SUGGESTED AMENDMENTS TO S. 1037, 85TH CONGRESS, 1ST SESSION
(Italic denotes additions)

SECTION 1. The Congress hereby finds and declares

(d) that the licensee of project 16 is entitled to use nineteen thousand seven hundred and twenty-five cubic feet per second of the United States shares of the waters until 1971 (which includes certain water rights in respect of which the licensee of project 16 has been making and is obligated to make specified payments to International Paper Company pursuant to agreements dated March 1, 1919 and August 1, 1937) and to use a further twelve thousand seven hundred and seventy-five cubic feet per second until further order of the Commission; SEC. 3. The Federal Power Commission shall include among the conditions of the license issued under section 2—

(c) a provision requiring the licensee to contract, with the approval of the Governor of the State of New York, pursuant to the procedure established by New York law, to sell to the licensee of project 16 for a period ending on the final maturity date of the bonds initially issued to finance the project works herein specifically authorized, four hundred and forty-five thousand kilowatts of power, which is equivalent to the amount produced by project 16 prior to June 7, 1956, for the same general purposes for which power from project 16 was utilized and in order to restore as nearly as possible low power costs: Provided, That the licensee of project 16 consents to the surrender of its license at the completion of the construction of such project works upon terms agreed to by both licensees and approved by the Federal Power Commission which shall include the following: (i) the licensee of project 16 shall waive and release any claim for compensation or damages from the Power Authority of the State of New York or the State of New York except just compensation for tangible property and rights-of-way actually taken, (ii) without limiting the generality of the foregoing, the licensee of project 16 shall waive all claims to compensation or damages based upon loss of or damage to riparian rights, diversionary rights or other rights relating to the diversion or use of water, whether founded on legislative grant or otherwise; and Provided Further, That prior to the surrender of its license, the licensee of project 16 shall have compensated International Paper Company in respect of the latter's water rights which are the subject matter of agreements between the licensee of project 16 and International Paper Company dated March 1, 1919 and August 1, 1937, and International Paper Company shall have waived and released any claims for compensation or damages from the Power Authority of the State of New York or the State of New York or the licensee of project 16 in respect of said seven hundred and thirty cubic feet per second of water, including without limiting the generality of the foregoing all claims for compensation or damages based upon loss of or damage to riparian rights, discretionary rights or other rights relating to the diversion or use of said seven hundred and thirty cubic feet per second of water, whether founded on legislative grant or otherwise.

Mr. KITTLE. We are concerned that while major rights are being protected, ours is a small right, but we, if we could, would like to see that protected as well.

Senator CARROLL. What is the basis of your right? Did it come originally from a leasing contract?

Mr. KITTLE. And I believe some came-I am not well versed enough on that, I am afraid, sir, to give you an accurate answer.

Senator CARROLL. You can come right to the point. I should say the basis of your right, the duration of it, the nature of it, is it a tangible right or intangible, and if you can give us all that information, we will consider it.

Mr. KITTLE. Thank you.

Senator NEUBERGER. I would like to ask Mr. Martin one question. Do you think, Mr. Martin, that any prospective litigation with the International Paper Co. would threaten the reservation clause set up for Niagara-Mohawk in the Ives-Javits bill?

Mr. MARTIN. I do not, sir.

Senator NEUBERGER. But you were here yesterday when Mr. Moses told the committee that he felt that the prospective litigation with Niagara-Mohawk, if the reservation were not granted, might threaten the ability of the power authority to sell its bonds. You were here then, weren't you?

Mr. MARTIN. Yes, sir.

Senator NEUBERGER. Those are all the questions that I have.
Senator CARROLL. That leads me to another question.

Is your power company so adamant in its position on this preference clause that you would resist this program if this committee insisted upon it? You know that some time ago, last year, the Senate passed a bill and in that bill-in May of 1956, less than a year ago the vote on that was 48 to 39, and there was not the provision in the bill that seemed to be desirable by the Niagara Mohawk. Suppose the Senate should decide to pass the same bill that it passed last year. Would you resist such a bill?

Mr. MACHOLD. I wouldn't have anything to say

Senator CARROLL. Assuming it would give Niagara-there is this intervening emergency that has happened in the rock slide-assuming that that objection is taken care of.

Mr. MACHOLD. I assume you are speaking of the amendment offered by Senator Javits this morning?

