Now, that question arose when Gordon Gray was before the committee because of an article that appeared in the Journal of Commerce, stating that Oxbow would not be completed until 1961. If it were not completed, obviously, with this specific condition in the certificate, there could be no writeoff with respect to that particular project.

So, when the question arose, and here was a conflict of testimony, I felt that it ought to be resolved by the president of the company, who allegedly made that statement in New York. But in this telegram he says emphatically that they expect, and it is their present intention. to complete Oxbow, along with Brownlee, in 1958, and comply with the criteria.

Senator KEFAUVER. It is also pertinent in connection with testimony we have had as to whether, if it is not completed, Mr. Gray can extend the time or whether he would extend the time in which he said he had the power to change the completion date, if certain circumstances arose. Also, it has to do, I felt, with certain notes that were made by Mr. Wyckoff in talking to Mr. Gray with reference to conferences he had had at the White House, that the criteria could be changed, which Mr. Wyckoff wrote on page 4 of a mimeographed staff memo.

Senator O'MAHONEY. Mr. Chairman, may I make a statement off the record?

Senator KEFAUVER. Yes.

(Discussion off the record.)

STATEMENT OF HON. FRED A. SEATON, SECRETARY OF THE INTERIOR; ACCOMPANIED BY FRED G. AANDAHL, ASSISTANT SECRETARY FOR WATER AND POWER DEVELOPMENT, DEPARTMENT OF THE INTERIOR; ELMER BENNETT, SOLICITOR, DEPARTMENT OF THE INTERIOR; GEORGE ENGLISH, COORDINATOR OF DEFENSE ELECTRIC POWER SUPPLY, OFFICE OF ASSISTANT SECRETARY FOR WATER AND POWER DEVELOPMENT, DEPARTMENT OF THE INTERIOR; AND E. D. FRYE, SPECIAL ASSISTANT TO THE UNDER SECRETARY OF THE INTERIOR

Senator KEFAUVER. Mr. Seaton, we are delighted to have you with When did you become the Secretary of the Interior?

Secretary SEATON. Well, the exact date escapes me at the moment. Senator O'MAHONEY. Wasn't that a red-letter day?

Secretary SEATON. It depends on your definition, Senator O'Mahoney.

The latter part of May, as I remember it.

Senator KEFAUVER. Of course, we know your long and useful experience in other executive departments and in the United States Senate before becoming Secretary of the Interior. You succeeded Mr. McKay?

Secretary SEATON. Yes, sir.

Senator KEFAUVER. Very well, Mr. Seaton.

Will you proceed? So that the press can file stories based upon your statement, we will let you finish your brief statement before the committee members ask questions.

Secretary SEATON. Thank you very much.

Mr. Chairman and members of the committee, I appreciate the opportunity of appearing before this subcommittee in order to be of such assistance as I can in connection with the subcommittee's study of certain tax-amortization certificates granted to the Idaho Power Co. by the Office of Defense Mobilization.

After a number of informal private conferences with Dr. Flemming, former Director of the Office of Defense Mobilization, I was requested by him on March 8, 1957, to comment on his proposed grantof these accelerated tax-amortization certificates.

ing

I had grave misgivings concerning the granting of these certificates. In the first place, there was the fact that the Federal Power Commission in its own findings concerning licenses to the Idaho Power Co. for the construction of Brownlee and Oxbow had stressed that the proposed development of the Snake River by that company was to be accomplished without any cost to the United States.

In the second place, it appeared to me that the record before the Federal Power Commission established clearly that the certificates were not necessary to the construction of Brownlee and Oxbow. In fact, it seems to me that the company did not expect tax certificates in making its plans for development of these units.

In the third place, it seemed to me that the record was established before the Federal Power Commission that these projects were not to be constructed for the purpose of building excess capacity but rather were designed to meet the ordinary load requirements of the company's system.

As a result of these considerations I sent my letter of March 11, 1957, to Dr. Flemming recommending that he deny issuance of tax certificates to this company.

The records of our Department, that is, the Department of the Interior, appear to establish that the criteria under which the Idaho. Power applications were reviewed are the same criteria established in

1952.

Under those criteria I have been assured by members of our departmental staff who are present with me today that the applications of the company met the requirements established by the Office of Defense Mobilization.

