generally shared by the people of the United States.
It is obvious that when these plants are needed for the production of munitions
 MUSCLE SHOALS 411

in time of war they will be needed quickly. The government should, therefore
hold the title to the plants and prevent their being so changed as to make imprac
ticable their immediate conversion for the manufacture of munitions, and arrange
ments should be made that will assure the maintenance of a trained operating
force. These needs can best be served, in our judgment, by operating the
plants. Fortunately, the plants are of such a character that they can render
an important peace-time service to agriculture, and this vast expenditure of the-
Government need not remain idle or unproductive.
We therefore unhesitatingly recommend legislation be enacted by Congress to-
lease this property on such terms as have been herein enumerated, and in event
of failure to obtain a lease the President should have authority to cause these
plants to be immediately operated as a Government enterprise.
It is with great reluctance that we turn toward Government operation, being
well advised of all of the infirmities inherent in such an undertaking. The great
investment of the Government at Muscle Shoals, however, the importance of
its continued maintenance as a part of our national defense, the crying need of
agriculture for more and cheaper fertilizer, and the favorable opportunity for
meeting that need, all compel us to disregard our prejudices, for we are convinced
that to longer permit this great investment to stand idle when it can be of such
great service to our people would be little less than a public calamity.
Delay in this case is expensive. Legislative action is imperative.
Dated this 14th day of November, 1925.
JOHN C. McKENZiE.
NATHANIEL B. DIAL.
R. F. BOWER.
The next expression of these same ideas is found in the House
Concurrent Resolution No. 4, adopted by the Sixty-ninth Congress,
first session, 1926, and is as follows:
Resoh'ed by the House of Representatives (the Senate concurring), That a joint
committee, to be known as the Joint Committee on Muscle Shoals, is hereby
established to be composed of three members to be appointed by the President
of the Senate from the Committee on Agriculture and Forestry and three mem
bers to be appointed by the Speaker of the House of Representatives from the-
Committee on Military Affairs.
The committee is authorized and directed to conduct negotiations for a lease
or leases (but no lease or leases shall be recommended which do not guarantee-
and safeguard the production of nitrates and other fertilizer ingredients mixed
or unmixed primarily as hereinafter provided) of the nitrate and power prop
erties of the United States at Muscle Shoals, Alabama, including the quarry
properties at Waco, Alabama, for the production of nitrates primarily and
incidentally for power purposes, such power to be equitably distributed between-
the communities and States to which it may be properly transported, in order
to serve national defense, agriculture, and industrial purposes, and upon terms
which so far as possible shall provide benefits to the Government and to agricul
ture equal to or greater than those set forth in H. R. 518, Sixty-eighth Congress,
first session, except that the lease or leases shall be for a period not to exceed fifty
years.
Said committee shall have leave to report its findings and recommendations,,
together with a bill or joint resolution for the purpose of carrying them into
effect, which bill or joint resolution shall, in the House, have the status that
is provided for measures enumerated in clause 56 of Rule XI: Provided, That
the committee shall report to Congress not later than April 26, 1926: And pro
vided further, That the committee in making its report shall file for the informa
tion of the Senate and the House of Representatives, a true copy of all proposals,
submitted to it in the conduct of such negotiations.
The next expression of this same principle is found in the report
of this committee to the Sixty-ninth Congress, second session, and
dated March 3, 1927, and is as follows:
The Committee on Military Affairs, to which was referred sundry bills relating-
to Muscle Shoals, Ala., submit to the House a report containing the report of the
subcommittee, which report was adopted by the full committee on March 3, 1927.
The chairman and members of the Military Affairs Committee of the House:
Your subcommittee appointed February 2, 1927, to consider H. R. 16396 and
H. R. 16614, known, respectively, as the Reese bill and the Madden bill, both.
412 MUSCLE SHOALS
having reference to the disposition of Muscle Shoals, organized and proceeded to
the discharge of its duties immediately after being appointed.
In considering the subject your subcommittee felt that the principal purpose
