series of dams. After discussions we made assurances to the Secretary of War that we would make the $5 million contribution required of local interests. However, before this was done, a critical need of water for agricul ture and important war and defense establishments arose. We have very important war industries in our area. We produce a large quantity of aircraft gasoline and we also have a rubber plant, which industries use a great deal of water. Because of the necessity of keeping those defense establishments running, the War Production Board in 1945 issued a certificate of necessity to build dam B as an emergency matter. They did not have money to do that, and we offered the Corps of Engineers to lend them $2 million until Congress gave it to us. But before the dam was finished the war was over and the certificate was withdrawn. The original contemplation was a $5 million contribution to the completion of 4 dams. After the restudy it was decided we would break that contribution up and we have paid $2 million already, which $2 million completed dam B, and we are committted to give $3 million. more on completion of McGee Bend Dam. We are definitely in need of water. We know our contribution does not measure up to the present standards to the cost of the water, but we want to emphasize the fact we are willing to go as far as we can go. My board has authorized me to commit the authority to pay the Secretary of War, in addition to the $3 million already committed to be paid on completion of McGee Bend, annual payments of $200,000 for 50 years, beginning 5 years after the completion of McGee Bend Dam. These payments, plus that already made, will total $15 million for the completion of 2 dams, against the original proposition of paying $5 million for the completion of 4 dams. We have studied the finances of our authority; we have had our investment bankers do to. We have issued some bonds already; we have some outstanding, some 5.5 million of bonds. We feel like that is just about as far as we can go and meet the commitments which we are offering to make here. I want to point this out, and I am asking the committee to approve the building of the McGee Bend Dam in accordance with table 2 of that summary which was handed to you nnder date of March 29. The study of the engineers was dated, I believe, in November of 1953. That provided for hydroelectric power as well as flood-control and water-conservation purposes. Now, as has been pointed out, the engineers have estimated an annual cost of that power as $762,000, including interest, amortization, and operations. In other words, the $762,000 per year, the Government will receive back all of the money that it has spent on an amortization basis. I have here and I wish to introduce this in evidence, photostatic copy of a letter from the president of the Gulf States Utilities Co. to me, which letter states that they are willing to purchase the annual ouput of this McGee Bend Dam for $800,000, provided that the power that the engineers have estimated would be there is actually delivered. (The letter referred to follows:) Mr. W. F. WEED, President, Lower Neches Valley Authority, GULF STATES UTILITIES Co., Beaumont, Ter. DEAR MR. WEED: We are in full agreement that an adequate supply of fresh water is of vital importance to the Beaumont-Port Arthur area. This company realizes that its own future is substantially dependent upon the continued agricultural and industrial expansion of that area and therefore desires to cooperate to the maximum extent warranted by economic considerations in order to insure a continuous and reliable source of water supply. Various plans have been considered over the years for the conservation of water and the incidental production of hydroelectric power on the NechesAngelina Rivers. Some 3 months ago you approached this company and discussed the existing status of those plans and submitted certain pertinent data thereon requesting that this company study the matter with a view to making a concrete offer to purchase the hydroelectric power output as then projected. Subsequently, we discussed details of the project with both the Corps of Engineers, Fort Worth district in Fort Worth, Tex., and with the Federal Power Commission in Forth Worth. We were advised that the latest report on the project by the Corps of Engineers had not been approved by Office of Chief of Engineers. However, based on the data furnished us at that time and upon related load studies on our own system, we hereby offer to purchase the entire electrical output of the McGee Bend project for an annual sum of $800,000, payable in equal monthly installments, subject to the execution with appropriate governmental authority of a mutually satisfactory agreement, which, among other things, shall provide: (1) That sufficient primary energy will be available to produce dependable peaking capacity of 43,000 kilowatts in any 12 months continual period for at least 1.752 hours with a maximum availability in any 1 month of 151.11 hours and a minimum availability of 118.99 hours. (2) That in addition to the above dependable peaking capacity and accompanying prime energy, secondary energy of not less than 53,964,000 kilowatthours per year, averaged over the term of agreement, will be delivered to Gulf States Utilities Co. (3) Generation of all energy will be as scheduled by Gulf States Utilities Co. to meet its load requirements. (4) Delivery will be at 138,000 volts at the dam site, with the necessary setup substation facilities to be provided by other than Gulf States Utilities Co. (5) Scheduled maintenance outages will be coordinated with the maintenance program of Gulf States Utilities Co. (6) Unless a mutually satisfactory agreement can