On May 3, 1916, at the request of Secretary Lane, I placed in the form of a letter my views concerning the proposed contract with Mark Rose, in connection with the Laguna Dam, Yuma project, Arizona-California. This letter included the following paragraphs:

"I am utterly unable to indorse the view of Mr. Rose and Mr. Frisbie that the water supply for the large acreage they propose to irrigate is sufficient, or anywhere near sufficient, without storage. I am reliably informed that there was an actual shortage of water in the autumn of 1915 for a short period for the lands now under irrigation, and while the shortage was not serious, it shows that the limit of safe use without storage is nearly reached, and that a reasonable increase in use of this water upon projects where appropriations have been confirmed by heavy expenditures in the Imperial Valley, in the Yuma Valley, and in the Uncompahgre and Grand Valleys, makes it absolutely certain that no new tract of any consequence can be safely and permanently irrigated without storage.

"Feasible storage sites are known to exist in the basin of the Colorado River, and storage development should be an integral part of any extensive irrigation development from the lower river."

On March 26, 1917, at the suggestion of Commissioner Tallman, I again placed of record, in the form of a letter to the Secretary of the Interior, my views concerning the engineering features of the proposed contract with Mark Rose. As my former letter had not been convincing, took occasion to reiterate my views concerning the water supply and to reinforce it by quotations from other authorities, in the hope of proving my point to the satisfaction of all. I quoted:

Gen. William L. Marshall; Dr. Elwood Mead; a board consisting of Joseph Jacobs, D. C. Henny, and Elwood Mead; board of governors, Yuma Water Users' Association; Holtville Commercial Club.

In addition to the above I made the following statement:

"Late in 1915 Imperial Valley diverted the entire flow of the Colorado, and yet suffered a water shortage for a short period. While the shortage was not serious, it shows that the safe limit of use without storage has been reached or nearly so."

In the last interview which I had with you and others interested, prior to signature of the present contract, I reiterated my views that there was no feasible project on the Imperial Laguna mesa without storage, and you will recall that Mr. Gates, attorney for Mark Rose, accused me of holding that storage was necessary if Mark Rose built the project but not necessary if built by the Government. I denied this and made the emphatic statement that I had always held storage necessary whoever built the project, and when pinned down to it Mr. Gates admitted that this was true.

It was my understanding when the existing contract was entered into with Mark Rose that the engineering features might be considered anew and without prejudice when the surveys that he was to make were completed.

In view of the above records and statements I was astonished recently to hear the statement that in making the present contract with Mr. Rose, the secretary admitted that the water supply was sufficient for the Rose project and that I had agreed to this.

This presents an imminent peril to the good name of the department as countenancing an impracticable project, which is sure to lead to hardship and disaster if carried out as planned by Mr. Rose, and to bring discredit to those who indorse the plan.

If the contract is indeed susceptible of such an interpretation, it should be abrogated as early as possible for the good name of the Government and its officers, as it commits the Government to possible fraud upon settlers which will be justly criticized and bitterly resented when the day of reckoning comes. It also jeopardizes the rights of the Yuma project and of the Imperial Valley; if hundreds of thousands of acres go short of water there will inevitably come a tremendous pressure for this developed region to divide its water supply with the sufferers, and it will be just as impossible to resist this as it has been to resist the illegal damming of the Colorado River to save Imperial Valley.

Mr. Rose has utterly failed to carry out the requirements of his contract for deailed surveys, specifications, and estimates of an all-American canal; he has not data enough to make any estimate whatever, detailed or otherwise. This fact is recognized by the contract recently entered into with the Imperial Valley by which it is provided that $45,000 wil be spent in getting this estimate

on merely a portion of the project involved in Mark Rose's contract. He has been given considerable extension of time and has submitted his final report, and the department now can, without breaking faith or doing any legal or moral wrong, adopt one of the alternatives required by the contract and abrogate it entirely.

