Now just when the Department of Agriculture will hold that normal conditions in the livestock industry have been reestablished, and hence that fees based on the normal value of the range should go into effect, I am not prepared to say. But I am reasonably sure that it will be long before the date set up in this bill, of 1936, when the general basis of grazing fees which the bill lays down can become effective..

In what I am going to say on this matter, which has been the -subject of a great deal of discussion and controversy, I want to make it perfectly clear that I have no criticism of the livestock industry, and that I am not wedded to any particular grazing fees. You gentlemen are doubtless familiar with the steps taken by the Secretary of Agriculture to review the whole question, going over the fees arrived at in Mr. Rachford's appraisal, by employing an experienced stockman entirely disassociated from Forest Service to make, as a representative of the Secretary, an entirely impartial and independent check on the whole proposition.

That is our program, and I believe that our program, speaking for the department and without referring to any particular setup of range appraisals, but dealing with the principle of it-I believe that program is in harmony with the general basis of grazing fees provided by the bill. We should be permitted to go ahead and carry out that program without the interposition of legislative time limits; that is, to put into effect a reasonable economic fee, moderate, as the bill says it should be, when in the judgment of the Secretary of Agriculture the livestock industry may be said to be on a normal financial footing.

Our present fees are, I believe, materially less than the general basis set up by the bill; and if the livestock industry gets back within a reasonable time upon a normal financial footing, assuming that it is not already back there, and these present low fees are continued until 1936, I do not believe that you are going to get very much. stability out of that situation. You will get a lot of speculation. You are going to run up against the same sort of situation that we dealt with in 1920, and I do not believe that the effect of such a situation is, in the long run, beneficial to the stockman themselves, because it places the Government in the position of granting a subsidy, or the equivalent of a subsidy, by whatever name you choose to call it, to livestock producers who have permits on the national forests.

Now, general relief for the livestock industry, in any way that Congress sees fit to provide it, is one thing; but the granting of grazing privileges at rates that are materially less than the resource is actually worth to a small part of that livestock industry is something entirely different. We have on the national forests about 5 per cent of all the cattle in the United States, and we have about 17 per cent of all the sheep in the United States. If you take the Western States by themselves, we have about 20 per cent of the cattle and about 28 per cent of the sheep. So a continuation of low grazing fees beyond the time when the livestock industry is in a normal economic situation is no relief for the livestock industry as a whole. It becomes a special form of granting

relief, if you wish to term it that, to a small portion of the livestock industry.

Now, I want to emphasize the fact in concrete terms, that what I call a subsidy for lack of a better term is a very real thing. It is not a bureaucratic dream, but it is the real goods. I think that is shown very conclusively by the bonuses that have been paid and that are now being paid for livestock or ranches which carry national forest permits. I would like to give the committee a little material on that point, for whatever it may be worth.

Senator ODDIE. Colonel Greeley; why should the National Forest Service charge grazing fees which result in a profit to the Federal Government over and above the cost of administration?

Colonel GREELEY. It does not seem to me, Senator, that that is the right basis to approach the subject, as to whether the fees mean a profit or do not mean a profit. We have a good many ranges, Senator, or at least some ranges, where all that the range is worth is no more than the cost of administration. We have some ranges that we are administering at an actual loss from the standpoint of the cost of administration. We have other ranges that are worth very much more than the cost of administration.

Senator ODDIE. But taking it all the way through, is not the cost of administration much less than the aggregate amount of the fees?

Colonel GREELEY. Yes.

Senator ODDIE. So there is a profit accruing to the Government from grazing fees?

Colonel GREELEY. If you separate grazing from all the other activities in the national forests and say that grazing should pay nothing toward the protection of the national forest from fire and nothing toward the improvement of the national forests, why, yes, there is a profit.

Senator ODDIE. Were not numbers of the present users occupying those areas before the forests were created?

Colonel GREELEY. Yes, sir.

Senator ODDIE. They paid no fees at that time?

