to our legal rights, not for the purpose of telling you what we are going to do, or what you have got to do, but just to emphasize the equities that should be considered in our favor.

Under the chairman's permission given the other day, I shall ask at the close of these hearings to file a brief summary, including possibly answers to propositions that have been made as they occurred to me.

Mr. GARNER. Supposing that Congress should decide not to permit any water to be taken out of the Niagara River on the American side on the ground that it injures navigation, and upon an investigation of the facts the courts should determine that it did not injure navigation, although Congress on that ground refused to permit water to be taken from it. What would be the result of a contest in the courts? Or, in other words, if I may put the question in this way: If Congress should find that it would injure navigation to permit 20,000 cubic feet per second to be taken, and by legislation should prohibit any portion of it to be taken, and you should go into the courts and contend that the findings of Congress were erroneous and establish that fact to the satisfaction of the court, that it did not interfere with navigation, would you still be entitled to take 20,000 cubic feet per second?

Mr. DIFENDERFER. Under the treaty.

Mr. BROWN. In the first place, let me say if I could predict always what the findings of the court would be, the function of a lawyer would be done away with.

It is the uncertainty in the solving of these problems in these matters before the courts, that we help to bring about a solution. I could not predict, sir, what a court would say, and I can only say what in my opinion they ought to say and what I would advise a client they ought to say under the law as I see it to be.

In that connection I would say to my client that the United States Supreme Court has already held in the drainage case in Two hundred United States that legislation by Congress where it attempts to limit private rights, where it tends to usurp private rights, the function of Congress in legislating or limiting upon personal or private rights, is stated by the United States Court that the exercise of such powers must have a "substantial relation to the public objects which the Government may legally accomplish," and further on the court says that the exercise, or attempted exercise, of any power by the United States Government-or any Government in these matters must not be" arbitrary or unreasonable, or beyond the necessities of the case." Those are from the United States Supreme Court in Two hundredth United States. On the same principle I should also quote to my client as laid down by the State of New York in a Niagara decision, where they say "not even a State has the liberty to interfere with the riparian rights of the relator arbitrarily, but such interference, if attempted, must be in the interest of some substantial right of the State affected by the exercise of the rights of the riparian to the use of the water of the river." (70 App. Div., 543.)

Such principles as that I should present to my clients and advise them that they had rights which would be protected in the courts. Mr. DIFENDERFER. At that point-supposing there was a tributary branch, we will say, a river supplying a navigable stream, would a company have a right to dam up and divert that water, or

could the United States Government prohibit them from doing that thing?

Mr. BROWN. To get the question clear, Mr. Difenderfer, you mean by diversion to divert it away and have it returned to the stream? Mr. DIFENDERFER. Never returned to the stream. The Government would have a right, would it not, to interfere in a case of that kind?

Mr. BROWN. Not only the Government, but every riparian owner below, because under the law when a man diverts water from a stream-and the same principle applies whether it is navigable or unnavigable-makes any substantial diversion-he must return it to the river. If by not so returning it the lower riparian owner suffers, or if the public suffers, they each and both have a remedy. Mr. DIFENDERFER. I believe there is a Rio Grande decision of the United States.

Mr. Cline. There is a Colorado decision, too, on that point.

Mr. BROWN. Yes, but you must remember that the Colorado decision and in some respects the Rio Grande decision are decisions which are not based upon riparian rights. The decision there is based upon what we call the law of "prior appropriation," that if any man goes in upon a stream and diverts the water, and carries it away for irrigation for instance, he does not have to return it, and he gains a prior right over every subsequent user, whether that subsequent user be a riparian or any other person. That law exists in Colorado.

It is for the same reason that the decision read by Mr. Watrous, the Colorado decision, is all right in its place, but it does not apply here. That Colorado decision read the other day is where a man upon a stream had a waterfall which was attractive, and he had used it in beautifying and developing his place, his summer resort. Afterwards, somebody above tried to divert some of the stream. The scenic-beauty man said that he had appropriated this fall as a part of the beauty of his property and he claimed it by prior appropriation. A subsequent man can not get rights against him, and the courts sustained him.

Mr. CLINE. I don't want to make this tedious. Do you claim that your company is now seeking to exercise all the rights conferred upon them as riparian owners by the common law of the State of New York, or haven't they submitted some of those rights to the jurisdiction of the Secretary of War, or the jurisdiction of the commission of the State of New York?