Senator CARROLL. That is one. We don't know whether the committee will accept that or not.

Mr. MACHOLD. Assuming that that amendment is not at variance with the State Power Authority Act, as I assume it isn't or Senator Javits wouldn't have proposed it, apparently in his opinion that amendment is not so at variance with the Power Authority Act as the so-called preference clause is that the power authority could accept the license and could proceed with the development of the Niagara, we would certainly be in favor of it.

Senator CARROLL. Let me put the question more bluntly. Suppose the preference clause which was included in the bill of last year was reenacted in this bill, would the Niagara Mohawk Power Co. contemplate litigation? That is the purpose of my question.

Mr. MACHOLD. I don't think so.

Senator CARROLL. Thank you.

Senator NEUBERGER. Thank you very much, Mr. Kittle, and gentle

men.

We will stand in recess until 2 o'clock today.

(Thereupon, at 12: 16 p. m., the committee adjourned, to reconvene at 2 o'clock p. m., this day.)

AFTERNOON SESSION

Senator KERR. Mr. Ginna will be our next witness.
Sit right down and make yourself at home.

STATEMENT OF ROBERT E. GINNA, PRESIDENT, ROCHESTER GAS & ELECTRIC CORP.

Mr. GINNA. Before I begin, Mr. Chairman, Mr. Machold would like to clear up something that was left at the end of this morning's session. So if I may I would like to step aside and let him make a

very brief statement with respect to some testimony. He was the last witness this morning.

FURTHER STATEMENT OF EARL J. MACHOLD, PRESIDENT, NIAGARA MOHAWK CORP.

Mr. MACHOLD. Thank you, Mr. Chairman.

This morning, when I testified, the last question that was asked me was asked by Senator Carroll. I have been told by some of my associates during the lunch hour the impression received from my answer was that there might not be any litigation as a result of the so-called Federal preference clause in any bill which might be finally approved by the Congress in this Niagara matter.

If I left that impression I am sorry. I want to make it clear that I think there would be if the New York State Power Authority accepted a license under those circumstances and acceded to the provisions of the Federal preference clause, as has been previously testified by the other witnesses.

Senator KERR. You think there would be what?

Mr. MACHOLD. Litigation.

Senator KERR. By whom?

Mr. MACHOLD. It might be by the private companies, it might be by interested taxpayers. I don't know.

Senator KERR. By your company?

Mr. MACHOLD. I think we would consider it very seriously.

Senator KERR. Are you telling the committee that if the Congress passes authorization for the New York Power Authority to build a facility there, and has any language in it with reference to the preference to municipalities and REA's, that your company will likely litigate that?

Mr. MACHOLD. No, sir.

Senator KERR. Then I don't understand what it is you are trying to tell me.

Mr. MACHOLD. I think the import of the answer that I made this morning was that the so-called Federal preference clause, as compared to the clause in the Ives-Javits bill, or the so-called provision that Senator Javits suggested this morning in the hearing, as far as that provision is concerned we accept it. We think that it does comply with the New York State law.

Senator KERR. Are you then telling us that if we put a provision in there that did not comply entirely with the existing laws of the State of New York, then it would be your judgment that it would be litigated by your company and others?

Mr. MACHOLD. That is my judgment, sir.

Senator KERR. And you are sorry you didn't tell them that this morning; is that what you said?

Mr. MACHOLD. I am sorry if I left the wrong impression.

Senator KERR. It reminds me a little of the boy who was going to see the daughter of a neighboring farmer and had to pass somebody else's house, and there was a dog there that seemed to interfere with his progress. He shot at it with a .22 rifle and wounded it greviously, but the dog lived. But the owner of it wanted to prosecute the boy. The neighbors finally prevailed upon him to give the boy an oppor

tunity to apologize, in which event he wouldn't prosecute him. So one Friday night they got together-the patrons of the school-the boy was given the opportunity to apologize and he rose and said, "The other night on the way to see my girl this dog of our neighbors ran at me and I shot it and hit it, but it didn't kill him. I am awfully sorry. I won't let it happen again."

Do you have anything else?

Mr. MACHOLD. That is all, sir.

Senator KERR. I want to say to you that in my judgment if Congress decided to put an additional provision in the bill they would feel that they were probably prepared for the impact of the suit that you think you might bring.

