boat. As you realize, there is a percentage which comes over the Alaska Highway and also comes in by air.

Mr. ABBOTT. Off the record.

(Discussion off the record.)

Mr. BROWNE. Much has been said, I know, before the committee here and in Washington about Alaska's great power resources. As you know, in 1948 the Bureau of Reclamation prepared a reconnaissance report in which seventy-four-odd sites were described which were capable of producing something like 50 billion kilowatt-hours annually.

I think that while it is very nice to have so many sites, if you look at it realistically, there are only very few of those sites which can be described as low-cost sites. By "low-cost" I mean those which could produce power at a rate sufficiently low to attract major electric metallurgical or electric chemical industries. While a 4-mill rate may be low in the States, it is not low in Alaska in view of the higher cost of just doing business.

Mr. O'BRIEN. Once again, Mr. Browne, is not that a field in which Canada is stealing the march on us-the hydroelectric development? Mr. BROWNE. I agree with you. They have made some striking progress in the last 4 or 5 years.

Mr. ABBOTT. When you say 4 mills may be low in the United States but is not low in Alaska, are you stating that it must be lower to attract industry?

Mr. BROWNE. Major industry, such as aluminum, for example.

Mr. ABBOTT. It is a relative matter and a matter of perspective. You may have variance within the Territory of Alaska as to what a desirable power rate would be for industrial attraction.

Mr. BROWNE. That is correct. I mentioned the figure only because, during the time I was with the Alaska Development Board we did have many conversations and many contacts with the Aluminum Company of America, which at that time was interested in the Taiya site north of Skagway, and they stated they would have to have 2-mill power to come into that area.

Mr. ABBOTT. Well now, one of your rather substantial mining operations up here, United States Smelting & Refining: We visited 1 of their dredges, 1 of their 8 dredging operations, outside of Fairbanks, and it is entirely from electrical energy power operating an 11,000 kilowatt plate capacity steam-generating plant and transmitting it 7 or 8 miles. That must be an extremely high-cost source of power and there might well be some relationship to their unhappiness at having to live within the $35 an ounce pay rate for gold. But that power must add a tremendous operating cost to their present operations, and they are surviving and, we understand, prospering in some respects.

Mr. BROWNE. The power situation as I referred to it dealt with those industries that require a vast amount of power where your cost of power figures directly into your pound of product produced, as in the case of aluminum or calcium or chrome or any of the alloys which consume substantial quantities of power.

We only have three large sites which you might describe as power giants, and one is the Taiya project, which now is tied up internationally, the Woods Canyon project, which currently is being investigated, and the Rampart project.

If I may, I would like to just mention briefly the Taiya project and its international complications.

As you gentlemen probably know, Frobisher, Ltd., of Toronto obtained from the Canadian Government and British Columbia water licenses for the headwaters to utilize the headwaters of the Yukon River. This past year they have crews in the field investigating. They have already put up a $2%1⁄2 million cash performance bond with the British Columbia Government, and when completed the project would produce more than 4 million horsepower, the estimated total cost something like $700 million. The first stage would be set at $270 million. The location is in the Taku Valley, about 20 miles from the Alaska boundary.

While this development would preclude development of the Taiya project, as such, for all time, the Canadian project would have a number of advantages or would offer them to Alaskans.

First, Frobisher would be bound and is bound to establish certain processing facilities. They must, for example, have facilities for processing nickel, cobalt, or for the production of iron and steel or the production of the manganese alloys, as well as smelters for the processing of copper and so forth. But the availability of those smelters would provide a ready market for many Alaskan minerals which could not now be produced and shipped to market economically.

I think in the Anchorage area it is our big hope for obtaining lowcost power for industry in this area-it lies in thermal generation. By that I mean location of your powerplant on the coalfield. As recent technological advances show, that power can be produced at costs that can compete with even our lowest hydro, as we have substantial coalfields in the area. The one thing that needs to be done, however, is that they should be explored, I believe, by the Bureau of Mines to determine reserves.

The Susitna has been mentioned as a possible source of hydropower. I am convinced from the studies that I have done that thermal power can beat the Susitna hands down.

The investigations that I have done I have contacted leading companies of the United States who have been making recent studies on thermal power generation, and I think you can get power in here for less than 4 mills from thermal sources.