Mr. BROWN. In answer to your question, sir, speaking for the Niagara company, we have riparian rights, vested property rights, beyond the extent that they have been exercised under any permits or as measured by any permits from the Government. Temporarily, and having regard for scenic beauty, they have submitted to provisions which have limited them to a certain use which is less than their legal rights.

Their taking the permits from the Government did not in any way constitute a submission of their rights to what is claimed-the right of the Government to dictate under the present law. They simply submitted as a temporary matter. For instance, our company had a capacity already developed, which required, for an economical operation, 10,000 cubic feet a second. The present law

limited that to 8,600. They submitted to that only as a temporary submission, until the thing should be adjusted, and we want to claim our right to have the use of 10,000 cubic feet. We don't expect you to fix that in detail, but expect that to whatever body you leave that to we may show our equities that that body may have the power at least to consider them.

In the same way, the hydraulic company needs 3,000 more in order to develop full capacity by operating at what will be a normal point of economy, and I say for them that they ought to have their 3,000.

STATEMENT OF MR. PHILIP B. BARTON-Resumed.

Mr. HARRISON. When was the Cataract Co. organized?

Mr. BARTON. About 14 years ago.

Mr. HARRISON. About 1898? What was the organized capital at that time?

Mr. BARTON. It was in 1895 or 1896 it began business, I think.
Mr. HARRISON. What was the capitalization?

Mr. BARTON. The present capitalization is $2,000,000 stock and something under a million dollars and a half in bonds.

Mr. HARRISON. What was the original capitalization of that company?

Mr. BARTON. Authorized, you mean?

Mr. HARRISON. No, sir; paid in.

Mr. BARTON. I can't give you that.

Mr. HARRISON. I understood you to say this morning that a majority of the stock is owned by the Niagara Falls Co.

Mr. BARTON. That is true.

Mr. HARRISON. How much did that cost?

Mr. BARTON. Niagara Falls Power Co.?

Mr. HARRISON. Yes.

Mr. BARTON. That stock was given to the Niagara Falls Power Co. as part of a consideration for the power contract and for the franchise in the city of Buffalo, the Niagara Falls Power Co. had obtained.

Mr. HARRISON. In other words, the Niagara Falls Power Co. paid nothing in cash or nothing in property except that it gave up the right to enter the city of Buffalo to distribute their power there.

Mr. BARTON. That partly is true. Their franchise in Buffalo also is a concession in price.

Mr. DIFENDERFER. It was a present, in other words.

Mr. BARTON. No; it wasn't a present. There is a very substantial consideration in the power contract, the very low price at which power was sold to the company was part consideration.

Mr. DIFENDERFER. That was the consideration at that time, a concession, was it?

Mr. BARTON. It was.

Mr. DIFENDERFER. At about how much would you approximate the value of that concession?

Mr. BARTON. Well, under present conditions the Cataract Co. is paying 6 per cent dividends. The Niagara Falls Power Co. is getting about $60,000 for its share of those dividends, $60,000 a year, and at the present rate power is delivered, about 65,000 horsepower, it would be about $1 a horsepower.

Mr. DIFENDERFER. Per year?

Mr. BARTON. Per year.

Mr. HARRISON. Is this company, the Niagara Falls Co., is that the company that Morgan is interested in?

Mr. BARTON. I am not sure that Mr. Morgan personally is, but the J. P. Morgan Co. is a large shareholder of the company.

The CHAIRMAN. Congressman Smith desires to be heard.

STATEMENT OF CHARLES B. SMITH.

Mr. SMITH. I desire to ask, Mr. Chairman, if Mr. Kenefick wishes to say anything.

I will read, with the committee's consent, two letters which I received from Buffalo, which tend to show the attitude of the people of that city.

The first one is from Mr. Frank C. Ferguson, a leading lawyer of the city, who wanted to come before the committee but was unable to do so because he had to appear before the Interstate Commerce Commission. This is what he says:

Hon. CHARLES BENNETT SMITH,

Washington, D. C.

FERGUSON & MAGAVERN, Buffalo, N. Y., January 20, 1912.

DEAR SIR: I am glad that you are taking such a great interest in the two Niagara Falls power questions, the question of the production of electrical power on this side of the line, and the question of the importation of Canadian power.

I hope that these things may be made plain to the committee, notwithstanding the fact that the great public does not find it so easy to go, or send its agents, to Washington, and get their views directly before the authorities, as to the power companies.

