tions and its lands which, before construction, were not salable at $1.25 per acre, were sold readily thereafter at double that price."

But there is more to this point than Mr. Donnelly indicates. When the price of the Government land within the grant limits was raised from $1.25 to $2.50 per acre the Northern Pacific profited by the change. The change in the price of Government land had the effect of fixing a minimum price of $2.50 for the railroad land. If the Government price had been left as $1.25 per acre, the railroad would have been confronted with the necessity for meeting this lower price in the sales of its land and this of course would have cut the receipts from the sale of its lands by 50 per cent. By having included in the law a provision raising the price of the Government land from $1.25 to $2.50 per acre, the railroad company was merely protecting its own interests.

Under paragraph 3, Mr. Donnelly say:

"It is to be remembered, finally, that by the act of 1864 the Northern Pacific Railroad is made 'a post route and military road subject to such regulations as Congress may impose restricting the charges for such Government transportation. This right to restrict its charges the Government has always exercised, through acts of Congress allowing to the Northern Pacific only a reduced percentage of the rates contemporaneously payable to other carriers for like services. The difference between what the Northern Pacific has thus far received for its services to the Government, and what it would have received if it were not for this land-grant restriction, is about $14,000,000. Of the $100,000,000 which the Northern Pacific has received or will receive from its grant, therefore, it has in effect turned back $14,000,000 into the United States Treasury. And this obligation to accept reduced rates is not a temporary or terminable one; it inheres in the franchise; and whoever owns and operates the Northern Pacific Railroad must bear it to the end of time. And as the value of the land grant to the Northern Pacific, whatever it may be, is something fixed and determinate, while the obligation to remit to the Government a portion of its service charges is perpetual, it is certain that unless rail transportation is superseded by transportation of some other form, the Northern Pacific will ultimately turn back to the Government all that the Government gave to it."

Mr. Donnelly lays great stress upon the fact that the Government has received $14,000,000 by reason of the reduced rates it has obtained under the land grant. It must be remembered that the sponsors of the land grant bill included the provision for reduced rates as a reason why the bill should be passed. They should not now complain of this provision. But, taking the receipts from the sales of the lands as Mr. Donnelly gives them, at $100,000,000-and this figure does not include over $20,000,000 that they have set off for taxes and expenses-it will be seen that the interest on this $100,000,000 at the low rate of 5 per cent would be $5,000,000 per annum. The $14,000,000 which the Government has saved has been over a period of some 54 years-that is, from 1870 to 1924. On a per annum basis the saving to the United States for carrying the mail and for the limited number of other items has been less than $300,000 per annum. Mr. Donnelly does not point out that the contribution by the United States to the capital investment of the Northern Pacific has been $100,000,000 or that this $100,000,000 is worth, at 5 per cent, $5,000,000 per annum to the Northern Pacific, and that it is perpetual. It is nearly seventeen times as great as the $300,000 per annum saving to the Government. On this basis the Northern Pacific can never turn back to the Government, by reason of a limited number of reduced rates, a sum that will equal what the grant has been and will continue to be worth to it. Certainly Mr. Donnelly's argument under this heading is a specious one.

Mr. Donnelly concludes his pamphlet with the following paragraph:

"The American people like fair play, and even in a time of seething excitement like the present they will recoil from what is unfair or from what savors of repudiation. The ultimate reliance of the Northern Pacific in this case, as in every case in which rights of property are assailed, must of course be in the courts; but we shall be slow to believe that the Nation's Representatives in Congress will adopt a course which will make it necessary again to turn to them."

It is quite true the American people like fair play and it is also true that they do not look with favor upon anything that savors of repudiation. The difficulty with Mr. Donnelly's presentation is the yardstick he uses in measuring fair play. In this case, all the Forest Service seeks is fair paly. If the railroad company has already received from the Government a value that represents what the Government obligated itself to give the Northern Pacific, then certainly, in so far as the Government is concerned, the Government has lived up to the terms of its

agreement. We believe this to be the fact. Certainly no one could object to an inquiry, the purpose of which would be to ascertain whether or not such a contention is well founded. It must be remembered also that there were two sides to this contract. Is it not fair for the Government to say to the Northern Pacific before this case is closed and before these national-forest lands have passed into private ownership: "What have you done with reference to your obligations under the contract? Have you made the same exacting performance that you have required of the United States?" Certainly such is a fair question. The Northern Pacific wishes to hold the United States to the last acre of land; yet, in so far as its own defaults are concerned, it says: "These are of no consequence and should be waived aside," We say "No, your obligations to the Government are just as binding as the obligations of the Government to you; and if you have failed to fulfill your obligations, then you have no just cause for demanding your 'pound of flesh' from the United States."

