The Forest Service, under a power found in the Statute, has leased a number of these power sites in forest reserves by revocable leases, but no such power exists with respect to power sites that are not located within forest reserves; and the revocable system of leasing is, of course, not a satisfactory one for the purpose of inviting the capital needed to put in proper plants for the transmission of power.
The Statute of 1891, with its amendments, permits the Secretary of the Interior to grant perpetual easements or rights-of-way from water sources over public lands for the primary purpose of irrigation and such electrical current as may be incidentally developed, but no grant can be made under this Statute to concerns whose primary purpose is generating and handling electricity. The Statute of 1901 authorizes the Secretary of the Interior to issue revocable permits over the public lands to electrical power companies, but this Statute is woefully inadequate because it does not authorize the collection of a charge or fix a term of years. Capital is slow to invest in an enterprise founded upon a permit revocable at will.
The subject is one that calls for new legislation. It has been thought that there was danger of combination to obtain possession of all the power sites and to unite them under one control. Whatever the evidence of this, or lack of it, at present we have had enough experience to know that combination would be profitable, and the control of a great number of power sites would enable the holders or owners to raise the price of power at will within certain sections; and the temptation would promptly attract investors, and the danger of monopoly would not be a remote one.
However this may be, it is the plain duty of the Government to see to it that in the utilization and development of all this immense amount of water-power, conditions shall be imposed that will prevent monopoly, and will prevent extortionate charges which are the accompaniment of monopoly. The difficulty of adjusting the matter is accentuated by the relation of the power sites to the water, the fall and flow of which create the power.
In the States where these sites are, the riparian owner does not control or own the power in the water which flows past his land. That power is under the control and within the grant of the State, and generally the rule is that the first user is entitled to the enjoyment. Now, the possession of the bank or water-power site over which the water is to be conveyed in order to make the power useful, gives to its owner an advantage and a certain kind of control over the use of the water-power, and it is proposed that the Government in dealing with its own lands should use this advantage and lease lands for power sites to those who would develop the power, and impose conditions on the leasehold with reference to the reasonableness of the rates at which the power, when transmuted, is to be furnished to the public, and forbidding the union of the particular power with a combination of others made for the purpose of monopoly by forbidding assignment of the lease save by consent of the Government (applause). Serious difficulties are anticipated by some in such an attempt on the part of the general Government, because of the sovereign control of the State over the water-power in its natural condition, and the mere proprietorship of the Government in the riparian lands.
It is contended that through its mere proprietary right in the site the central Government has no power to attempt to exercise police jurisdiction with reference to how the water-power in a river owned and controlled by the State shall be used, and that it is a violation of the State's rights. I question the validity of this objection. The Government may impose any conditions that it chooses in its lease of its own property, even though it may have the same purpose and in effect accomplish just what the State would accomplish by the exercise of its sovereignty. That is shown frequently in leases of houses containing a covenant against the use of the house for that which under the law of the State is an unlawful use; and nevertheless, no one has ever contended that that condition, though it be for the stricter enforcement of the State law, is without the power of the lessor as a proprietor of the land which he is leasing.
There are those (and the Director of the Geological Survey, Mr Smith, who has given a great deal of attention to this matter, is one of them) who insist that this matter of transmuting water-power into electricity which can be conveyed all over the country and across State lines, is a matter that ought to be retained by the general Government, and that it should avail itself of the ownership of these power sites for the very purpose of coordinating in one general plan the power generated from these Government-owned sites. On the other hand, it is contended that it would relieve a complicated situation if the control of the water-power site and the control of the water were vested in the same sovereignty and ownership, viz: the State, and then were disposed of for development to private lessees under the restrictions needed to preserve the interests of the public from the extortions and abuses of monopoly. Therefore, bills have been introduced in Congress providing that whenever the State authorities deem a water-power useful they may apply to the Government of the United States for a grant to the State of the adjacent land for a water-power site, and that this grant from the Federal Government to the State shall contain a condition that the State shall never part with the title to the water-power site or the water-power, but shall lease it only for a term of years not exceeding fifty, with provisions in the lease by which the rental and the rates for which the power is furnished to the public shall be readjusted at periods less than the term of the lease, say every ten years.
The argument is urged against this disposition of power sites that legislators and State authorities are more subject to corporate influence and control than would be the central Government. In reply it is claimed that a readjustment of the terms of leasehold every ten years would secure to the public and the State just and equitable terms. Then it is said that the State authorities are better able to understand the local need and what is a fair adjustment in the particular locality than would be the authorities at Washington. It has been argued that after the Federal Government parts with title to a power site it cannot control the action of the State in fulfilling the conditions of the deed, to which it is answered that in the grant from the Government there may be easily inserted a condition specifying the terms upon which the State may part with the temporary control of the water-power sites, and, indeed, the water-power, and providing for a forfeiture of the title to the water-power sites in case the condition is not performed; and giving to the President, in case of such violation of conditions, the power to declare forfeiture and to direct proceedings to restore to the central Government the ownership of the power sites with all the improvements thereon, and that these conditions may be promptly enforced and the land and plants forfeited to the general Government by suit of the United States against the State, which is permissible under the Constitution (applause). And that by such a provision, in terrorem, the edict of States and of the legislatures in respect to these lands might be enforced through the general Government.
I do not express an opinion upon the controversy thus made or a preference as to the two methods of treating water-power sites. I shall submit the matter to Congress with all the arguments, and urge that one or the other of the two plans be promptly adopted.