of the Congress regarding Muscle Shoals is to safeguard the national defense,
promote fertilizer production of substantial benefit to agriculture, and to secure
the most beneficial public use of the power-generating facilities after the national
defense and fertilizer manufacture purposes have been fully served. This pur
pose has been stressed in reports made on the subject by various committees
of Congress, the joint commission, and the President of the United States.
Having in mind this fundamental purposes in its consideration of the two offers,
your subcommittee also felt bound by the following limitations placed upon it
by the full committee:
"1. That the property shall at all times be subject to the absolute right and
control of the Government for the production of nitrates or other ammunition
components of munitions of war and that nitrate plant No. 2 must be kept
available therefor by the purchasers, lessees, or users of the property.
"2. That the purchasers, lessees, or users of the property shall be obligated in
the strictest terms to the manufacture and sale to the public of fertilizers in time
of peace.
3. That any proposal for the purchase, lease, or use of the Muscle Shoals
property of the United States Government must be for the entire property except
the so-called Gorgas plan and the transmission line therefrom.
"4. In the consideration of any offers for Muscle Shoals that it be a prerequisite
that such offer contain a stipulation that the lessee, operating agency, or owner,
as the case may be, be required to return to, or account for to, the Government
either in cash or by way of reduction in the price of the fertilizer manufactured,
the profits from the sale of power which would have been used in the manufac
ture of fertilizer in case there had been no discontinuance in the manufacture
thereof; that the manufacture of fertilizer may be discontinued only when there
shall be such excess accumulation of fertilizer stocks as shall be in excess of the
reasonable or prospective demands for such fertilizer, and such manufacture shall
be resumed upon reduction to a reasonable degree of such accumulated stock of
fertilizer.
"5. That any bid must contain a provision for the forfeiture of the power rights
and fertilizer provisions if there is any failure to produce nitrates in the amount
of at least 40,000 tons per year, provided that such forfeiture as may not be due
to the neglect, misconduct, or fault of the lessee, shall not include the loss of the
reasonable value of the property at the time of the forfeiture, but the lessee shall
be reimbursed by the Government for the reasonable value of such property then
and there belonging to the lessee and essential to the operation of the plants."
After full and careful consideration, including discussions on both propositions
with representatives of the respective bidders, your subcommittee has reached the
unanimous decision that neither of the offers as embodied in the two bids con
sidered, either as originally introduced or as amended by representatives of the
respective bidders following discussion in the subcommittee, meet all the funda
mental principles hereinbefore enumerated and in their present forms neither
sufficiently safeguards all the public interests involved.
Your subcommittee has agreed unanimously that the principle and limitations
noted in this report should be held as fundamental and any proposed legislation
submitted to Congress for consideration at the next session should contain pro
visions based on these fundamentals.
Your subcommittee is also of the opinion and submits to the committee that
unless by the time Congress convenes for the Seventieth Congress a bid is received
which more fully and satisfactorily meets the conditions and limitations set forth
in this report, an effort should be made to secure an operating contract for the
production of fertilizer at Muscle Shoals, and in default thereof this committee
should give the matter of operation at Muscle Shoals by a Government corporation
full and careful consideration.
The subcommittee unanimously agreed that the committee be advised that it
is the sense of the subcommittee that no preliminary permit be granted by the
Federal Power Commission at Cove Creek, or any other point which might
affect the Muscle Shoals project, until after the expiration of the next session of
Congress.
It was also unanimously agreed that the Secretary of War be requested to allot
a sufficient amount from available funds for the Government engineers to make
a preliminary investigation and survey of the Cove Creek Dam proposition,
including borings, and that such work be actively prosecuted so that a report to
Congress can be made thereon at the beginning of the next session. It is also the
 MUSCLE SHOALS 413