Under my interpretation of the contract, the chief difficulty is that he has not presented a feasible project, because he does not propose any storage; but under the interpretation proposed to be given to this contract this objection disappears, it being held that this point was settled when the contract was signed. There is, however, another valid reason for canceling the contract, and thus extricating the Secretary from this dilemma without violating any legal or moral obligation, namely, the lack of compliance with the requirement “to make a complete and detailed survey, specifications, and estimates of cost." If extension of time is granted this defect will be reduced and may be entirely corrected. There will then be nothing left to do, if the department insists that the water supply is adequate but to accept alternative (c) and accept and approve same in their entirety as representing a practical and sufficient plan and scheme of works and reclamation for the purpose of this contract," and then it wil be impossible to escape a just charge that the department has been a party to the indorsement of the project under which settlers will be induced to settle in a very hot, sandy, and arid country with an insufficient water supply, and a menace will be created to the supply of both Imperial Valley and the Yuma project.

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I do not wish to be understood as criticizing anything that the department has done in the past, but the recent astonishing revelation has proved the importance of placing my views on record in such a manner that they can not be misunderstood.

For the above reasons I recommend the immediate abrogation of the contract with the Imperial Laguna Water Co. substantially in accordance with a letter which I drafted for this purpose and sent to the department March 26, 1918, for the Secretary's signature. Respectfully submitted.

A. P. DAVIS, Director and Chief Engineer.

Mr. SMITH of Idaho. What is the date of that letter, Mr. Davis? Mr. DAVIS. April 3, 1918. That is only a week later than the first recommendation.

Mr. SMITH of Idaho. No action has been taken?

Mr. DAVIS. The contract has not been abrogated.

The CHAIRMAN. Let me ask this. With the enactment of this bill, 11553, what extent of storage would be contemplated?

Mr. DAVIS. The additional lands that have not been irrigated would all be supplied with storage. The sites vary in quantity and require study that has not been completed. We are now investigating various reservoir sites on the upper Colorado, and one on the lower Colorado below the Grand Canyon, and those estimates and examinations can be completed by the time the irrigation district is organized. It will probably cost somewhere in the neighborhood of between $10 and $20 per acre for storage, possibly more than that. I am not able to quote figures on it for two reasons; one is that I have not in mind what we do know about it in detail, and the other is that the investigation is not completed.

The CHAIRMAN. Where would those storage sites probably be located?

Mr. DAVIS. That has not been determined. There are some in the upper river and one on the lower river that we investigated.

Mr. WELLING. Mr. Davis, referring to your recommendation that the Rose contract be abrogated in April, 1918, have the Rose representatives done anything since that time to make their contract a

more valid contract? Have they done anything that has reinstated the contract so that it would be a more valid contract?

Mr. TAYLOR. Have they furnished any additional data?
Mr. WELLING. That is what I mean.

Mr. DAVIS. They have not furnished any additional data. They have, however, cooperated in furnishing such data as they could. I have no criticism to make of the action of the company in that matter; they have not, so far as I know, made any additional surveys, have you?

Mr. ROSE. No; but you recall a letter written to me just after the date of this letter probably 10 days, in which the Secretary said that he would suspend action awaiting the result of the other survey, to see whether my plans were correct?

Mr. DAVIS. I think so.

Mr. ROSE. And the suggestion that I cooperate with the other districts to get all the interests together in order to build this all-American canal?

Mr. HAYDEN. I have here a copy of that letter. Perhaps I had better read it into the record.

DEPARTMENT OF THE INTERIOR,
Washington, April 16, 1918.

Mr. MARK ROSE,

President Imperial Laguna Water Co.

Mr. WOODLAND GATES,

Attorney, Colorado Building,

Washington, D. C.

MY DEAR MR. ROSE: Your letter of January 30, 1918, and report transmitted by your chief engineer and two consulting engineers, under contract with the Secretary of the Interior, dated July 6, 1917, have been given careful consideration.