be reached within a period of 3 years from the date hereof, Gulf States Utilities Co. may withdraw this offer upon 6 months' written notice. If for any cause whatsoever the dependable peaking capacity, the primary energy and/or the secondary energy as above set forth shall not be made available to Gulf States Utilities Co., then the annual payment of $800,000 will be appropriately revised. Yours very truly, GULF STATES UTILITIES Co. By R. S. NELSON, President. There is one more point that I want to bring out and that is Senator Lyndon Johnson presented a study made by the Department of the Interior on July 8, 1953, which is known as Senate Document No. 58, 83d Congress, 1st session. This study indicates that there is a surplus of water in east Texas that can be transported to the valley in the southwest area of Texas, and if we build a dam on the Neches River with that hydroelectric power provided in it, because there will be a lot of water stored for hydroelectric power, that water, when used, can be available for transportation purposes farther west. I just want you gentlemen to keep that in mind because if we ever build a small dam up there, because insofar as we can find out there is only one available dam site on the Angelina River which is capable of storing enough water to be of use to us, and if we built without the hydroelectric feature in it, the additional water that it will store, and therefore use, it might seriously damage any further use of conservation water later on. That is all I have to say, Mr. Chairman. Mr. ANGELL. Thank you very much, Mr. Weed. Are there any questions by members of the committee? Mr. SCUDDER. I would like to ask just one question, Mr. Chairman. Mr. ANGELL. Yes, Mr. Scudder. Mr. SCUDDER. We had a situation somewhat similar to this in the State of Oregon which the committee passed on, and that was a floodcontrol project, and we made arrangements with the city of Eugene to pay the difference for the establishment of the power, and the Federal Government determined the matter of the difference in the cost of power, and that would be theirs. Is there anything down in your district by which you would be able to step into the breach and pay for the additional cost for the use of the power? Mr. WEED. I believe not. Mr. ANGELL. Any further questions? Mr. DEMPSEY. What rate of interest do you figure to pay on this project? Mr. WEED. I understand the Government's interest rate usually is 2.5 percent. Mr. DEMPSEY. Two point five percent? Mr. WEED. Yes. Mr. DEMPSEY. And what rate of depreciation? Mr. WEED. Over 50 years, I think it is, is what they figure the life of the project to be. Mr. SCUDDER. Mr. Chairman, do they pay the 2.5 percent, plus 2.5 annual amortization, or just pay the interest? Mr. WEED. Two percent annual amortization, I believe. Mr. SCUDDER. Two percent? Mr. WEED. Two percent, I believe, Mr. Scudder, plus 212 percent is my understanding. I do not know the formula that the Army engi neers use. Mr. ANGELL. Is that right, colonel? Colonel WHIPPLE. Not exactly. The amortization is figured on 212 percent interest basis, but it is done on a sinking fund basis, sufficient to amortize the cost of the project over a 50-year life. Mr. SCUDDER. Well, that does not include interest at all, does it? You say an amortization basis; you are not paying any interest at all; you are just amortizing the loan? Colonel WHIPPLE. They will pay 2.5 percent interest and, in addition to that, they will pay the amortization rate on the original investment over a 50-year period which amounts to slightly more than 1 percent additional. Mr. WEED. Mr. Chairman, with your permission, I would like to have included in the record a letter written by me to the Public Works Committee, dated May 24, 1954, which sets out in considerable detail the data on which our request is based. Mr. ANGELL. Without objection, the letter will be made a part of the record. (The letter referred to follows:) PUBLIC WORKS COMMITTEE, LOWER NECHES VALLEY AUTHORITY, United States House of Representatives, Washington, D. C. GENTLEMEN: The Lower Neches Valley Authority is a State of Texas agency charged with the orderly and useful development of the lower Neches River and its tributaries. It was created in 1933. I am the president of this authority. For 10 years we sought a solution for our deficient water-supply problem. In 1943, through voluntary negotiations, we acquired the water-distribution rights to almost all of the flow of the lower Neches River and began intensified studies of methods of obtaining an adequate reserve supply of water. In March of 1945 a public hearing was held in Beaumont, Tex., on LNVA's application to the War Department to build a dam at Rockland to impound approximately 1 million acre-feet of water. At about the time of the hearing the Congress of the United States passed the authorization bill of 1945, authorizing, among other things, the building of 2 large and 2 small dams on the Neches River and its principal tributary, the Angelina, according to the conditions set out in Senate Document 98, 76th Congress, 1st session. This report, submitted by the Army engineers in May of 1939, provided that no work on the project be initiated until a local agency agreed to contribute $5 million toward the cost of the project, which contribution would be made on completion of the entire project. LNVA has received estimates that a dam meeting its requirements could in 1945 be built by the authority for approximately $5 million. At a conference with the Chief of Engineers and our Congressman in 1945 on the matter of our application for a permit we were informed that our project would seriously interfere with the authorized project, and we were solicited by these