Colonel GREELEY. No. They had no protection in the use of the range at that time. Any newcomer, any nomadic sheep herder, could come in and run them off, just exactly as they are running your Nevada homesteaders off the territory you were referring to the other day. They had absolutely no protection. Their range might be there one year and not there the next year, whereas now they are under 10-year contracts which assure them that range. To a very large degree, if not completely, they are protected in the use and enjoyment of that range from any trespassing livestock. It certainly is very much more valuable to them now than it was then when it was open public range.

Senator ODDIE. Following that same line of reasoning, do you believe a man should pay the Federal Government or his State a profit on the police protection he receives for his life and property? Colonel GREELEY. No, except as he pays it through general taxes. But, Senator, this is a commercial business. If you were in any other commercial business and bought raw materials you would pay what they are worth in the market.

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The CHAIRMAN. I would like for Colonel Greeley to pursue to the end this idea of a subsidy. You started to explain why this would be a subsidy.

Colonel GREELEY. I want to say again that in bringing up this data I am not doing so in any critical spirit toward the livestock industry. If I were in their shoes I would do exactly the same thing. They are taking advantage, as any business man would, of the benefits of their situation, and I am simply bringing out these data to make it clear to the committee what the situation actually is and how the fee question on the national forests works out.

Reading a news item from the Salt Lake Tribune:

ROCK SPRINGS, WYO., October 26.-The Jamison-May interests recently paid S. Curtis the unusually high price of $17 a head for 1,400 ewes. The reason for this high price is said to be found in the fact that the purchase also included important grazing permits in the Wyoming National Forest in the western part of the State.

I recently had a report from the district forester at Ogden which indicates that bonuses up to $15 per head have been paid for permitted sheep on the Mantai National Forest in central Utah. That is the value of grazing permits. On the Fish Lake National Forest, in the same State, the ordinary price for sheep in the last few months without a national forest permit has been $12 per head, while with a grazing preference the running price has been around $20 per head. In that case $8 per head is being paid to-day for the grazing privilege.

I could multiply cases of that sort. Here is one case before the Supreme Court of the State of Idaho, 1923, in which it was brought out in the evidence and made a matter of comment in the judicial determination of the court, that in a sale of 1,750 head of sheep in the Sawtooth National Forest the purchase included a valuation of $3 per head for the grazing preference.

We had an appeals case come up in 1918 from the Cache National Forest in which a bill of sale showed plainly that the value of the grazing preference was rated at $6 per head, and so on. We had another appeals case that came up from the Tusayan National Forest in Arizona, in 1924, in which the record of sales showed plainly that a bonus of $3 per head had been paid for a grazing preference on sheep.

Now, let me bring out another factor in the situation, and that is the value of national forest grazing preference to the larger permittees in connection with their financial arrangements. I want to quote from three or four prospectuses dealing with bond issues or other forms of security offerings by sheep or cattle outfits in the Western States. One of them contains this statement:

The lands and equipment, the water rights, preferences, and leases which form the security for these bonds have been appraised for you in excess of $1,310,000. Our total holdings embrace an area of over 770,000 acres, of which about 200,000 are owned in fee, 175,000 acres held under leases from the State, and about 395,000 held under Government permits or controlled by water rights.

It is impossible in that case to determine just what value the outfit has placed upon its national-forest permit in arriving at its appraised value of $1,310,000, but any process of figuring would show that a high value has been placed upon that grazing permit as a basis of security for the bonds.

Senator ODDIE. To whom did the bonuses go in those cases? Colonel GREELEY. Why, in this case the bonus, as in the usual case, has been absorbed in the value of either the ranch or the herd.

Another prospectus contains this statement, that the property virtually controls a range territory 114 miles in length and 60 miles wide, which is a reference to one of the Nevada national forests. That is offered as one of the securities of the outfit-a reason why they have good security to offer the purchasers of their bonds.

Senator ODDIE. Colonel Greeley, let me interrupt you again. Do these so-called bonuses that you refer to cover just a one-year privilege or is it an all-time privilege?

Colonel GREELEY. They cover the privilege for all time-whatever the owner of the range or livestock has to sell. If he has a 10-year permit, it cover the 10-year permit. If he has a grazing preference, it covers his grazing preference-anything he has to sell.

