B-78055, JULY 22, 1948, 28 COMP. GEN. 38

B-78055: Jul 22, 1948

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DISPOSITION OF THE SURPLUS BY SALE TO A NON-GOVERNMENT ACTIVITY IS NOT LEGALLY OBJECTIONABLE. 1948: I HAVE YOUR LETTER OF JULY 1. THAT THIS PLANT IS NOW BEING ADAPTED FOR USE IN CONNECTION WITH A PLANT FOR THE EXPERIMENTAL PRODUCTION OF SYNTHETIC LIQUID FUEL NOW UNDER CONSTRUCTION. YOU STATE THAT ONE OF THE FACILITIES OF THE FORMER ORDNANCE PLANT IS A STEAM-ELECTRIC GENERATING PLANT WITH THREE GENERATING UNITS RATED AT 7. THAT IT IS INTENDED TO USE THE GENERATING PLANT TO FURNISH STEAM AND ELECTRIC ENERGY FOR THE OPERATION OF THE SYNTHETIC LIQUID FUELS PLANT. IT IS STATED FURTHER THAT THE CAPACITY OF THE GENERATING PLANT IS IN EXCESS OF THE BUREAU'S REQUIREMENTS FOR THE OPERATION OF THE SYNTHETIC LIQUID FUEL PLANT.

B-78055, JULY 22, 1948, 28 COMP. GEN. 38

SALE OF EXCESS ELECTRICITY TO NON-GOVERNMENT ACTIVITIES - DISPOSITION OF PROCEEDS FEDERAL AGENCIES MAY NOT MAKE USE OF APPROPRIATED FUNDS TO MANUFACTURE PRODUCTS OR MATERIALS FOR, OR OTHERWISE SUPPLY SERVICES TO, PRIVATE PARTIES, IN THE ABSENCE OF SPECIFIC AUTHORITY THEREFOR; HOWEVER, WHERE A GOVERNMENT AGENCY IN THE COURSE OF ITS OPERATIONS PRODUCES ELECTRIC CURRENT IN EXCESS OF ITS NEEDS, DISPOSITION OF THE SURPLUS BY SALE TO A NON-GOVERNMENT ACTIVITY IS NOT LEGALLY OBJECTIONABLE. IF IT BE ADMINISTRATIVELY DETERMINED BY THE BUREAU OF MINES THAT IT WOULD BE IN THE GOVERNMENT'S INTERESTS TO OPERATE A GOVERNMENT-OWNED ELECTRIC GENERATING PLANT AT ITS CAPACITY, ANY SURPLUS ELECTRICITY RESULTING THEREFROM MAY BE DISPOSED OF BY SALE TO A PRIVATE ACTIVITY; HOWEVER, UNDER SECTION 3618, REVISED STATUTES, THE CREDITS ACCRUING TO THE BUREAU THROUGH PAYMENT BY THE PURCHASER OF INVOICES FOR MATERIALS, SUPPLIES, ETC., USED IN THE PLANT'S OPERATION--- AS DISTINGUISHED FROM DIRECT MONEY PAYMENTS--- MAY NOT BE USED WITHOUT MAKING CORRESPONDING TRANSFERS FROM THE BUREAU'S APPROPRIATED FUNDS INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

ACTING COMPTROLLER GENERAL YATES TO THE SECRETARY OF THE INTERIOR, JULY 22, 1948:

I HAVE YOUR LETTER OF JULY 1, 1948, STATING THAT THE BUREAU OF MINES, IN THE PERFORMANCE OF ITS FUNCTIONS UNDER THE SYNTHETIC LIQUID FUELS ACT OF APRIL 5, 1944, 58 STAT. 190, 30 U.S.C. 321-325, HAS TAKEN OVER FROM THE DEPARTMENT OF NATIONAL DEFENSE A FORMER ORDNANCE PLANT LOCATED AT LOUISIANA, MISSOURI, AND THAT THIS PLANT IS NOW BEING ADAPTED FOR USE IN CONNECTION WITH A PLANT FOR THE EXPERIMENTAL PRODUCTION OF SYNTHETIC LIQUID FUEL NOW UNDER CONSTRUCTION.