1. That while electrical power is produced by the use of the Niagara Falls current at a low cost to the producers, the public, on this side of the international boundary line at least, have never received any benefit from that decreased cost of production. On the contrary, it has always had to pay exceedingly high rates. Indeed, the city of Buffalo particularly is worse off to-day than as though no electrical power at the Falls had ever been developed. In anticipation of cheap Niagara Falls power, it advertised itself far and wide as the electrical city. Owing to the fact that it has always had to pay excessive rates for power, it could not and did not "make good" in its claim, and the reaction that followed when the outside world found out the facts has harmed it greatly. You know this as well as I do, but people living 500 miles from Buffalo do not generally know it. I wish that the committee could have one of its hearings at Buffalo, in order that it might find out what the local sentiment in this matter really is.

2. Any sentiment in western New York that any of the power companies should be given the right to use any more water than they now have the legal right to use, is strictly confined to the power companies themselves, their agents and servants. All of the rest of the public believe either that no additional water should be used for the development of electrical power, or that the additional 4,400 cubic feet of water which the treaty allows to be taken, should be turned over to the State of New York. Leaving out of account the matter of the injury to the natural beauty of the Falls by the diversion of water, it would, of course, be to the manifest advantage of the public to have additional electrical power developed at the Falls, if the public could thereby get the power at a reasonably low rate, as it probably could if the present electrical power monopoly should be broken and the additional current or power development be turned over to the State of New York. The production and distribution of electrical power at the Falls at the present time is an absolute monopoly, and it would not interfere with that monopoly in the slightest

degree to give to the present companies the right to take increased amount of current.

As long as the development of Niagara power remains a monopoly in private hands I have no confidence in our ability to get electrical power at a fair rate through the public service commission.

3. Every restriction on the importation of Canadian power should be at once removed. Electrical power is a "raw material" and should be "free." Electrical power has of itself no value. It is simply an instrument to produce value. 4. Subject to the paramount right of Congress over navigation and commerce, its treaty-making rights and its control over imports, the National Government has really no legal right to interfere with the State of New York in the matter of the development and sale of Niagara power.

I hope that the hearings before the committee will not be concluded until the authorities of the State of New York shall be heard upon these two subjects— of the production and importation of Niagara power and until the committee shall be well informed as to the real local sentiment in western New York.

Yours, very truly,

FRANK C. FERGUSON.

That is from Mr. Ferguson. Another letter received this morning is from Charles M. Heald, president of the Mutual Transit Co., one of the leading transportation companies on the Great Lakes:

Hon. CHARLES BENNETT SMITH,

BUFFALO, N. Y., January 23, 1912.

House of Representatives, Washington, D. C.

MY DEAR SIR: I have just read a letter recently sent you by Mr. Frank C. Ferguson, of this city, bearing on the question of Niagara Falls power.

I am heartily in accord with the position taken by Mr. Ferguson, and I feel absolutely safe in saying that in all probability 90 per cent of the citizens of Buffalo would concur if they had the opportunity to pass an opinion upon this question.

While I am not aware, of course, as to what it costs to produce this electrical power, I am sure it is produced at a low cost, but, unfortunately, the users of it on this side of the international boundary line have never yet been able to secure the power at anything like the proper figure.

To properly conserve this power for the interest of the people who have the right to it--and that is the people at large-I feel the concession of any rights should be invested in the State of New York and not in private companies, as our experience with the latter up to this time has not been at all satisfactory. Electrical power is, as Mr. Ferguson expressed it, a raw material; it is of no value whatever until it is put into use or, in other words, "manufactured," and therefore, as raw material, it should be admitted to this country free.

The State of New York, subject, of course, to Congressional and National Government control, should have vested in it the right to control; and through such control, if properly conducted, of course manufacturing industries generally would get the benefit of this cheap power, which they certainly are entitled to. I trust this matter will not be disposed of before all parties of any importance may have an opportunity to be heard before the committee, especially the New York State authorities.

This question of the use and control of the Niagara Falls power is of vital interest to this section of the State, and I trust it will receive your earnest attention and support.

Yours, very truly,

CHARLES M. HEALD, President.

I have also here a letter from Senator Burd, of Albany, which I will have placed in the minutes.

COMMITTEE ON FOREIGN AFFAIRS,

House of Representatives, Washington, D. C.

GENTLEMEN: A matter of large importance to our whole State, and especially to the city of Buffalo and its environs, is now pending before your committee, I am informed. I refer to the further diversion of water above Niagara Falls for power purposes.

If it had not been for the efforts of Hon. Charles B. Smith, now Congressman from the district in which I reside, I am certain our State, and especially our locality, would have lost the direct benefit coming from this additional water.

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