Senator ODDIE. Then, assume that the 10-year permits may be renewed five times; that would be 50 years. A bonus of $5 a head for sheep would be the price paid for a possible 50 years use of the range. So it might be as low as 10 cents a head, or in an extreme case it might be even less.

Colonel GREELEY. You might figure that way if you wish. The purchaser of that outfit is putting a definite value on the range privilege. That is the point I want to establish. I want to show that while you may say the Government should not make a profit in leasing the use of a public resource or that we should not commercialize the range, yet the stockmen are, very naturally as business men, commercializing that grazing privilege when it comes to selling their stock or ranches or securing loans to handle their business. There is a very large element of commercial value there; that is the point. Senator ODDIE. But was not that value there at the start? And is not that value that they place on the range dependent on the value of their commensurate ranch holdings? And are not the values that they place on their ranch holdings dependent almost entirely on the use of the range?

Colonel GREELEY. Of course, there is a very direct relationship. The value of the ranch often does depend upon the availability of the range.

The CHAIRMAN. The value of the ranch is reflected in the right to graze. As was so often stated in the hearings last summer, the value of the ranch is dependent upon the right to graze.

Colonel GREELEY. That is often true.

The CHAIRMAN. Of course that is a natural condition that must arise. Now, would you take that value away from the stockmen? Colonel GREELEY. No; I would not take away from them any value that they now have.

The CHAIRMAN. Or that they may acquire by reason of a preference right to graze?

Colonel GREELEY. No; I would not take away any value that the stockman now has or that his ranch has, but I would draw the line on permitting him to go. ahead and pyramid on that value through a continuance of grazing fees that do not represent an economic compensation for the resource he is utilizing.

The CHAIRMAN. Of course, so far as the community is concerned. in which he lives, the taxable value of his property is dependent upon his right to graze. Therefore he is indirectly paying it to the local and State governments what otherwise, on a basis of increased fees, he would pay to the Federal Government.

Colonel GREELEY. No; I do not think there would be any direct duplication there. Of course I grant that he may be paying taxes on a value at which his ranch has been assessed which include in one way and another a value placed upon his grazing privilege, or on the availability of range.

The CHAIRMAN. What is the difference between that and the free gift homestead?

Colonel GREELEY. The same thing is true of any enterprise on the national forests. Take a sawmill that is cutting Government timber on a national forest. That sawmill is appraised by the tax assessors on what they regard as its value. If it were not for the availability of the national forest timber it would have no value. And yet the manufacturer is paying for the Government timber its actual market value, whatever that may be.

The CHAIRMAN. Of course that is a tax on replacement. A man may move in and build a new sawmill, purchase the parts and put them together, and he has a new sawmill, but he can not patch together any fragments and make a new ranch.

Colonel GREELEY. Take the taxation of any established business; it is related to the opportunity of that factory or plant to operate successfully as a business, but the fact that the factory or plant pays a tax of that sort does not affect the price at which the factory buys its raw material. It seems to me that, while the analogy is a little far-fetched, it is true in this case.

The CHAIRMAN. I can not quite follow you in the idea that it is comparable, that it is a fair comparison. But I want to get back to this matter of the subsidy.

Colonel GREELEY. May I finish this material just to establish that point? The point I am trying to establish is that whatever our approach to the proposition may be, whether we approach the question of grazing fees from the point of view of cost of administration or what not, there is a very large element of value in the grazing privilege on the national forests which is expressed in the bonuses charged for it when the grazing privilege is sold and in the financial arrangements made by outfits when they seek new forms of credit.

I have here another prospectus calling for a bond issue of $500,000 which says

Lands and water were acquired with a view to exclusive use of the forest reserve and State grazing lands along the border of which the company's lands are located, and accordingly the 37,000 acres owned control access to more than 400,000 acres of grazing area, which adds a very large value to the lands of the company.

Another prospectus for a bond issue of $1,500,000 has this state

ment:

These bonds will be a first closed mortgage on 375,000 acres of well-watered grazing land, which controls for grazing purposes approximately 2,000,000 acres-375,000 acres of pasturage lands which, in conjunction with State leases, forest reserve permits, and ownership of water rights directly control in excess of 2,000,000 acres.