ments of one man you termed the part played by the Budget Bureau in that meeting as "shocking," "reprehensible," "outrageous flouting of the will of Congress," without making any attempt to find out whether the story is true, which could have been done very simply by checking with the Budget Bureau. That is an outstanding procedure.

Specifically, these are the portions of your telegram based on the allegations of Mr. Charles M. Everhart which are in variance of the facts: (1) Our representatives did not suggest at any time that the Kentucky Utilities Co. be contacted for the purpose of arranging a partnership project; (2) no mention was made of a "nominal fee for use of the water," whatever this may mean. Furthermore, I would also like you to know that, contrary to the statements attributed to you in the press, it was not suggested that the project's approval depended on private utility participation or that "a private utility take over a possession owned by the Federal Government." So that the record may be straight, it is this administration's policy to encourage whenever possible local participation— whether by private or public bodies as may be locally desired-in water resource projects. In line with the guiding principles established by the President, in our review of budget requests we consider whether it is necessary for the Federal Government to provide the entire financing or whether there are means of securing participation, in whole or in part, by local interests. A review is made to determine, among other things, if the possibility of local participation has been adequately explored.

As you may recall, the Congress in 1954, after a similar review, amended the Priest Rapids, Wash., Coosa River, Ala., and Markham Ferry, Okla., authorizations in this manner. As originally approved by the Congress, these projects were authorized for Federal construction: The 1954 amendments allowed local interests to construct the power features, and the Federal Government to contribute to the nonpower features. In the case of the lower Cumberland project, when an authorized project will require a $167 million Federal expenditure, and where construction may be long delayed because of financial limitations, it makes good sense, we believe, to explore the possibility of a local sharing of costs in power development which might speed up time of completion and at the same time allow Federal tax dollars to serve a greater number of people. If investigation showed such partnership was feasible it could reduce the investment of the Federal Government by more than $57 million in this case. The Budget Bureau officials suggested it be explored. This suggestion was entirely consistent with administration policy, congressional policy as spelled out in recent enactments, and sound public policy.

ROWLAND R. HUGHES, Director.

I have this statement to make in connection with the telegram that I have just received from the Director of the Budget. To his first request, "In reply to your telegram of October 31, may I ask that you invite the Budget Bureau representatives referred to by you to give their side of this story under oath before your subcommittee," I would like to say this:

In transmitting the telegram from Nashville, Tenn., to the Director of the Budget, I announced that I was making a copy of that telegram available to Mr. Chudoff, chairman of a Subcommittee of the House Committee on Government Operations which has as its responsibility the investigation of the Federal power policy; and that a further request would be made of Mr. Chudoff to make inquiries and investigations into the allegation contained in the testimony before this subcommittee, as shown in the telegram which was transmitted to him from Nashville.

Now in the light of this telegram, if that investigation is not forthcoming, or if the request is not granted by Mr. Chudoff, the chairman of that subcommittee, then the chairman of this subcommittee will call a meeting at which time all of the participants in that discussion will be brought before the subcommittee, all of them under oath, and they will testify as to what actually took place. The names which have been mentioned will be extracted from the record, those names sub

mitted by Mr. Everhart to this subcommittee, and they and others of the Bureau of the Budget whom they suggest or whom they want to testify will be available to come before the subcommittee.

Now, secondly, the telegram is based on the assumption that this did not happen, or that the facts that Mr. Everhart alleged to the committee did not transpire in any conversations with the representatives of the Bureau of the Budget, but if they did transpire-I am still paraphrasing the telegram-it was certainly in order as it would be the policy of the administration to review authorized projects on which local participation had been investigated by the Congress of the United States in originally authorizing the project. However, this project was authorized as late as 1953, so an authorized project such as this lower Cumberland project was not an old project requiring reexamination. But recourse was taken to find interested parties.

Thirdly, the telegram directed to me cited authorizations of the Priest Rapids, Markham Ferry, and the Alabama-Coosa projects, which were projects authorized and amended by law, not by administrative directives. The telegram cited these as the basis for finding some utility to participate in the program and engage in a joint enterprise of constructing the lower Cumberland project. Had this matter been handled in such a way as to direct it to the attention of the Congress, then that is a matter for which the Bureau of the Budget and Mr. Rowland Hughes would have to procure congressional authority in order to engage in the type of partnership he refers to as having been engaged in on the Coosa, the Markham Ferry, or the Priest Rapids projects.