sense of your subcommittee that any money expended by the Government in

this preliminary work, including borings at Cove Creek, should be repaid to the
Government by any licensee to whom a license might hereafter be granted by
the Federal Power Commission, in case the Government should not build the
dam at Cove Creek.
It is recommended that the stenographic report of the hearings and discussions
held by the subcommittee, together with data pertinent to the subject filed with
the subcommittee, be printed with a proper index for the information of the com
mittee and the Members of Congress.
For the information of the members of the committee there is made a part of
this report the proposed legislation with original language eliminated or changed
indicated by stricken-through type and new language inserted indicated by
italics. Proposed amendments not agreed to by the representatives of the bidders
will be found in the printed hearings.
W. FRANK JAMES.
HARRY WURZRACH.
J. MAYHEW WAINWRIGHT.
NORLE J. JOHNSON.
HURERT F. FISHER.
W. C. WRIGHT.
J. J. McSwAiN.
These are the general principles that have become fundamental in
my thinking on this subject, and I believe the country will be shocked
by finding that some of them at least are now partially disregarded.
I am not a blind worshiper of the past, and I recognize the full value
of any ideas introduced and any suggestions coming from persons
that have not been long habituated by a fixed manner of thinking on
the subject. At the same time, in view of the peculiar nature of this
project, in view of its essential unity, in view of its constituting an
important, essential, indispensable part of our national defense
program, I am still persuaded that the views of our predecessors on
the committee, and the views that have prevailed in the committee
since I became a member thereof up to the present modification of
these views, are justified by reason, common sense, and business
experience.
ROARD NECESSARY TO NEGOTIATE LEASE

I fully concur in that feature of the bill setting up a board to

negotiate the terms of a lease, but, as above indicated, think that
the board should be a permanent body and should therefore be con
firmed by the Senate. Several years ago I became convinced that
it would be impossible for the two Houses of Congress ever to
negotiate the terms of a lease for this property. I therefore fre
quently announced this conclusion and expressed an intention of
formulating a bill setting up a board to negotiate and execute the
lease subject to specifications and limitations so definite and clear
that the original ideas of the Congress with reference to these prop
erties could not be frustrated. I did prepare such a bill and the same
appears in the form of a committee print dated April 15, 1930.
Later I revised the same somewhat by way of clarifying and amplify
ing the same, and it now appears as H. R. 12097. That bill repre
sents my individual views as to the limitations and requirements that
should be imposed on the board. In the bill reported by the majority
of the committee, I fear there is too wide a discretion vested in the
board. The board has almost as much nower to deal with these
Government properties as the individual citizen has in dealing with
his own property. It is contended by those directly responsible for
101229—30 27
414 MUSCLE SHOALS

the bill that these ample powers and this great latitude are necessary
in order to enable the board to effectuate a lease. I know that these
gentlemen are sincere in this contention, and I merelj submit most
respectfully that they are mistaken. There is no such urgent neces
sity for the swift and certain execution of a lease as to justify our
taking the chances of making a serious mistake.
Having studied the problem very carefully for about eight years,
having attended all the hearings within that time, having made an
earnest effort to accomplish leases with proposed private operators,
I am clearly of the opinion that the limitations and restrictions
imposed upon the board under the terms of H. R. 12097 would not
prevent the negotiation of a lease for the entire property, and that
is especially true, if the alternative provision for operation of the
properties by the board in the event of failure to execute such lease
is coupled with the lease authorization in the same bill. I fully
sympathize with the opposition to Government operation. I would
turn to it most reluctantly. But I believe if we say in one and the
same bill, unless private persons are willing to lease these properties
upon the fair and reasonable terms that we set down, being such
terms as we have all agreed upon for the last eight years or more,
then the property shall be operated by the board. This will be a
very persuasive and perhaps compelling consideration in the minds
of both the board and prospective lessees, in hastening negotiations
and in concluding a lease.
WHAT THE SPECIFICATIONS SHOULD RE