This case is not a question of repudiation on the part of the United Statesit is just the opposite. It is a question of insisting upon fair play by the Northern Pacific and requiring it to show that it has complied with the legislative contract it entered into with the United States. And we ask that this compliance be required-not under some fantastic rule, but under all the facts, circumstances, and laws which bear upon the case. Certainly the Forest Service would be lax in its duty in representing the interests of the United States if it asked for anything less.

It should be remembered in reading Mr. Donnelly's pamphlet, this memorandum, and the report of the hearings before the House Committee on Public Lands, that the proposed joint resolution does not take from the Northern Pacific Railway Co. an acre of land. All that is proposed is an inquiry by Congress to ascertain whether or not the Northern Pacific has complied with the provisions of its legislative contract with the United States. We submit that the Northern Pacific has not made such a compliance, that it has violated in more than one instance some of the cardinal requirements of the contract with the Government, and that it can not now, in good conscience, ask for more than it is entitled to receive from the United States, taking these violations of the contract into consideration. The element of "repudiation" applies with great force to what the Northern Pacific has failed to do under its legislative contract with the United States.

It must always be remembered in the consideration of the Northern Pacific land grant that the grant was a law as well as a contract and that the Northern Pacific must comply with its provisions.

The proposed congressional inquiry revolves around some 3,000,000 acres of national-forest lands that have been under administration by the Government for 20 years. These lands are possibly worth $30,000,000. The Northern Pacific claims them, notwithstanding the fact that it has violated its agreement with the United States and notwithstanding the fact that the values it has already received from the United States probably have been in excess of what it was entitled to receive under ita legislative contract. It is inconceivable that Congress would fail to make the inquiry recommended by the President, the Secretary of Agriculture, the Secretary of the Interior, and the Attorney General. Certainly it is solely within the province of Congress to determine whether it will permit these 3,000,000 acres of national forest lands to pass into private ownership. Obviously they should be retained in public ownership even if the United States has to pay for them, but they may be retained by the United States without payment if Congress finds that the equities of the Northern Pacific have already been fully satisfied. Furthermore, it is not at all certain that the Northern Pacific is not indebted to the United States by reason of the failure of the company to comply with the requirements of the legislative contract under which it obtained its land grant.

Congress should, in any event, retain these 3,000,000 acres of national forest lands in public ownership. It should inquire into all the facts and circumstances in connection with the Northern Pacific land grant, including the sale of lands by the company at prices in excess of $2.50 per acre, the failure to construct the railroad within the time specified, and all other violations of the terms of the grant by the company.

If after such an inquiry it is found that the Northern Pacific is entitled to a settlement for the 3,000,000 acres of national forest lands, a settlement should be made by the Government. If, on the other hand, it is found that the Northern Pacific has already been overpaid under its grant, and I confidently believe

such is the situation, the Northern Pacific should be required to make a just settlement with the United States.

Manifestly this is not repudiation; it is fair play not only to the Northern Pacific Railway Co., but to the people of the United States.

D. F. McGoWAN,
Inspector of Lands.

THE FACTS ABOUT THE NORTHERN PACIFIC LAND GRANT

On February 23, 1924, President Coolidge addressed to the chairman of the House Committee on the Public Lands a letter directing attention to the grant of lands made in 1864 to the Northern Pacific Railroad Co., and particularly to the claim made by that company, or its successor, to certain lands within the national forests. He refers to and quotes from a letter of the Secretary of Agriculture in which 12 reasons are given to show that under its grant the Northern Pacific has received already more land than it is equitably entitled to receive; and he asks Congress to take action looking to the protection of the public interests. A preliminary hearing was begun March 1, before the House Committee on the Public Lands, and it is to be assumed that the facts will be fully developed; but as few people can be expected to attend such a hearing or to read the testimony, whereas many have read the newspaper accounts of President Coolidge's letter, it seems proper to state, first, what the Northern Pacific claim is; second, what are the reasons urged by the Secretary of Agriculture for its disallowance; and, third, what are the equitable and moral considerations involved.