So I consider first that we have a denial; and, second, a confession that if they did say it, it was a thing they should have said on that occasion-which is what we lawyers call a plea of confession and avoidance. I repeat again that the matter will be a subject of investigation by this subcommittee in the event that Chairman Chudoff does not grant a hearing on the subject before his subcommittee.

Mr. LIPSCOMB. Mr. Chairman, it is my understanding you sent a telegram to the Bureau of the Budget. Now, what is the understanding you have with Mr. Chudoff that I am not aware of?

Mr. JONES. I have no understanding. It would be the proper legislative committee to make inquiry as to whether or not the Federal power policy now being carried out was a trespass upon the laws which are enacted. The executive branch of the Government can go no further than the laws under which they operate. Therefore, if they in the Bureau of the Budget made a suggestion to those people in attendance, as Mr. Everhart alleged before this committee in Nashville, then, of course, that is a violation of the Federal law and it is a violation of the Federal policy with respect to authorized projects. Nowhere in the discussion was there any suggestion that the Congress undertake to rewrite the law in such a manner that the Kentucky Utilities Co. would obtain the right and the authority to construct the hydroelectric potential of the lower Cumberland project.

Mr. LIPSCOMB. Mr. Chairman, I feel that since you, as chairman of this subcommittee, sent the wire to the Bureau of the Budget, this subcommittee should go into it. I do not see any connection with the Chudoff subcommittee in this regard at all. In fact, I believe in order to clean this up and finish up the job while we are down here in the South that all of the parties concerned with this particular

matter should be called and appear before the committee in Memphis on Friday.

Mr. JONES. It is unfortunate that the subcommittee has already engaged itself to have witnesses come from various parts of the country to Memphis. As the matter stands at the present time we have the allegations of Mr. Everhart before this subcommittee and the allegations of the Bureau of the Budget that it did not take place. It is the situation which the subcommittee finds itself faced with.

Mr. LIPSCOMB. I think that the subcommittee should determine and get the matter straightened out immediately and not turn it over to another body because of some question of jurisdiction which may be involved.

Mr. JONES. The Chair will state that the current schedule of hearings runs through the 10th and 11th of November. Those are already scheduled and the people have been advised to attend those meetings. To call those meetings off would be discommoding to them and it would disturb the regular schedule of the subcommittee. I assure the subcommittee that the chairman will not endeavor to protract this matter to some uncertain day; that it will come up and it will be a matter of discussion. This question can be resolved in executive session of the subcommittee.

Mr. LIPSCOMB. I believe, inasmuch as this subcommittee heard the testimony from Mr. Everhart in Tennessee, that this subcommittee has a knowledge of the situation and it has the receipt of this telegram in which the Bureau of the Budget has informed us that the facts do not conform at all to the allegations you submitted in your telegram. Therefore, we should go ahead with the job and finish up the job and clear up the situation while we are in the South, where the disclosure was made. That is my feeling on it, and I feel that the subcommittee could go through our regular schedule of hearings and work extra time in order to get the matter straightened out immediately.

Mr. JONES. The Chair will rule it is a matter to be disposed of in executive session.

Our first witness this afternoon is Mr. Clyde T. Ellis, general manager, National Rural Electric Cooperative Association, from Washington.

We are glad to have you, Mr. Ellis.

STATEMENT OF CLYDE T. ELLIS, GENERAL MANAGER, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION; ACCOMPANIED BY DR. CLAY COCHRAN, STAFF ECONOMIST, HEAD OF THE LEGISLATIVE AND RESEARCH DEPARTMENT, NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

Mr. ELLIS. Thank you, Mr. Chairman.

Mr. JONES. I know you made a special effort to be with us today, having flown from Los Angeles, Clyde; is that right.

Mr. ELLIS. That is right.

Mr. JONES. We are going to work our way out there so that we can see Los Angeles.

Mr. ELLIS. No smog yesterday.

Mr. LIPSCOMB. It was beautiful; was it not, sir?

Mr. ELLIS. It was. It is always beautiful.

Mr. JONES. Will you identify Mr. Clay Cochran, who is your associate, and give his position?

Mr. ELLIS. Yes, Mr. Chairman. This is Dr. Clay Cochran, our association's staff economist, who heads up our legislative and research department. There may be points, with your permission, which I would like to call upon him to answer.

Mr. JONES. Mr. Ellis, is it your intention to summarize the statement and the various sections you have prepared?

Mr. ELLIS. With your permission, Mr. Chairman and members of the committee.