The law should insure the financial responsibility of any lessee by

requiring the lessee to deposit at least $10,000,000 in such securities
and with such trustee as would satisfy the board of the absolute and
undisputed financial solvency and good faith of the lessee. In the
next place, the law should require the lessee to fix nitrogen and to
convert the same into nitrogenous plant food available as a fertilizer
by direct application to the soil, in fixed quantities to be specified in
the law and to be increased at fixed periods of time by fixed amounts
until the maximum production capacity of both Nitrate Plants
Nos. 1 and 2, has been reached. Of course, there should be ample
authority granted to the lessee to change the process of fixing
nitrogen in either or both of said plants, or to establish other plants
on the same property for that purpose, but the amounts to be
produced should not be left to the discretion of the board. Of course,
the law should provide that if the nitrogenous fertilizer will not sell
in sufficient volume to take practically the entire output of said plants,
then the plants need not be operated so long as a stipulated minimum
is kept in storage. Furthermore, the President should not be author
ized upon the recommendation of the board to release the lessee from
any of the requirements of the law or of the leases. If in the progress
of science or under great economic changes the lessee can not succeed
with any part of the project, for illustration, with the fertilizer feature,
then Congress alone should exercise the discretion to release a lessee
from the terms of his contract.
However, I have always favored a provision of law that if a lessee
makes an honest effort in good faith, to make a success of the fertilizer
feature at Muscle Shoals, and if for any reason beyond his control
the fertilizer feature fails, then the lessee should be released by
 MUSCLE SHOALS 415

Congress, and should also be reimbursed for the reasonable value of

any property that the lessee might have placed upon the land of the
Government for the purpose of carrving out the provisions of the
lease. It would be more economical for the Government to thus
have the lessee make the experiment and to fail, than it would be for
the Government itself to make the experiment and fail. The Govern
ment would thus own whatever plant and machinery the lessee might
have installed, and it would only be a fair and reasonable inducement
for the execution of a lease. Such was the opinion of the committee
in its report of March 3, 1927.
SOME FAVORARLE POINTS
Candor compels the admission that, if the exact quantity of nitrog
enous fertilizer to be produced were unequivocally and absolutely
stipulated, the bill has several favorable features as to fertilizer, and
has some features more favorable to agriculture than any bill that
has been seriously considered since the Ford offer was before Congress.
(a) The limitation of 8 per cent profit on the turnover is such as to
induce the lessee to turn out the greatest quantity of fertilizer con
sistent with the capacity of the plants and with the demands of the
trade. For every dollar's worth of fertilizer he manufactures and
sells, he gets 8 cents clear profit.
(6) Exceedingly important in the matter of the cost of fertilizer is
the provision requiring a bilateral audit to be made each year of the
cost of fertilizer for the purpose of fixing the price. It is my belief
that under the set-up of this bill nitrogenous fertilizers can be
produced and sold at somewhere between 25 and 40 per cent less
than fertilizers containing the same kind and the same percentage of
plant food are now being sold at. To insure this reduction in the
selling price of nitrogenous plant food the bill contemplates an
impartial ascertainment and decision of the costs of production. This
is insured by the appointment of one production engineer by the
lessee and another production engineer by the President on behalf of
the public, and these two shall work in connection with a certified
public accountant to be chosen by them, and in the event of any
dispute among them as to the elements and proper items of cost
they shall select a third production engineer, and after hearing all
the facts and arguments for both sides he shall render a decision.
Each annual audit shall be filed with the Secretary of Agriculture and
preserved for purposes of comparisdn and for checking in the future.
This is a most valuable provision.
(c) According to the long-standing decision of the committee and
of Congress, credit shall be allowed as against the cost of manufactur
ing fertilizer, for any profit arising from the sale of power during any
period of temporary suspension in the manufacture of fertilizer.
It is also provided that if the lessee installs any new process or method
of fixing nitrogen and of preparing the same for use as a fertilizer
and if such new installation or method results in an economy of
power, then such economy shall be divided equally between the lessee,
to encourage him to make such change, and the fertilizer account, in
order to give agriculture the benefit of such economy.
(d) An entirely new and highly valuable suggestion is contained in
the direction that secondary power shall be employed wherever the
same can be economically done, either by firming the same up by the
416 MUSCLE SHOALS