1. WHAT THE NORTHERN PACIFIC CLAIM IS

On July 2, 1864, President Lincoln approved an act of Congress by which 134 persons, "and all such other persons as may be associated with them," were created a body corporate, under the name Northern Pacific Railroad Co., for the purpose of building a railroad from a point on Lake Superior to a point on Puget Sound. To aid its construction the odd-numbered sections of land on each side of the track within certain specified limits were granted to the company thus created; and so that the company should know exactly what lands it got and what lands it did not get the act provided that the Government would cause the lands on each side of the railroad, within the specified limits, to be surveyed, "as fast as may be required by the construction of said railroad," and that "whenever 25 consecutive miles of any portion of the railroad should be constructed," patents should be issued to the company for the granted lands on either side of it. Mineral lands, lands occupied by settlers, and lands reserved for other purposes were, however, excepted from the grant; and the act provided that wherever a section was lost to the company, whether because it was mineral, or because it was occupied by settlers, or because it was otherwise reserved, the company should have the right to select as "indemnity," in lieu of the lands thus lost, an equal quantity of land from the odd-numbered sections within certain defined belts or zones lying contiguous to the lands granted. The odd-numbered sections directly granted by the act came to be known, in land grant parlance, as "place" lands, and the limits within which they were found were called the "place limits" of the grant; while the odd numbered sections selectable as indemnity for place land losses came to be known as "indemnity" lands, and the defined limits within which these were found were called the "indemnity limits" of the grant.

The railroad was built to the satisfaction of the Government, and was accepted by the Government some 40 years ago; but the Government did not do what, on its part, it had engaged to do; that is to say, it did not cause the lands to be surveyed as fast as might be required by the construction of said railroad";. indeed, a part of the grant remains unsurveyed to this day. So long as the place lands remained unsurveyed the company was, of course, uncertain how much of its place land had been lost through occupancy or prior reservations; and so long as the indemnity lands remained unsurveyed it was powerless to make selections within the indemnity limits even for known losses within the place limits; and as a survey was a necessary preliminary to the issuance of patents, the failure of the Government to keep its promise to survey the lands made it impossible for it to keep its promise to issue patents. On the other hand, settlers had, under the law, a perfect right to settle upon, and by occu

pancy to initiate rights in, odd-numbered sections within the indemnity limits, whether surveyed or not; and as settlers have freely exercised this right throughout the whole period of 60 years since the grant was made, the number of oddnumbered sections available for selection, of course, dwindled rapidly as time went on.

In 1896 the Commissioner of the General Land Office prepared a statement showing that there was a large deficiency in the grant to the Northern Pacific Railroad Co.; and that, in consequence of losses within the place limits, and of the numerous settlements upon odd-numbered sections within the indemnity limits, the sum of the lands available, whether place or indemnity, would fall far short of equaling the total acreage granted. Notwithstanding this fact the Government, in pursuit of its conservation policy, proceeded to create forest reserves, and to include within these reserves odd-numbered sections lying within the indemnity limits of the grant to the Northern Pacific. Against this action the Northern Pacific protested. We said:

"In the face of the admission that all the available lands are necessary to satisfy the grant even partially, it is a manifest wrong to set these lands apart for the Government's own uses. The promise to survey them and to issue patents for them as the road was constructed has been neglected; and as a consequence we are losing them daily to settlers who go upon them. This we are powerless to prevent, and so have submitted to it. But what is now proposed goes beyond this and involves nor merely neglect, but a clear breach of faith; it involves a taking by the Government for its own purposes of lands which we were told should be available to us."

This protest was ignored and the Government continued to treat the lands in dispute as a part of the national forests. And when the Secretary of Agriculture states, in the letter which the President quotes, that “3,000,000 acres of national forest lands may be lost to the United States," he means only that that quantity of Northern Pacific indemnity lands taken over by the Government under these circumstances may have to be given back again.

In 1916 a situation developed which made it necessary for the Government to bring, in the United States Circuit Court for the District of Montana, a suit to test the specific question whether it had a right to do what we had protested against its doing; that is to say, whether, in the face of a deficiency in the grant, it could lawfully include within the boundaries of national forests odd-numbered sections within the indemnity limits of the Northern Pacific grant, and necessary even to a partial satisfaction of that grant. The court decided this question in favor of the railway company, holding that the Government did not have this right. The case was appealed to the United States Circuit Court of Appeals for the Ninth Circuit at San Francisco, and that court affirmed the decision, all three of the judges concurring. (264 Fed. Rep. 898.) The case was then carried to the Supreme Court of the United States, and that court likewise affirmed the decision, all nine of the justices concurring. (256 U. S. p. 51.) In rendering its decision, the Supreme Court, out of an excess of caution, directed a reexamination by the Secretary of the Interior of the question whether when the forest withdrawals were made there was in fact a deficiency in the grant; because it was upon this question that the whole decision turned. This reexaminatoin has just been completed. It confirms the findings which, as stated above, were made by the Commissioner of the General Land Office as early as 1896. Thereupon, and on February 12, 1924, the Secretary of Agriculture and the Secretary of Interior addressed to the chairman of the House Committee on the Public Lands their joint letter suggesting action by Congress; and this was followed, on February 23, 1924, by the letter of President Coolidge above referred to.1