I am advised that under those criteria it is not necessary for an applicant to establish financial need in order to be eligible for a tax amortization certificate.

I am also informed that the findings of the Federal Power Commission in the granting of licenses under the Federal Power Act are not material to eligibility for such certificates.

I have also been advised, subsequent to my letter of March 11, that the company has submitted data to the Office of Defense Mobilization which would establish that excess capacity would be constructed within the limitations of the applicable regulations and criteria applicable in previous cases of this kind.

My letter of March 11 was intended as an appeal to the Director of the Office of Defense Mobilization to exercise the discretion vested in him to deny these certificates on grounds which lie outside of the established regulations and criteria which have been applied in pre

vious cases.

I recognize full well that the Director of the Office of Defense Mobilization has authority to act in these matters without my concurrence. I also recognize that in the face of precedents reaching back over two administrations he might be most reluctant to deny such certificates on grounds which lie outside of the established regulations and criteria. Therefore, I have no criticism to offer of the Director. He exercised his best judgment as it appeared to him under authority vested in him.

Nevertheless, I reiterate that I did recommend against issuance of the certificates and would do so again. In my opinion, such certificates should not be granted without a showing of financial need. Nor do I believe that such a certificate should be granted where a Federal Power Commission license has been predicated on the lack of cost to the United States. On these grounds I would recommend against the issuance of certificates to any similar project on which I am called to comment.

I should add in closing my prepared statement, however, that I am informed the cost to the United States of these certificates has been exaggerated.

As I pointed out in my letter of March 11, the cost to the Government resulting from the issuance of these tax amortization certificates is the difference between the interest the Government pays on money borrowed as a result of reduced tax receipts during the 5-year amortization period and the interest saved on the larger tax payments received by the Government beginning with the sixth year of the amortization period. The best information I can get on this subject indicates that this figure would be about $17 million. It should be noted that this is the cumulative cost to the end of the 50-year period. I shall be pleased to cooperate with the committee and endeavor to answer any questions you may have. There are present today the appropriate staff members of the Department to assist in this regard, as you requested.

Senator KEFAUVER. Mr. Seaton, thank you very much for your

statement.

First, I want to congratulate you upon the consideration you have given this matter, and the expressions in your letter of March 11, which I believe was the first time that you had an opportunity of expressing your judgment about it. Is that correct?

Secretary SEATON. That is right, sir.

Senator KEFAUVER. The previous expressions had been by your predecessor, Mr. McKay, as Secretary of the Interior.

Is that correct?

Secretary SEATON. Well, Senator, I believe the communications to the Office of Defense Mobilization were signed by Assistant Secretary Aandahl. What there may have been with Mr. McKay, I don't know. I have no knowledge of that.

Senator KEFAUVER. By Mr. McKay or someone under his authority? Secretary SEATON. Mr. Aandahl is here today, too, Senator Kefauver.

Senator KEFAUVER. Mr. Aandahl is here today?

Secretary SEATON. Yes, sir.

Senator KEFAUVER. Why doesn't he come around? We may want to ask him some questions.

Now, Mr. Seaton, would you give, for the benefit of the committee, the actual date when these certificates were aplied for, that is, the dates of the various actions on them, insofar as the Department of Interior is concerned.

Secretary SEATON. Senator Kefauver, since all of that was handled prior to my going to the Department of Interior, I would like your permission to ask Secretary Aandahl to answer those questions.

Senator KEFAUVER. I think that should be established at the beginning. So, if you can very briefly recite the dates, Mr. Aandahl. Mr. AANDAHL. The application for Oxbow was received in Interior in 1954.

Senator KEFAUVER. What date?

Mr. AANDAHL. August 7, 1954.
Senator KEFAUVER. All right, sir.

Mr. AANDAHL. An amended application was received on February 1, 1954.

Senator KEFAUVER. February 1, 1954, or 1955?

Mr. AANDAHL. No. That would be 1955.

There is confusion in the dates on the memorandum that I have here.

Mr. Chairman, may I make a further correction?

The first date is August 7, 1953, and the second date is February 4,

1954.

Senator KEFAUVER. All right, sir.

Mr. AANDAHL. They were incorrectly noted on the memorandum that I have, and I have the correction from the staff.

The application for Brownlee was received on August 24, 1953, and an amended application was received on February 2, 1954.