use of supplementary steam power or by the periodic employment

of secondary power. As the consumption of fertilizer is periodic,
being used almost exclusively in the southern tier of States during
the spring and summer, the production thereof can also be made
periodic. If the period of production is made to fit the period of
greatest volume of water in the Tennessee River which usually ex
tends from the late fall to the late spring, then there should be a still
greater economy in the production of such fertilizer.
(e) The stipulation that no charge shall be made against the lessee
for the ammonization of nitrate plants No. 1 and No. 2 so long as they
are employed in the fixation of nitrogen for agricultural purposes, is
highly advantageous to fertilizer. It is a perfectly fair proposition
because the bill requires that those parts of nitrate plants No. 1 and
No. 2 which are employed for the oxidation of ammonia in the pro
duction of nitric acid and of ammonium nitrate, shall be maintained
in good condition by the lessee and ready at all times to be employed
for such purpose, for the making of the ingredients of explosives for
ammunition purposes. Thus the lessee is obligated to keep up, ready
for use at all times, what is virtually an arsenal, and an essential
feature of national defense. In fact, the whole project of fixing nitro
gen is essential to national defense. Fortunately and happily the
more nitrogen we fix for agriculture the better prepared we are in that
respect for war. There is no other situation analogous to it. This
dual use of the plants at Muscle Shoals, this peace-time purpose and
war-time mission, is similar to the supposed case of where a ship
would be useful for peace time in carrying commerce and in war for
fighting battles. It is also similar to what would be the case if an
army were useful in peace times for producing crops, or for manu
facturing products, or for carrying on useful and valuable education,
and at the same time be thus better prepared for the conduct of war
in that event. For these reasons, the Muscle Shoals project is
unique and stands separate and apart from any other thing connected
with our national-defense program. In view of the supreme import
ance of agriculture and of our absolute dependence upon agricultural
products both in peace and in war, it is highly proper that every
reasonable encouragement should be provided in the lease for the fix
ing of nitrogen during all the years of peace.
(/) The provision that the lessee shall not charge for any patent
rights belonging to it, or to any of its officers, or to any of its sub
sidiary or allied corporations or to their officers is a wise protection
against abuse. Furthermore, such patent rights as may be purchased
for the purpose of producing fertilizer ingredients more economically
shall be charged as plant account and thus distribute the cost of such
patent rights through a long period of time.
(<7) It will also be noted that the lessee shall be bound to carry on
laboratory experiments to ascertain what, if anything, can be done
to produce fertilizers more economically and in general to establish
agriculture on a scientific basis. In fact, the entire plant is one huge
laboratory that will prove of vast value to agriculture, and expecially
in breaking the power of the world trust in nitrogen, and especially
in costing off the yoke that the Chilean Government and the Chilean
nitrate producers have fixed upon the necks of American farmers.
(h) The right of visitation at any time by the representatives of
the War Department and of the Department of Agriculture, in order
to keep abreast of the progress being made in the Muscle Shoals
 MUSCLE SHOALS 417