Mr. ABBOTT. Would you repeat that?

Mr. BROWNE. I believe you can get power into Anchorage for less than 4 mills from thermal sources.

Mr. ABBOTT. With what heating source, coal or gas?

Mr. BROWNE. Coal. Location of your power generation facilities on the coalfields.

Mr. ABBOTT. Do you know of any major thermal generating plant where power is produced for 4 mills?

Mr. BROWNE. Yes, sir.

Mr. ABBOTT. Are you talking of delivered to load center here?
Mr. BROWNE. Delivery into Anchorage, yes.

In my research I found that in southern Illinois now a 300,000kilowatt plant recently was constructed from which they are getting power there now at 3.9 mills. It is a private development. You probably know all about it.

Mr. ABBOTT. Let me ask you, have you heard of any plant other than that one?

Mr. BROWNE. I don't know the cost of the Texas plant of Alcoa where they are producing power for the production of aluminum from their Texas lignites.

Mr. ABBOTT. While you mention that lignites coming down past Healy the other day I referred to lignites. Could you explain why I was corrected to subbituminous, that I wasn't really talking about lignites, I was talking about subbituminous coal?

Mr. BROWNE. To my knowledge, your coal in the Nenana fields is decribed by the Bureau of Mines as lignites, as you come down into the Matanuska Valley they are subbituminous.

Mr. ABBOTT. Then I just didn't look at the milepost.

Mr. BROWNE. That may well be.

Mr. ABBOTT. Proceed, please.

Mr. BROWNE. As you can see, there are things that are happening in Alaska and they are happening despite the fact we have no tax holiday, which I think is the most naive proposal. I cannot envision the Congress enacting such legislation. I think what Alaska needs more than a tax holiday is roads. We need access roads into the various areas.

I might comment on that by saying I had a discussion with two representatives of one of the leading mining companies in the United States recently, and I asked them, "How did you like Alaska? How are you finding things?"

They said, "Well, when we first came up here we were disturbed. We visited Juneau first, and all we could hear about was the taxes, the high taxes, and we became so concerned we looked into the tax structure. Your tax structure would not keep us out of the Territory. What you want to do is raise your taxes and build more roads. We need roads." I thought that was an interesting sidelight.

Mr. ABBOTT. Did they want to be here paying taxes while the roads are being built or come in after their construction?

Mr. BROWNE. I don't-they didn't answer that.

I earnestly believe that roads do more to stimulate the development. of our resources than almost any other single factor.

With that, I conclude my remarks, and I hope that you, as I, feel. that things are happening in Alaska.

Thank you.

Mr. O'BRIEN. Thank you very much. We will take a short recess. (A short recess was taken.)

Mr. O'BRIEN. The hearing will be in order.

Mr. ABBOTT. Would you two gentlemen come forward please.

STATEMENTS OF TERRENCE G. MACKLE, VIRGIL SEISER, AND GEORGE E. M. GUSTAFSON, ANCHORAGE, ALASKA

Mr. MACKLE. My name is Terrence Mackle.

Mr. SEISER. My name is Virgil Seiser, of Anchorage.

Mr. O'BRIEN. If we may suspend for a couple of minutes, the gentleman wants to take a picture.

(A short suspension of the hearing.)

Mr. ABBOTT. Now could you identify yourselves as you face us for the reporter?

Mr. O'BRIEN. I think they have already.

Mr. GUSTAFSON. George E. M. Gustafson, resident of Anchorage, member of Chugach Board of Directors.

Mr. MACKLE. Terrence Mackle, chairman of the board.

May we proceed?

Mr. ABBOTT. How long is this going to take?

Mr. MACKLE. We could take a couple of days, but we will limit it about to perhaps 10 minutes. We realize you have gone through many things, gentlemen, and ordinarily we would not have appeared because I know there are other items certainly just as important.

(Discussion off the record.)

Mr. MACKLE. With the thought in mind that such information as has been given you during the course of the matter as they relate to public power might affect the decision of yours and others who are entitled to act upon them, and somewhat fearful of the consequences of what we have been able to judge for a longer period than you may have been able to in the short space of time, we felt it proper to come Otherwise we would not have appeared.

to you.