The most important provision of the contract is the requirement to "make a complete detailed survey, specifications, and estimates of cost" for the works listed in the contract. An examination shows that the data furnished fails to fulfill these requirements and that such data does not afford a sufficient basis for any reliable estimates on which further procedure under the terms of the contract could be approved at this time.

Under the contract the duty of the Secretary of the Interior is to adopt one of three courses: No. 1. " (a) Require further or additional surveys, specifications, and estimates or a changed or modified plan in whole or in part to be made and submitted, together with such other requirements as may by said Secretary be deemed necessary to insure the permanency and success of the enterprise, all within such time or times as said Secretary may prescribe, whereupon the plans, surveys, specifications, and estimates as so modified and amended may be rejected and diapproved or accepted and approved in their entirety, as provided in subdivisions (b) and (c) of this section; or (b) reject and disprove of said surveys, specifications, and estimates in their entirety, for any reason in his judgment deemed sufficient, in which case this contract shall be and become void and of no further force and effect whatsoever; or (c) accept and approve same in their entirety as representing a practical and sufficient plan and scheme of works and reclamations for the purpose of this contract, in which event the company shall have the right to connect its said proposed irrigation system with the said Laguna Dam and to enlarge said main canal of the United States on compliance and in accordance with the terms nd conditions of this contract."

From the foregoing it is apparent that alternative (c) can not be exercised at this time. The question therefore presents itself as to whether further or additional surveys, specifications, and estimates should be required under the alternative (a) or whether the surveys and estimates heretofore presented should be rejected and disproved under alternative (b).

As you are aware, there have been extensive negotiations and conferences with representatives of the Imperial Valley irrigation district with a view to a connection with the Laguna Dam and the construction of an All-American canal for the irrigation of the lands in the Imperial irrigation district, and to

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that end a tentative contract has been drafted and submitted to the Imperial irrigation district. It is apparent that construction and operation under both of these contracts can not proceed independently. Mr. Holt, the representative of the district, repeatedly represented to the department that he is favorably disposed toward inclusion of the mesa lands, or a part thereof, in the irrigation district, and of making provision for the reclamation of such lands to be reclaimed through an all-American canal.

It has become more and more apparent in the course of these negotiations that an all-American canal is an extensive and expensive proposition, in the construction of which all interests that may possibly be benefited thereby should cooperate and contribute. and the department is favorably disposed toward working out some feasible plan of accomplishing this object. The Reclamation Service is now, in cooperation with the Imperial irrigation district, making a survey with a view to determning the feasbility of an allAmerican canal. To require you to proceed at this time under alternative (a) might result in a useless duplication of work. Under the circumstances, therefore, it is deemed advisable at this time not to take action under either alternative (a) or (b), but rather to grant your request for more time by suspending further action at the present. This will give an opportunity to consider the results of the surveys and investigations now in progress and will afford your company and the people of the Imperial irrigation district an opportunity to consider further the advisability and ways and means of bringing in the mesa lands.

Cordially, yours,

E. C. BRADLEY, Assistant to the Secretary.

Mr. ROSE. I would like to ask Mr. Davis just one question there. Mr. HAYDEN. Let me ask him one first, if you please.

Do you consider that the contract which was entered into by the Secretary of the Interior with the Imperial irrigation district, authorizing connection with the Laguna Dam, is in conflict with the contract of Mr. Rose?

Mr. DAVIS. I think it is somewhat. It seems to me so.

Mr. HAYDEN. Then the statement in this letter that it is apparent that construction and operation under both of these contracts can not proceed independently is correct?

Mr. DAVIS. Yes, sir; they ought not to, is the meaning of that— that is, there would be duplication and waste.

Mr. HAYDEN. So that if the contract with the Imperial irrigation district is carried out it would certainly be necessary to modify the Rose contract to some extent, wherein there was conflict?

Mr. DAVIS. You mean the contract with the Imperial irrigation district?

Mr. HAYDEN. To connect with the Laguna Dam, the existing contract; if it was carried out, the Rose contract could not be carried out?

