Atlanta tri-weekly journal. [volume] (Atlanta, Ga.) 1920-19??, 1922-05-27
Daugherty, in Official 0pin-
ion, Decides That Nitrates
Corporations Claim Can
not Be Sustained

WASHINGTON, May 26.-By the
Associated Press. Am opinion by
Attorney General Daugherty, sub
mitted to Secretary Weeks and for
warded Thursday to the house mill
tary committee, holds that the con-
tract executed by the government
with the Alabama Power company is
"invalid' with respect to the provi-
sion which power company officials
contend gives them the right of eX-
elusive purchase of the govern
ments interests in the steam pow
er plant at Gorgas, Ala.
The contract negotiated by the
war department with the Air Nj
trates Corporation of New York, a
subsidiary of the American Cyana-
mid company, under which nitrate
plant number two was constructed
at Muscle Shoals, is also held I'm
= valid" by the attorney gneeral with
regard to the option Of exclusive
purchase claimed by the corpora
tior in the event the plant ever is
disposed of by the government to
private enterprise.
The opinion of the attorney gen
eral, which was presented to the
committee by Chairman Kahn, was
Immediately, upon its receipt from
the war department., said the con-
tract was "burdensome upon the
government" and had been executed
by the war department without
proper congressional authority.
Power of Congress
The national defense act, the opin-
ion added, clearly stated that con-
gress alone could dispose by sale
or other means of the Muscle Shoals
properties.
The committee had been called
to consider the document in connec-
ton with the investigation of pro-
posals made by Henry Ford and
other private interests to develop
the governments power and nitrate
projects at Muscle Shoals.
Members of the committee who
favored the Ford proposal said the
opinion was of the greatest i'm
portance with respect to. ultimate
action upon the proposal in con-
gress. Mr.. Ford proposed to pur-
chase the nitrate plant and. under
his offer, would receive clear title
to the power station at HGorgas.
Vice President Hammitt, of the
Air Nitrate corporation, and Thorn
as Martin, president of the Ala
bama Power company, both had
served notice to the committee that
the interest they represented con-
fidently expected the government to
live up to the terms of the respec-
tive contracts and, in the event of
failure on the part of the govern
ment. would institute court proceed
ings to prevent the delivery of the
properties to other private interests.
The Alabama Power company,
pursuant to the terms of it's con-
tract with the war department re-
Gently made an offer to Secretary
Weeks of $2,500,000 for the gov,
ernment's interest in the Gorgas
plant, the railroad and transmits
sio Mine to Muscle Shoals.
Mr.. Martin is scheduled to argue
the question of legality of the con-
tract before the sneate committee
Saturday.
Quick Action Forecast
Acknowledgement Daugherty's
opinion, committee members said
was almost an exact confirmation Of
that submitted by Colonel Hill, act
ing judge advocate general Of the
army. Committee members, it was
explained, had desire to obtain an
opinion from the civilian law officer
of the government before they took
decisive action on the proposals be-
fore the committee. and for that
reason it was determined to delay
a decision until the attorney-generaPs
views were obtained.
Some members of the house mill
tary affairs committee predicted to-
day that committee action on the
various private offers for develop
ment of Muscle, Shoals would be de-
cided quickly as the result of the
opinion of Acknowledgement Daugh-
erty holding invalid certain contracts
entered into by the government with
the Alabama Power company, and
vi
Discussing the Alabama Power
company's contract, Mr.. Daugherty
said in part:
mo one can carefully analyze the
long and rather complex contract
made with this company, without
being impressed with the harsh and
even drastic provisions which it
imposes on the government. When
ofY~1o P10CplU
scrutinized and their full signifi-
canoe realized, it becomes at once
apparent that the company lost no
opportunity of turning to its own
advantage every possible change of
circumstances. But, however bur
densome the agreement may be, the
government on it's part must faith
fully observe the obligations it as
sumed if they were in fact author
lied by proper statutory power. L
feel persuaded, however, that the
option to purchase which the con-
tract contains, was unauthorized.
but before 1 proceed to state my
reasons I must call attention to
what the agreement really con-
tainS."
Synopsis of Opinion
After reciting a lengthy synopsis
of the contract the OPINION ADDS:
1.-THE option to purchase is based
on a number of contingencies; but
the outstanding feature is that the
government may, after designated
time, compel the company to buy
the Warrior extensions and the
Warrior substation at value to be
determined by arbitration, with pay
ments to be spread over a period Of
71-2 years. On the other hand, the
company at any other time after
December 1, 1926 or earlier, if the
United States finally ceases to take
power, may demand that the value
be determined by three arbitrations.
Although the United States is OBJ