properties in connection with the fixation and processing of nitrogen,

must prove exceedingly valuable. While the information thus ob
tained is not to be published, it will become indirectly and eventually
the property of the scientific and industrial world and will thus prove
of great benefit to the whole people, producers, and consumers.
(i) The right of recapture, both temporary and permanent, is
absolutely protected by the provisions of the bill. In the event of
war the President may by order take over the property without
interference by any court and the Government shall be liable only for
the actual damages sustained by the lessee on account of such taking,
not mcluding any speculative damages and the amount of such actual
damages must be ascertained by proceedings in the Court of Claims.
On the other hand, in the event of failure by the lessee to carry out
the terms of the lease, the President may direct the Attorney General
to institute suit in any United States district court having jurisdiction
of the lessee, to declare the lease vacated and ended by reason of such
failure and thus accomplish the permanent recapture of the property.
(?) The manifest and reasonable provision that the lessee must be
either an American citizen or a corporation owned and controlled by
an American citizen and in the event of a failure in this requirement
the President is to have the absolute and immediate right or reentry,
(by force if necessary) for the purpose of repossessing the property,
and in such event there shall be no compensation paid to the lessee.
(k) The provision in section 1 1 whereby the power to lease is lim
ited to the prior or contemporaneuos leasing of some part of the prop
erty whereby the lessee shall agree to the production of fertilizer bases
or fertilizers as specified in subsection A of section 2. While this pro
vision is made necessary by reason of the proposed cutting up of the
property into two or more parts, and leasing the same to two or more
lessees, and is a partial protection against the danger inherent in such
plant, yet it is not a complete protection and if the bill becomes law
in its present form, the board must watch these dangers and hedge
against them, or otherwise all hope for agricultural relief against the
world monopoly in nitrogen may be abandoned. The danger lies in
the possibility of the nitrate plants being leased to one or more per
sons, firms, or corporations that do not possess ample assets, and
whose financial solvency is not above question and who may not enter
into the leases in good faith but merely as "straw men" or "decoys"
in order to permit the leasing of the valuable power parts of the prop
erty. In such event the financially weak and morally faithless lessees
of the nitrate plants might drop out of the picture very soon and the
United States would be helpless. It is true there would be the per
formance bond on which the United States might after long litigation
be able to collect some money, but the money would be utterly insig
nificant in value when compared with the losses to agriculture. Fur
thermore, the Government would be unable to lease these same prop
erties to any other lessee in the face of the failure already made, and
second, in view of the fact that the power and its privileges and bene
fits has already passed to another lessee and that lessee would prob
ably be unfriendly to the claims and admissions of agriculture. This
way lies danger and for this reason the entire property should be tied
together and if not leased to the same person, firm, or corporation,
the two or more lessees should certainly be mutual guarantors. If
there were one lessee only, then the failure of the provisions of the
lease in any one important respect would justify the United States in
418 MUSCLE SHOALS

recapturing the entire property. In like manner, if the lessees were

mutual guarantors, no one lessee could drop out of the picture.
Either all would succeed or all would fail. It will be practically im
possible for all to fail, in view of the magnitude of the power privileges.
SAFETY CLAUSE

Provision is made in the bill that the negotiations for leasing and
the actual lease itself shall not be transacted in a dark chamber nor
in a corner. The board is required to give the widest possible pub
licity, inviting proposals to lease. The poard is also required to fur
nish any person on demand full information as to the appraised value
of the property. It is further provided that at least 30 days shall
elapse after the board and the lessee shall agree as to the terms of
the lease before the same shall become effective by the written ap
proval of the President. During this 30 days any citizen of the
United States interested in the subject, and having ground to think
that a mistake is about to be made, can either see the President, or
address a memorial, or brief, or other communication to the President,
stating the reasons for such belief and warning the President against
confirming by his approval the action of the board.
SECOND ALTERNATIVE PROVISION

I think, however, that there should not only be coupled with the
authority to lease a provision that the same board shall commence
the operation of the property at a fixed time, in the event that no
satisfactory lease for the entire property should have been negotiated,
but I also think that the bill should contain what may be rightly
termed a "second alternative," providing that the same board shall
have authority even after it may commence the operation of the
properties, to consider any proposal made to it for leasing the prop
erty, and if a satisfactory proposal be made, and a lease be executed
by the board, then that the lease should contain provisions for the
lessee to take over the property as a going concern by paying for the
stock in process and any stock on hand, so that there may be the
minimum of interruption to the business. A transfer can be made
from Government operation to private operation, without the stopping
of a single wheel or the reduction of the fertilizer product by a single
pound.
FINAL DISPOSITION OF QUESTION DESIRARLE