Mr. MACHOLD. Thank you, sir.

Senator GORE. Mr. Chairman, may I ask the gentleman a question? Senator KERR. Yes.

Senator GORE. Do you mean this as the conveyance of a threat to this committee that unless it passes a bill having to do with the waters of the United States satisfactory to you and your company and those associated with you, then you will undertake, by every legal means available to you, to prevent its development for the benefit of the people of New York and surrounding area?

Mr. MACHOLD. No, sir; I don't mean that at all.
Senator GORE. Just what do you mean?

Senator KERR. Just how much short of that is your statement?

Mr. MACHOLD. Chairman Moses of the New York State Power Authority, all of the witnesses who have appeared here, Senator Javits, and so forth, contend that the project cannot be financed with the Federal preference clause

Senator GORE. I didn't ask you what Senator Javits or Mr. Moses said. I asked you what you implied by serving notice on this committee that if they didn't report a bill satisfactory to you, your company and perhaps others would enter litigation to prevent its develop

ment.

Mr. MACHOLD. I didn't say that, sir. I said I agreed with the testimony of Chairman Moses that there very possibly could be litigation in connection with this Federal preference clause if it did not conform with the preference provisions of the New York State law.

Senator GORE. And if the bill which Congress passes is not satisfactory to you, then you are advising this committee that your company and others will prevent the development of the project in accordance therewith if it is legally possible to do so?

Mr. MACHOLD. We will have to very seriously consider the question of litigating the situation.

Senator GORE. You would seriously consider, then, the interposition of a special claim of your company to this natural resource as against the welfare of the whole people and the benefits derived from its development?

Mr. MACHOLD. Sir, I am only talking about the conformity of this so-called preference provision in relation to the similar provisions in the New York State statute which created the New York State Power Authority.

Senator GORE. Mr. Chairman, I think the gentleman has made his position plain.

Senator KERR. I will ask him one more question since that has developed.

What would be the position of your company if Congress passed a law authorizing the construction of this project as a Federal project? Mr. MACHOLD. In my opinion that would be it, if they did it. Senator KERR. What would be the reaction of your company if Congress doesn't pass any law at all?

Mr. MACHOLD. I think it would be a catastrophe as to New York. Senator KERR. It seems to me now-and I want you to have the opportunity to make yourself clear if I misinterpret your remarks— that while you recognize the authority and power of the Congress to pass a bill to construct the Federal project there, which would have the full preference clause applicable to all Federal projects, and while you feel that if we didn't pass any law at all it would be a catastrophe, are you telling us that if we make every effort we can as men of good will and reasonable attitude to pass a bill permitting the New York State Authority to construct this project, feeling that by so doing we are recognizing the rights of the State of New York as we feel we should and at the same time making it possible to develop this power for the people and the economy of the area, still if we depart one pot or one tittle from the provisions of the New York State law with reference to the preference, that your company would be disposed to do what it could to prevent the construction of the project under that circumstance?

Mr. MACHOLD. I don't think I said that, sir.

Senator KERR. I say if I have misinterpreted you then I would want you to clarify your position if you care to.

Mr. MACHOLD. I think we would have to consider the whole problem, we would have to consider it in the light of whatever the position of the power authority was at that time, whether or not it was possible to finance it and so forth.

Senator KERR. You are with what company?

Mr. MACHOLD. Niagara Mohawk Power Corp.

Senator KERR. Then you are interested in not only having the right to get the amount of power from the New York Power Authority if they build this overall project which you would get if your own project there were reconstructed for the duration of the time for which you have a license from the Federal Power Commission, but you are also interested in telling the Congress of the United States and the State Authority of New York what they can or cannot do with reference to the power over and beyond that which will replace the power you can no longer generate?

Mr. MACHOLD. I don't think that is so, sir.

Senator KERR. Then to what degree have I exaggerated?

Mr. MACHOLD. I agree with the testimony that Chairman Moses gave here yesterday about the whole situation in western New York. Senator KERR. Is Chairman Moses here?

Mr. MOORE. No, sir.

Senator KERR. Are any of his associates who were here with him yesterday here?

Mr. MOORE. Yes, sir.

Senator KERR. Who is it that is authorized to speak for him?

Mr. MOORE. I don't think anybody is. I will be glad to answer any questions that you care to ask.