Mr. BALLAINE. Yes, originally, but all of that stock was taken up by Frost & Osborne and other purchasers.

Senator NELSON. I know it was peddled out among the farmers in Minnesota.

Mr. BALLAINE. When I sold the road to Frost & Osborne a provision in the contract required them to protect that stock, and they took it all in, all they could get, at an advance of 25 per cent over the price the original purchasers paid for it. Other purchasers scoured the country for it also and bought all they could get.

Senator NELSON. I know I discovered two parties who had bunches of your stock and peddled it out among the farmers of Minnesota. Mr. BALLAINE. They all had the opportunity to sell it back at 25 per cent advance.

Senator NELSON. So you did not raise all the money by your notes; you sold stock?

Mr. BALLAINE. Mr. Heinze, of Butte, put in $8,500, and all the rest of us interested in the original company put up different amounts, for which we took stock.

Senator NELSON. Did you not get something out of the stock you sold to the farmers?

Mr. BALLAINE. The company did, but we put money in the stocks ourselves. The sale of the preferred stock was used to make the preliminary surveys. Not a dollar of it was used in building the 20 miles. I borrowed money on my own notes from the Shedd Bros., of Chicago, from the Washington Trust Co., in Seattle, and from Frost & Osborne, with an additional amount, which I put in myself, to make up all of the $325,000 that built the first 20 miles, without a dollar from any other source whatever.

Senator LIPPITT. When you say "built it," you mean the cost of the surveys and the preliminary expense?

Mr. BALLAINE. The permanent survey, the preliminary work, and the construction. We built a dock and a sawmill. We purchased the equipment also out of all of that. So that that $325,000 represented not only the railroad, but the rolling stock, the docks, and the other equipment.

After I sold to Frost & Osborne they added $46,500 to that first 20 miles, making it stand $18,300 per mile, as it is to-day.

I believe that that will be the basis on which the Government will consider the value of the road, not a basis of $65,000. And if the owners of it are unwilling to accept that amount, the Government is entirely free to parallel the road, for there is ample room, and the Government owns practically everything at the head of Resurrection Bay.

I want to point out another feature that I will present later. It will be for the information of the members of the committee.

Senator NELSON. Have you any objection to telling the committee what you and your colleagues got out of Frost & Osborne when you turned over the project?

Mr. BALLAINE. None whatever. I am willing to submit our contract with them for your inspection.

Senator NELSON. And what was the arrangement?

Mr. BALLAINE. Frost & Osborne paid back all of the money which had been expended upon the road. They gave me in addition $28,000 in cash, out of which I paid outstanding indebtedness, and

they gave us also 17 per cent of the common stock. They obligated themselves to complete the road and not to increase the bond issue above $35,000 per mile. They obligated themselves also to protect the preferred stock that was outstanding. They went into the market to buy it for cash, in competition with other buyers. They made this offer direct themselves and through a broker in Duluth, Charles B. Aske. They bought all of the preferred stock they could. I think they owned practically all of it, and turned it over with their other securities to the Sovereign Bank of Canada. They paid for that preferred stock an average advance of 25 per cent over the original price which the purchasers had paid for it, so that that transaction was clean and honorable in every way.

Senator NELSON. My recollection is that that stock was peddled out to farmers at 15, 20 and 25 cents a share.

Mr. BALLAINE. Oh, no, $7 a share. It was $50 stock.
Senator NELSON. $7 a share?

Mr. BALLAINE. Yes; it was sold originally a year and a half before we started the work on the statement, that it was to be used for preliminary surveys. Of course we were not informed at that time whether it would be possible to find a feasible route or whether it would be possible to finance this project. And everybody who bought stock did it with that representation and with the knowledge that they might lose everything they put into it. Instead of losing, they got back every penny they put in and 25 per cent advance. If they did not, it was not because they did not have the opportunity. In the report made by the Alaska Railroad Commission, there is an exhaustive report as to the resources along the different routes. Their statements so far as I can see are accurate and trustworthy in that respect. But I do not believe that their recommendations are consistent with the body of their report.

Senator WALSH. If it does not interrupt you, Major, Freceived the impression from that report that these great coal deposits of which we hear may not prove to be particularly valuable or available by reason of their broken condition.