We are most concerned over the fact and grateful for what you have done in the revelation about the famous $15,000 fund. I hate to disagree with a fellow Irishman, Mr. O'Brien. I listened to his very fine television broadcast last night. And bear in mind we are grateful for what you have done. I nonetheless am, shall we say, constrained to disagree with one statement you made, but I believe I can correct why you did make it.

I think you said that you felt that there was nothing perhaps improper as you say about the disbursement of the $15,000 fund. Mr. O'Brien, I feel confident you said that in the light of what had then been presented, but I am here to state very clearly that what you got was a unilateral point of view.

Let me explain and put into the record that when the first

Mr. O'BRIEN. As Mr. Abbott pointed out, what I had in mind was the purpose for which the intended expenditure was. It struck me as

proper.

Mr. MACKLE. Yes. I didn't want to go away from the community unapprised of all the facts.

When the first advance was made for the $15,000 fund there was a stipulation in our resolution which was agreed to by our board member, who is also our board member, as part of the constituent group. That is, he was the member from Chugach Electric Association to CAPA. That stipulation said very clearly, and it therefore has the effect of limitation, that these moneys were to be appropriated for the sole purpose of hydroelectric studies on the Kenai Peninsula. And, gentlemen, with no sense of humor I tell you I don't know where $220 for a booze party at Club 25 is going to develop any hydroelectric power. You may determine the potency of whisky, but I think these good gentlemen knew of this before they went there.

Now you were also told by counsel of CEA that a report was tendered us. We have not yet been tendered a report which could be construed by even an eighth grade student as an accounting report. I happen to be a member of the accounting profession, have been for 25 years, and worked for such national firms as Ernst & Ernst Peat, Marwick, Mitchell & Co., and I have never seen anything as useless as what they offered the other night.

But let. us for one moment say that if we were in a court of law would they-it was a statement that approximately $26,000 had been spent for this and this and this. Let us admit that that statement was accepted, but it has never been acted upon. Gentlemen, it did not say that they had spent $15,000 to the Alaska Committee for public power. It is, therefore, without any question a false financial statement, and that is the type of people we are dealing with.

Now bear in mind that our purpose for being here as members of the board is we are fearful that this type of thing will destroy the REA movement. Let us leave it very clear with you that we would not, do no want to lose REA. It has done a marvelous job, and I am thankful unto God who created the idea, and on that score we are here to tell you we represent seven or eight thousand consumers who came out to the last annual meeting and jammed it, the biggest audience, to protest this very kind of mismanagement.

Our director knew what that fund was for, and nonetheless it appears to me that they had this in mind before they even came to us with the request for advance of funds.

Mr. ABBOTT. Mr. Mackle, I believe you said, "Our director knew." Is that what you intended to say?

Mr. MACKLE. Yes; our manager and director knew of this. If he didn't know of it, what sort of manager is he?

Maybe in one sense we are airing our own troubles upon you, but I say again I know these things are going to go into the report and back to Washington, and we are just almost frightened to death that this thing would kill public-sponsored power. I know that it does in the States. You can't, on one hand, accuse the public powers of lobbying and not get something like this and turn around and clobber you. And so we are just unalterably opposed to this type of conduct. Another thing we would like to make clear: There is no disagreement or ill feeling between ourselves and the city fathers. The problems which have ensued are inherent in an expanding area, and they can be solved by honest men. But certainly honest men and women do not conduct themselves in clandestine manner.

You had good testimony yesterday as the witnesses were before you that there is no such thing as the Alaska Committee for Public Power. It is the unprincipled members of the CAPA Board themselves who by the very creation of the Alaska Committee for Public Power gave prima facie evidence that they were doing something they knew was otherwise illegal. They have not yet

Mr. ABBOTT. Let me ask you a question at that point, Mr. Mackle. Is it conceivable in your view that responsible directors of CAPA would have made available to the Alaska Committee for Public Power or any other so designated agency $15,000 or $1 without knowing (a) to whom they were handing those funds, and (b) for what purpose?

Mr. MACKLE. Correct. You do not deal with unknown people. You don't advance money out of your own pocket to a stranger.

I know Mr. Croul, the manager of the chamber of commerce. He is my neighbor. But if he had asked me for $100 I would ask for a mortgage on all his children's tricycles. It would simply be good business. And it was clear cut here yesterday as they fussed andbut let me be fair now. I don't want to distort the issue. I am not attempting to be the star witness.