parties to become the sponsors of the authorized Senate Document 98 project. Therefore, recognizing that the development of these rivers according to Senate Document 98 would benefit the Nation to a much greater degree than our proposed singlepurpose dam, we abandoned our plans and application. We made the required assurances of $5 million. Owing to the critical need of water for agriculture and important war and defense establishments, the War Production Board in 1945 issued a certificate of necessity to build the smallest element of the project, namely, dam B. Before work could be started on this dam, however, the war ended and the certificate was withdrawn. Our efforts were then directed toward getting congressional appropriations to build us a water supply, either long-term or emergency. Dam B was completed in 1951 as an emergency relief supply. That it is inadequate is proven by the fact that all water in it was used in 1951 and 1952 and 85 percent in 1953. During all of these years rationing of water was demanded of our consumers, and as a result products suffered. LNVA has repeatedly increased its commitment to the Secretary of War, regarding the payment of $5 million. It now stands as an actually delivered $2 million and the assurance of $3 million more on completion of McGee Bend Dam. We are willing to go further-in fact, as far as we think we can safely go-because we still desperately need more water. My board has authorized me to commit the authority to pay the Secretary of War, in addition to the $3 million already committed to be paid on completion of McGee Bend, annual payments of $200,000 for 50 years, beginning 5 years after completion of McGee Bend Dam. These payments, plus that already made, will total $15 million against the $5 million initially asked, and will be made on completion of one-half of the originally contemplated project. I wish to point out that I am asking this committee to approve the project as outlined in table II of the summary of pertinent information concerning Neches-Angelina Rivers, Tex., project, which summary was prepared by the Fort Worth district of the Corps of Engineers under date of November 1953, and which summary, I understand, was transmitted to this committee under date of March 29, 1954. We are desirous of seeing flood control and hydroelectric power reservoirs included. The necessity of flood control needs no explanation. In regard to hydroelectric power, we have a letter from our local electric utility company making a firm offer to purchase the electrical output of the dam for a flat sum of $800.000 per annum, provided the power estimated by the engineers to be available, is delivered. I understand that the engineers' estimate of the annual cost of this power is slightly less than this sum. It therefore appears to me to be justified. I further point out that there is an oversupply of water in the valley of this river, while further west there is an opposite condition. A study of this problem has been made by the Department of the Interior and presented by Hon. Lyndon Johnson, senior Senator from Texas, on July 8, 1953, as Senate Document 57, 83d Congress, 1st session. This study develops the feasibility of harnessing the oversupply of water in east Texas and delivering it to west Texas. If this project is not built with the hydroelectric pool, conservation of a large amount of water that could be so used will be lost. In conclusion, may I respectfully request that this committee sympathetically consider our dire need for a reserve water supply and our strenuous efforts to acquire such. If, in your discretion, you feel that more is required of us, please so point out, keeping in mind that we have made a thorough study of our abilities to pay, and feel that we have about reached them in this proposal; and that this proposal is far greater than contemplated when we made our original guaranty and paid out our $2 million. This is a general statement of our position. The gentlemen with me have more specific statements of various phases of the project. May I call on them now? Yours truly, W. F. WEED, Mr. ANGELL. Are there any further questions? If not, we thank you, Mr. Weed. Mr. WEED. Thank you. Mr. ANGELL. Any further witnesses, Mr. Brooks? Mr. BROOKS. Yes, Mr. Chairman, I would like to present briefly Mr. Howard Hicks, secretary of the Chamber of Commerce of Beaumont, Tex. STATEMENT OF HOWARD HICKS, SECRETARY, CHAMBER OF COMMERCE, BEAUMONT, TEX.-Resumed Mr. ANGELL. Mr. Hicks, the committee will be very glad to hear you. Mr. HICKS. Mr. Chairman, for the record, my name is Howard Hicks, manager of the Beaumont, Tex., Chamber of Commerce, an organization composed of some 2,000 business and professional men in Beaumont, Tex. We are "busting" at the seams in Beaumont. We are building plants. We need the water. We need protection from the hazards of floods on the Neches River, on the lower Neches, as it affects Beaumont. We are a refining area, and an industrial area, and we are an agricultural area. We grow great quantities of rice in our area, and we cannot grow any more rice because we do not have the water to grow more rice. We are building in our immediate area at this particular time 3 new plants, 3 new industrial plants which add to the wealth of this country: The Du Pont plant, and a large paper mill at Evadale on the Neches River, 20 miles from Beaumont; and a large sawmill, a $10 million sawmill, if you will, at Silsbee, just north of Beaumont. We are in dire need of this project. We believe that the Federal Government has a contract with the people in our area. We have already committed some $2 million to the Lower Neches Valley Authority, to this project, and we feel that the Government has entered |