Mr. DAVIS. There are to some extent two contracts for the same thing, and they conflict.

Mr. HAYDEN. Both providing for the all-American canal?
Mr. DAVIS. Yes, sir.

Mr. HAYDEN. In this connection, Mr. Chairman, I also desire to read into the record a letter by the Acting Secretary of the Interior, Mr. Vogelsang, under date of April 27, 1918, written shortly after the letter which I just read:

The REGISTER AND RECEIVER,

DEPARTMENT OF THE INTERIOR,
Washington, April 27, 1918.

United States Land Office, El Centro, Calif.

GENTLEMEN: The attention of the department has been directed to the fact that inquiries have been made at your office as to whether persons who at pres

ent purchase stock in the Imperial Laguna Water Co. will be granted preference rights to file on public lands of the United States in the event the company's irrigation system is constructed.

July 6, 1917, the Secretary approved a form of contract providing for preliminary surveys and investigations for the project of the Imperial Laguna Water Co. and for the carrying forward of its plan if found feasible. Section 7 of the contract expressly provided that pending completion of all payments to be made to the United States under the contract or pending the prior termination of the contract the company should not dispose of any of its stock or rights to the use of water, except upon such terms and conditions as shall have been approved by the Secretary of the Interior.

Section 8 provided that sales of stock or rights to the use of water or contracts therefor by the company might be in amounts sufficient to furnish a water supply appurtenant to 160 acres of land and no more to any one person at a price not exceeding actual and necessary cost of the system. Section 9 provided that the first payments on account of the purchase of such stock or rights should be not less than $10 per acre of irrigable land, the entire amount of the first payment to be deposited in escrow in such national banks as the Secretary of the Interior may designate. Section 11 provided that in the event of the rejection of the plans, specifications, and estimates of the company, or in case the plans should fail, the Secretary of the Interior might direct the escrow-holding banks to repay the amounts deposited to the respective purchasers of stock or water rights, or their successors in interest.

None of these provisions and no other portion of the contract authorizes the statement that persons buying water stock from this company would thereby secure a preference right to enter any particular tract of public land. No such statement was made, either in writing or verbally, by this department or any of its officers, so far as I am advised.

The contract, however, did contemplate that public lands of the United States within the areas susceptible of irrigation by the company's proposed works would be opened in such manner that entries would be made only by those who were able to secure water for the irrigation thereof. This might have resulted, had the company's plan been successful, in the acquisition of lands by persons holding stock in the company, but, as intimated, they would get no preference right to any particular tract of land, but would have to participate in a drawing or whatever other plan was adopted by the department for the opening of the lands.

The situation with respect to the said company at present is that the department has found the preliminary surveys and investigations to be too meager and unsatisfactory to warrant further favorable action, and that rejection. of the plan pursuant to section 5 of the contract may be made at any time, action thereon having been merely suspended by the department because of the fact that there was some thought that a complete and comprehensive plan for the irrigation of the lands involved and of other lands in the Imperial Valley, including the existing Imperial irrigation district, might be provided for under an arrangement with the Imperial irrigation district and other parties in interest.

You are authorized to state specifically to any person making inquiry that the purchase of Imperial Laguna water stock will not entitle them to a preference right to enter any public land, and that up to the present time the company has made no such showing to the department as would indicate the feasibility of its scheme of irrigation.

Very truly, yours,

ALEXANDER T. VOGELSANG,
Acting Secretary.

I would like to ask Mr. Rose how much stock has been sold in the Laguna Water Co.?

Mr. ROSE. There has not been one single share sold. In 1914 and prior to that there were about 10,000 shares of stock sold.

Mr. HAYDEN. At how much a share?

Mr. Rose. It varied all the way from $5 to $15.

Mr. HAYDEN. Then how much money has been raised altogether by the sale of shares?

Mr. Rose. I should judge about $75,000 has been actually paid in on that stock.