If the bill contained adequately definite stipulations and require

ments for any lease to be executed by a continuing board to be ap
pointed by the President and confirmed by the Senate, and if in the
same bill there were provisions for the board thus constituted to
operate the property upon failure to execute a satisfactory lease
within the time stipulated, and if in addition there was a provision,
as above indicated, giving the board power and authority to execute
a lease even after commencing Government operation, then every
possible phase of this long-standing and many-sided problem would
be settled legislatively. To provide now for the leasing only means
that if a satisfactory lease is not made, the proposition must be
before Congress again with all of its perplexing complications and
undisputed difficulties, in about 18 months. The question will then
 MUSCLE SHOALS 419

be the same as it is now. We are just as well prepared now to settle

the entire proposition as we will be to settle it piecemeal 18 months
from now. Under such a threefold disposition of the problem, every
aspect of the question is met and settled. Undoubtedly the clear
majority opinion is that Government operation should be resorted
to only as a last resort. But the power in the board to commence
Government operation will give momentum to negotiations looking
to a lease. Also, after Government operation commences, the power
to make a lease will stimulate interest on the part of persons wishing
to enter that field of business and wishing at the same time to be
free from Government competition. From every point of view this
threefold treatment of the proposal should be satisfactory and
should command a prompt and overwhelming majority in both
Houses.
ECONOMIC AND INDUSTRIAL RESULTS

Let us take a glimpse into the future of what will probably be the
result of wise and rational action by the leasing board. If the prop
erty is leased to a concern financially responsible which intends in
good faith to carry out the purposes of the act, then I can envisage a
marvelous development in the whole Tennessee River region and
even in adjacent sections. The first and direct result will be the
production of a cheap nitrogeneous plant food which will demonstrate
to the farmers and the business people of the United States, the actual
cost of fixing nitrogen and of processing the same for use as fertilizer.
Judging by numerous estimates made by experts, the reduction will
cut the present cost of nitrogen products from 25 to 40 per cent.
This should break the power of the Chilean nitrate trust which has
extracted tribute from the world and especially from the farmers of
the United States, merely because Chile has a monopoly upon
mineral nitrate of soda. Two hundred and sixty-five million dollars
has been paid into the public treasury of Chile as the export duty
upon nitrate of soda exported to the United States alone. When to
this is added the exports of nitrate of soda to other countries, especially
prior to the World War, the total receipts by the Government of
Chile for such export tax must amount to more than a billion dollars.
Thus the people of Chile have shifted a large part of their tax burden
upon the shoulders of the people of other nations, merely because
they possess a natural monopoly in an essential commodity vitally
important in both peace and war.
In the next place, to ascertain the actual cost of producing such
synthetic nitrogen for agricultural purposes will help to crush the
world-wide Nitrogen Trust. At present the world price of nitrogen
follows along and barely below the price of Chilean nitrate. Thus a
monopoly on mineral nitrogen and a monopoly on synthetic nitrogen
go hand in hand. If the United States Government can help break
this trust team and set the farmers of this country free, it will be one
of the greatest blessings that agriculture has ever received.
Commencing with 10,000 tons of pure nitrogen, in such form and
combination as the leasing board may specify and as the lessee may
subsequently decide to be most attractive to the farmer, the volume
of fertilizers produced will increase and will probably increase very
rapidly. With the advantages given to the protection of agricul
tural nitrogen, it is my belief that the lessee will find production
420 MUSCLE SHOALS