II. THE GROUNDS ASSIGNED FOR DEFEATING THE CLAIM

Our purpose in this statement is to put the facts before the public only in the most general outline, and we shall not attempt to examine closely or in detail the several grounds for the defeat of the claim set forth by the Secretary of Agriculture and quoted in the President's letter; but before coming to the brief considdration we are about to give them, the question suggests itself, Why was no one of them addressed to the courts? If they are valid reasons for the rejection of the claim they are equally valid when the courts had the question under advisement. Why was not the attention of the courts directed to them? Why do we hear of them now for the first time? It is no answer to say that they are "equitable" considerations, for the suit was brought on the equity side of the

1 The joint letter of the two Secretaries and President Coolidge's letter are appended to this statement.

court. They are either valid reasons for the disallowance of our claim (and if so a court of equity would have disallowed it) or they are nothing. However, passing that, we proceed to consider them briefly in the order in which they are stated:

"The total gross receipts of the Northern Pacific to June 30, 1917, from the sale of the lands from its grant amounted to $136,118,533.14. The cost of constructing the road did not exceed $70,000,000.❞

Even if these statements were quite accurate they would not be relevant, because the grant of course was absolute, and was made without reference to the relation or proportion which its value should bear to the cost of the railroad. This truth is, however, that the net receipts to December 31, 1923, from all land-grant sources-land sales, timber sales, royalties and rents-plus the amount of the deferred payments yet due under contracts, plus the estimated returns to be received from unsold lands, equal only $100,065,732.07;2 whereas the Northern Pacific has expended upon its main line from Lake Superior to Puget Sound independently of branches or feeders, a sum in excess of $300,000,000.

"2. That the Northern Pacific failed to construct 1,507.21 miles of its railroad within the time required by law, thereby rendering the granted lands subject to forfeiture."

It is at least doubtful whether in view of subsequent legislation there was any fixed period within which construction was to be completed; but, however that may be, the railroad, when and as constructed, was accepted formally by the President of the United States; for more than forty years the Government has dealt with it as having met the laws' requirements; Congress has enacted some twenty-eight statutes recognizing that it has met them; and the Government throughout that period has enjoyed the benefit of reduced land grant rates for the movement of its traffic over it.

"3. That the Northern Pacific failed to dispose of certain of its lands to settlers at not to exceed $2.50 per acre as required by the law."

That this was required by the law the Northern Pacific denies; and 15 years ago, when the contention was first advanced by settlers, it was rejected, on full consideration, by the Secretary of the Interior. Not one of the settlers ventured to take the question into court, and it was never thereafter revived.

"4. That the Northern Pacific failed to dispose of hundreds of thousands of acres of its lands at public sale, as required by law."

This is an attack upon the decree of sale entered by the United States court in the foreclosure proceedings of 1875. The decree was in every respect a valid one; it was never appealed from; nor has its validity been challenged until now, nearly fifty years after it was entered.

"5. That hundreds of thousands of acres of poor land in the Northern Pacific grant were erroneously classified as mineral."

The They

This is an attack by the Government upon the acts of its own officers. mineral classification commission proceeded under an act of Congress. are not charged with fraud. Their findings were frequently objectionable to the Northern Pacific because we considered that the tendency was to classify as mineral (and therefore as not belonging to the Northern Pacific) lands which possessed little if any, mineral value. But we repeat, the commissioners were officers of the Government, and are not accused of fraud; they exercised their best judgment; and it would be strange indeed if now, more than 20 years after their findings were submitted to the Secretary of the Interior and by him approved, those findings could be assailed as erroneous."

6. That under a rule of law laid down by the Supreme Court the Northern Pacific has been erroneously allowed 1,500,000 acres too much land in the State of Washington."

In the whole period of 50 years during which the Northern Pacific grant has been in course of administration this claim was never advanced before. It is grounded upon the fact that the Northern Pacific might have built across the State of Washington a line more direct than the line which it actually constructed; and that if it had done so, as its mileage within that State would have been less, so the number of sections of land granted to it would have been less. But the company was given authority to fix its route; it conceived the route which it chose to be, as in fact it was (in the language of the act), "the most eligible one." The Government accepted the line as constructed, and for more than 40 years has used it and had the benefit of reduced land grant rates over it.

The net receipts are $77,800,709.76; there is due under contracts $7,265,022.31; and it is estimated that the unsold lands will produce net returns amounting to about $15,000,000. And the reader will bear in mind that this sum of $77,800,709.76 actually received was not all received at once. It is the total of the net receipts accumulated slowly and gradually during the fifty-four years since construction began.