Mr. BALLAINE. That is true of the Bering River coal fields, to some extent. It is not true altogether of the Matanuska coal fields. Part of the Matanuska coal fields are broken, as you will see if you examine the reports of the Geological Survey, but I think a large majority of the area covered by the Matanuska coal fields is principally in place and never has been disturbed at all, or to a serious extent.

Senator WALSH. I am speaking about that report. Do they not make substantially the same report as to both of these fields?

Mr. BALLAINE. I have not noticed that particular feature of it. If they do, however, I think that Dr. Brookes will tell you that in the Matanuska district particularly, with which I am perfectly familiar, a large part of the coal measures are undisturbed at all, and never have been broken in any way. Some are perfectly level; some have a dip of 30 or 40°.

Senator NELSON. The report of the Geological Survey, I think, clearly indicates that the Matanuska field is the superior of the two. Mr. BALLAINE. Yes; that is conceded by all who know the two fields.

Senator NELSON. In the first place, they have more high-grade coal in the Matanuska, and in the next place, there is not so much of it broken.

Mr. BALLAINE. The Bering River coal district has been very badly broken by earthquakes.

The ACTING CHAIRMAN. Which country is that?

Mr. BALLAINE. The Bering River coal fields. The coal there is more or less in powdered form, although there is some of it that is in place that has not been badly disturbed.

For your information, and as a matter of official record, I wish to point out that if the Government does not desire to build from Chitina to Fairbanks, connecting with the Copper Ri er & Northwestern Railway, and does not wish to buy the Copper River & Northwestern, it will be at no loss. The distance from Chitina to Fairbanks is 313 miles, according to the railway commission's report. From Chitina for 200 miles to the Tanana Valley the country is barren of resources. The Copper River Valley is a high, dry, barren plateau, as the reports of the Agricultural Department have shown. All interested in Alaska, of every faction, I believe, will bear out my statement that agriculture in the Copper River Valley is impossible on account of the high altitude and the barren, dry soil.

On the other hand, the line from Seward through the Susitna Valley to the Tanana River would tap a very rich country all the way, a country rich in mineral, timber, and agriculture.

Senator WALSH. Let me inquire of you. Other than the people who are interested in the town down there, Cordova, who, of course, would like to have that route adopted, who else are particularly concerned in that route?

Mr. BALLAINE. Which route?

Senator WALSH. The route running from Cordova and up the Copper River.

Mr. BALLAINE. This railroad from Cordova is owned by the Alaska syndicate, which is made up of J. P. Morgan & Co., the Guggenheim brothers, and Kuhn, Loeb & Co. They own a half interest in the Cordova town site. I do not believe that anybody except those interested in this immediate railroad have any interest in the building or would favor the building of that line from Chitina to Fairbanks.

Senator WALSH. Those interests would not care at all about building from the Copper River up to Tanana??

Mr. BALLAINE. Except as it would make a feeder for their road. Senator NELSON. They will have to build to the Tanana or the road will not pay expenses. All they have got there now is the copper.

Mr. BALLAINE. This district in the Chitina Valley is the richest copper field in Alaska. They built the Copper River and Northwestern Railroad to tap their own copper properties. They have made a survey for the extension of that road through the mountains at Scoli pass to reach other copper properties, on the opposite side of the mountains.

Senator NELSON. What is that other copper field?
Mr. BALLAINE. The White River and the Nebesna.

That is on the opposite side of the Mount Wrangle range from the Kennecott copper mine.

Senator NELSON. Is that as good a copper country as down there in the Kennecott?

Mr. BALLAINE. Probably not so high a grade, but a very rich copper country. The Kennecott is the richest copper district in Alaska so far as known at the present time. The Alaska syndicate owns that particular copper property, and they practically own all the copper in that district, because they own all of the smelters on the Pacific coast, except a few which are owned by the United States Mining and Smelting Co.

The ACTING CHAIRMAN. Have they obtained title to that mining country?

Mr. BALLAINE. I think they have.

Senator WALSH. That road is being regularly operated, then?

Mr. BALLAINE. Yes. It was built primarily for their own purposes; that is, to reach their own copper properties. It was built up a very difficult canyon through the coast range of mountains. The mountains at this point are from 6,000 to 8,000 feet high, and the Copper River has cut its way through, making a very deep gorge. Senator NELSON. There are two very large glaciers there-Miles and Childs close together?