profitable to himself, and therefore will be induced to increase the

annual quantity. In order to dispose of such increased quantity,
very naturally the lessee will resort to the reasonable and proper
business method of combining nitrogen with phosphoric acid and
perhaps with potash. Phosphate rock is found in great abundance
in the Tennessee River Basin. This can be floated down the river
and subjected to electric furnace methods at the time of the year when
cheap secondary power is available, and thus phosphoric acid pro
duced more cheaply than it is being produced to-day by the wet
process. Then probably the potash shales in that section of the
country can be economically treated so as to extract the potash for
agricultural purposes and leave valuable by-products of high com
mercial value.
It is entirely within the range of reasonable possibility that hi 10
or 15 years the whole fertilizer practices in America will be revolu
tionized. The unit cost of plant food will be cut from 25 to 40 per
cent. The present annual fertilizer expenditure is about $230,000,000
a year. Deduct 25 per cent of that and you have a saving of $56,-
000,000. Also the fertilizer will be more concentrated and there will
be great saving in freight, in sacks, in hauling, and in handling, thus
accomplishing another saving of at least $20,000,000 a year. We can
thus reasonably hope to realize an annual saving of $76,000,000 for
the users of commercial fertilizer.
INDUSTRIAL RESULTS

But in the field of industry the results will surely be more mar
velous and astonishing. The lessee will certainly find it advantageous
to set up large establishiments for the production of electrochemical
and ferro-alloys. In that section of the country are all the raw
materials for the manufacture of chemicals and all steel products,
at the same time numerous and valuable by-products will be manu
factured. Furthermore, there are 1 1 valuable dam sites between the
Cove Creek Dam and the Wilson Dam, and the construction of the
Cove Creek Dam will double the power available at each one of these
dam sites. Within the next generation perhaps all of the dams in
that stretch of the river will be constructed and the power will be
used not only at and near the dam, but will be sent in various
directions to existing cities and towns and to new cities and towns
within transmission distance.
Thus the 1,000,000 horsepower to be found along that 300-mile
section of the Tennessee River from Cove Creek to Wilson Dam will
become a great hive of industry. Perhaps millions of busy and
industrious people will gather to use the electric energy there gener
ated. New cities and towns will rise in places now unthought of.
Many hundreds of millions of dollars will be invested in new plants
and in new enterprises, and proportionate profits will arise from these
investments. From the day that earth is broken for the construction
of the Cove Creek Dam, which will impound 3,000,000 acre-feet of
water stretching over practically 60,000 acres, the largest artificial
lake in the world, the eyes of the whole country will be turned upon
that section and the footsteps of millions will be directed toward the
Tennessee Valley. Agriculture in that section will thrive as never
before, producing diversified crops and vegetables to feed the busy
millions engaged in construction and in the conduct of industry.
 MUSCLE SHOALS 421

While such a picture dazzles the imagination, it is backed up by reason

and human probability, and based upon the commanding influence
of cheap power. Power is the secret of modern industry. Modern
industry is the impelling force of modern civilization. In this
Tennessee River Valley, so rich in the quantity and variety of mineral
deposits, will spring up some of the greatest industrial activities of
the world. With a magnificent climate, with a productive soil, with
a strong and virile population to draw from in the surrounding
States, with a people devoted to the ideals of our Republic and to the
principles of our Constitution, resolved to maintain and preserve
order and justice, that section presents a promise of future develop
ment and prosperity comparable to what has taken place in a com
mercial and financial way on Manhattan Island.
IT ALL DEPENDS

But this bright picture will never be realized unless the leasing
board uses great wisdom, profound business judgment, and unusual
foresight in selecting the person or persons to whom the property
may be leased and in prescribing the conditions under which the
leases mav be made. The financial responsibility of the lessees must
be carefully scrutinized. If any newly organized concern, not now
in business, offers to lease the property or any part thereof, the stock
ownership and control of such new corporation must be thoroughly
examined. I very much fear that hostile interests may organize
some new corporation with the deliberate purpose of using it to help
wreck the entire project, and especially to lease the nitrate plants and
to operate them in such a way as to insure the defeat of the fertilizer
project. Great caution must be exercised by the leasing board to
prevent this result.
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