Mr. LIPSCOMB. Mr. Chairman, how long has this statement been available for the subcommittee's perusal?

Mr. JONES. It came in yesterday, I believe.

Mr. ELLIS. I cannot tell you. As far as I know, it came in this morning, but if it came in yesterday, I did not know it.

Mr. LIPSCOMB. If it is possible, Mr. Chairman, I would appreciate it if we, as members of the subcommittee, could have an opportunity to receive statements such as this a little ahead of time so that at least we could brief through them and we would have a better opportunity of questioning and listening to the witness.

Mr. JONES. Of course, I would like to see that, but that puts a terrible burden on the chairman in trying to anticipate what witnesses will testify to, or what they are going to offer. We are in session for the purpose of examining testimony. That is a part of the duties of the members of the committee.

Mr. LIPSCOMB. I realize every person cannot submit a statement ahead of time, but in this case I believe this statement has been here for a day.

Mr. JONES. As I understood Mr. Young, on yesterday afternoon he told me that he had a package in his office, or the first thing this morning. I do not know which one it was. However, it was either late yesterday afternoon or this morning. It was brought around this morning and I had not had an opportunity to examine it.

I will say to the gentleman from California he knows as much about what is in the statement as any other member of the committee. We will just have to do the best we can and try to go along. I do not know of any way you can anticipate the length or even the prolixity of a

statement.

Mr. LIPSCOMB. My only point, Mr. Chairman, was that when statements are available, if the staff or committee members do know about it ahead of time and we are going to make it a policy to receive these statements, then if we can have them ahead of time so that we can work on them the night before, it will be appreciated by at least one committee member anyway.

Mr. JONES. I will make every endeavor to obtain as many as I possibly can, but I do not know of any procedure that I could follow which would be satisfactory in every case to get all of the statements.

Mr. REUSS. I say to Congressman Lipscomb that this is a lengthy statement, and I think it is a good practice, as has been suggested by the witness, that he merely summarize it. However, I have this question to ask of Mr. Ellis: In the event that members of the committee, after reading the lengthy statement at their leisure, have questions concerning it, will you be available for further questioning by the committee at some later date?

Mr. ELLIS. I will, sir.

Mr. REUSS. Thank you.

Mr. JONES. Let me say this to the members of the committee: If there is any question relating to the testimony of any witness appearing before the committee and you feel it is necessary to satisfy your mind on the points made by the witness, so that it requires a reexamination of him, the Chair will attempt to obtain the witness for the purpose of recalling him for further examination.

Now, Mr. Ellis, you may proceed.

Mr. ELLIS. Mr. Chairman, I apologize for the report coming in here late. These hearings came up, so far as I know, after our regional meetings were already in progress, and we have had one gigantic job trying to put this statement together during the course of our meetings.

For the record, my name is Clyde T. Ellis, general manager of the National Rural Electric Cooperative Association. NRECA is the service organization of the rural electric systems of the United States, including Alaska. More than 900 of the rural electric systems, about 91 percent, are voluntary members of NRECA. These 900 systems are serving approximately 32 million farm homes and rural establishments in the States and Alaska.

The National Rural Electric Cooperative Association performs a great number of services for the rural electric systems. Rather, they perform these services for themselves through their national organization.

The rural electric systems, as the committee knows, borrow the funds for their capital and their capital investment from the Rural Electrification Administration, the REA.

Before proceeding with my statement, members of the committee, I would like to recognize the fact that this meeting is being held in the district of Congressman Bob Jones, who is chairman of the committee who, if I may be permitted to express an opinion, has been one of the very finest friends of the rural electrification program and the Federal power program, including the Tennessee Valley Authority, in the Congress.

Let me say at the outset that I was interested in the telegram which the chairman just read. I have been hearing about your session of yesterday and the day before. I am somewhat amazed at some of the language used in the telegram in expressing the administration's policy of carrying out the so-called partnership and local participation philosophy as "may be locally desired." If I heard it right, as you read it, Mr. Chairman, that is a part of what I want to talk about before this committee, that "as may be locally desired."

Partnership is being rammed down our throats as may not be locally desired. That is what it amounts to. And in no case have we been asked whether it was locally desired, so far as I know.

By the way, Mr. Chairman, do I understand that my statement will be made a part of the record, that is, my formal statement, and the supplement I have submitted?

Mr. JONES. It will be made a part of the record and also you can summarize it. Of course, if there is any part of it that takes any member by surprise, the members will have a right to recall you. That can be accomplished when we hold our meetings in Washington, so it

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