Mr. BALLAINE. The Miles and the Childs glaciers; yes, sir; and they have great difficulty in keeping the road open in the summertime on account of the glacial floods, and in the wintertime on account of the terrific winds that sweep down and bank the snow. Senator NELSON. They have crossed the Copper River practically three times. They started from Cordova and built east across the Copper River delta, and then they swung north between the Miles and the Childs glaciers, and went up on the west side, somewhere around to Chitina. Then they had to cross over. Is not that cor

rect?

Mr. BALLAINE. That is correct.

Senator WALSH. Let me inquire again. Have any entries been approved to any of these Bering coal-field lands?

Mr. BALLAINE. None at all. Most of them were canceled. The Cunningham group in the Bering River field was canceled. Several claims are still pending there.

Senator NELSON. My recollection is that there is one solitary entry that has been allowed.

Mr. WICKERSHAM. There are two; one at Port Graham and another down near Juneau-less than 200 acres.

Mr. BALLAINE. Yes; the Whorf property at Point Elizabeth. It is a lignite coal. None of the high-grade coal has been patented at

all.

Senator NELSON. All of the coal along Cook Inlet is lignite.

Mr. BALLAINE. All of this is lignite along Cook Inlet. This in the Matanuska district [pointing] is high-grade coal, where the bituminous and the anthracite occur. There has been very good coal recently discovered on the Skwentna River here [pointing].

Senator NELSON. Is that a branch of the Susitna?

Mr. BALLAINE. It is a branch of the Yetna. There is one vein of fine coal there 19 feet in thickness.

Senator NELSON. The Yetna is a branch of the Susitna?
Mr. BALLAINE. Yes, sir.

Senator NELSON. And this, the Skwentna, is a branch of the Yetna?

Mr. BALLAINE. Yes, sir.

Senator WALSH. This Copper River Railway does not reach the Bering fields?

Mr. BALLAINE. It would require a branch to reach the Bering fields. Senator NELSON. How long?

Mr. BALLAINE. There are two surveys. One is about 38 miles and the other about 50 or 55 miles.

Senator BRISTOW. Would you need a branch from your railway to the Matanuska field?

Mr. BALLAINE. Please don't refer to it as my railroad. I have no interest whatever in the Alaskan Northern.

Senator NELSON. If you will allow me to interrupt you, to reach the Bering River field they can build from the Cordova road, from the junction where it turns north

Mr. BALLAINE. They can either build from the junction at mile 42 from Cordova, straight across, or they can build from Controller Bay provided they decide there is a harbor on Controller Bay, or they can build from Katalla, 7 miles west of Controller Bay.

Senator WALSH. That would be a short line?

Mr. BALLAINE. That would be only about 25 miles.

Senator NELSON. And the other from the junction would be between 40 and 50 miles?

Mr. BALLAINE. Yes, sir.

Senator WALSH. How far would you have to build to get into the Matanuska fields?

Mr. BALLAINE. From Seward to the end of the Matanuska line is 183 miles. You would strike coal at mile 105. It is lignite. Twelve miles above the junction at Knik you enter the coal area in the Matanuska district, and this branch line, which would be 38 miles along from Knik, extends all the way through the coal fields.

Senator NELSON. But from the end of the completed line it is about 80 or 90 miles?

Mr. BALLAINE. The line is completed now to mile 71 and a fraction practically 72 miles. Cook Inlet is not navigable for about six months in the wintertime, on account of the floating ice, and there is a heavy bore coming in with the tide. The ice is rolled and turned so that navigation on Cook Inlet is absolutely impossible in the winter months. In the summer for about six months there is a harbor, and a very good one, at what is known as Ship Creek, on Knik Arm, at the head of Cook Inlet.

Senator NELSON. Which side of Knik Arm is that?

Mr. BALLAINE. On the east side. The coal for six months in the year can be brought from the Matanuska to Ship Creek at a very good harbor, in a distance of about 60 miles.

Senator WALSH. Then, as a matter of fact, to reach a supply of coal in the Bering fields all that would be required would be a branch line of railroad 41 miles, or an independent line of road perhaps 25 miles?

Mr. BALLAINE. Yes, sir.

Senator WALSH. And another one of an aggregate length of 40 miles or thereabouts?

Senator NELSON. You are not correct in that.