Senator KEFAUVER. Give the dates of the action by the Interior Department on the applications.

Mr. AANDAHL. The recommendation to ODM was signed October 25, 1955, and the same date for the Brownlee project.

Senator KEFAUVER. Do you have the full letter of recommendation? Part of it has been put in the record.

Mr. AANDAHL. I have here the transmittal letter dated October 25, 1955, addressed to Mr. Wyckoff of the Office of Defense Mobilization and signed by George English, who is the Defense Power Supply Coordinator in the Department of the Interior.

Senator KEFAUVER. Let that be printed in the record. (The letter referred to is as follows:)

Mr. J. B. WYCKOFF.

Finance Division, Production Area,

Office of Defense Mobilization,

DEPARTMENT OF THE INTERIOR,

OFFICE OF THE SECRETARY, Washington, D. C., October 25, 1955.

Washington, D. C.

DEAR MR. WYCKOFF: We enclose herewith reports and recommendations in connection with the following applications for necessity certificates:

TA-26407-Idaho Power Co.

TA-26500-Idaho Power Co.

Will you please acknowledge receipt of these reports by signing and returning the attached copy of this letter.

Sincerely yours,

GEORGE H. ENGLISH,

Defense Power Supply Coordinator,

Office of Assistant Secretary for Water and Power.

Senator KEFAUVER. But isn't there a longer memorandum of explanation?

Mr. AANDAHL. Yes. There is a form upon which the analysis of the application is made.

Senator KEFAUVER. If you will supply that, we will have it printed in the record also.

Mr. AANDAHL. I have here the office copy, and we would be glad to let you have it, but we would like to have this copy returned. It is our office copy.

Senator KEFAUVER. We will have it returned to you. I will direct the staff to see that it gets back to you.

Now, is this on Oxbow or is this on Brownlee?

Mr. AANDAHL. The other I gave you is Brownlee, and this is the Oxbow project.

Senator KEFAUVER. Do you want that returned?

Mr. AANDAHL. Yes, please.

Senator KEFAUVER. Let them both be printed in the record. We will see that they are returned to you.

(The documents referred to are as follows:)

DEPARTMENT OF THE INTERIOR,

DEFENSE ELECTRIC POWER ADMINISTRATION,

Washington, D. C., October 25, 1955.

To: Administrator, Defense Production Administration.

From: Administrator, Defense Electric Power Administration.

Subject: Report and recommendation on application for necessity certificate under section 124A of the Internal Revenue Code.

DPA File No.: TA-26407.

Date filed by applicant: February 1, 1954.

Name and address of applicant: Idaho Power Co., 1220 Idaho Street, Boise, Idaho.

Location or name of facilities: Oxbow Hydroelectric Power Development.

Description of facilities and functions served

New hydroelectric project on the Snake River__

Cost

$35, 943, 730

4 water wheels and generators rated at 37,750 KW each, with a total peaking capability of 173,600 KW.

Reservoirs, dams, waterways, structures, step-up substation, associated equipment and housing for employees.

10.75 miles 230-kv double-circuit transmission line, Oxbow to Brownlee. 52.65 miles 230-kv single-circuit transmission line, Brownlee to Baker. 48.65 miles 230-kv single-circuit transmission line, Baker to La Grande. 109.4 miles 230-kv single-circuit transmission line, Brownlee to Boise. 60.65 miles 230-kv single-circuit transmission line, Brownlee to Ontario. Terminal facilities at Brownlee, Boise, Baker, Ontario, Oxbow, and La Grande.

4 66,667-kv-a, 230/138-kv transformers at Boise.

4 33,333-kv-a, 230/138-kv transformers at Baker.

4 66,667-kv-a, 230/138-kv transformers at Ontario. Construction schedule

Start: November 1955.

In service: December 1957.

The following criteria are either met by or found inapplicable to this application, unless specifically noted otherwise: Necessity of all facilities described from aspect of national defense; absence or unsuitability of idle facilities; possibility of purchase from others; military security; availability of manpower, housing, community facilities, transportation, and other elements of production; and competence of applicant. Unless indicated otherwise, no Government financing is involved and no acquired facilities or replacements are sought to be certified. Where land is sought to be certified, it is excluded as a matter of DPA administrative policy.