YOU STATE THAT ONE OF THE FACILITIES OF THE FORMER ORDNANCE PLANT IS A STEAM-ELECTRIC GENERATING PLANT WITH THREE GENERATING UNITS RATED AT 7,500 KILOWATTS EACH, AND THAT IT IS INTENDED TO USE THE GENERATING PLANT TO FURNISH STEAM AND ELECTRIC ENERGY FOR THE OPERATION OF THE SYNTHETIC LIQUID FUELS PLANT. IT IS STATED FURTHER THAT THE CAPACITY OF THE GENERATING PLANT IS IN EXCESS OF THE BUREAU'S REQUIREMENTS FOR THE OPERATION OF THE SYNTHETIC LIQUID FUEL PLANT, BUT AS THE OPERATION OF THE GENERATING PLANT APPROACHES ITS CAPACITY THE UNIT COST OF THE STEAM AND ELECTRIC ENERGY PRODUCED WILL BE PROPORTIONATELY REDUCED; IN OTHER WORDS, THAT ECONOMY AND EFFICIENCY OF OPERATION WILL BE SERVED BY OPERATING THE GENERATING PLANT TO PRODUCE MORE STEAM AND ELECTRIC ENERGY THAN THE BUREAU WILL REQUIRE, IF THE EXCESS ELECTRIC ENERGY CAN BE SUITABLY DISPOSED OF.

IT IS STATED THAT THE NORTHEAST MISSOURI POWER COOP, A RURAL ELECTRIC COOPERATIVE ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF MISSOURI, NEEDS THE EXCESS ELECTRIC ENERGY AND DESIRES TO COOPERATE WITH THE BUREAU OF MINES IN THE OPERATION OF THE STEAM-ELECTRIC GENERATING PLANT BY CONTRIBUTING TO THE COST OF ITS OPERATION; THAT IF THE BUREAU OF MINES MAY RECEIVE AND HAVE THE BENEFIT OF THE COOPERATIVE'S CONTRIBUTION IT WOULD BE DESIRABLE TO OPERATE THE PLANT AS INDICATED TO PRODUCE EXCESS ELECTRIC ENERGY WHICH WOULD BE DELIVERED TO THE COOPERATIVE.

YOU ENCLOSE A DRAFT OF A PROPOSED CONTRACT TO BE ENTERED INTO WITH NORTHEAST MISSOURI POWER COOP TO ACCOMPLISH THE ABOVE PURPOSE, THE ESSENCE OF THE AGREEMENT BEING THAT THE BUREAU OF MINES WILL OPERATE THE POWER PLANT TO PRODUCE MORE ELECTRIC ENERGY THAN THE BUREAU ITSELF REQUIRES, AND WILL DELIVER THE EXCESS ELECTRIC ENERGY TO THE COOPERATIVE, AND THE CONTRIBUTION OF THE COOPERATIVE WILL BE MEASURED BY THE AMOUNT OF ELECTRIC ENERGY DELIVERED TO IT AS STATED RATES. UNDER THE CONTRACT THE COOPERATIVE WILL NOT ACTUALLY PAY ANY MONEY TO THE BUREAU OF MINES BUT WILL PAY THE BUREAU OF MINES' CERTIFIED INVOICES FOR MATERIALS, SUPPLIES, OR EQUIPMENT WHICH WILL BE USED BY THE BUREAU IN THE OPERATION OF THE PLANT. IT IS INDICATED THAT PAYMENT FOR THE PURCHASE OF COAL NECESSARY TO OPERATE THE POWER PLANT WILL FORM THE LARGEST PART OF THE COOPERATIVE'S CONTRIBUTION, AND MAY BE SUFFICIENT TO BALANCE ALL OF THE BUREAU'S CREDITS AS THEY ACCUMULATE FOR THE DELIVERY OF ELECTRIC ENERGY.

YOU REQUEST AN OPINION AS TO THE LEGAL PROPRIETY OF THIS TRANSACTION, PARTICULARLY WITH RESPECT TO THE BUREAU'S USE OF THE CREDITS WHICH WILL ACCRUE TO IT UPON THE DELIVERY OF ELECTRIC ENERGY WITHOUT MAKING CORRESPONDING TRANSFERS FROM ITS APPROPRIATED FUNDS INTO THE MISCELLANEOUS RECEIPTS OF THE TREASURY. YOUR LETTER SUGGESTS CERTAIN POINTS FOR CONSIDERATION BY THIS OFFICE IN REACHING A CONCLUSION, AS FOLLOWS:

THE SYNTHETIC LIQUID FUELS ACT, SUPRA, PROVIDES THAT: " IN ORDER TO CARRY OUT THE PURPOSES OF THIS CHAPTER, THE SECRETARY OF THE INTERIOR IS AUTHORIZED * * * TO COOPERATE WITH ANY OTHER FEDERAL OR STATE DEPARTMENT, AGENCY, OR INSTRUMENTALITY, AND WITH ANY PRIVATE PERSON, FIRM, EDUCATIONAL INSTITUTION, OR CORPORATION, IN EFFECTUATING THE PURPOSES OF THIS CHAPTER.' UNDER THIS AND SIMILAR PROVISIONS IN OTHER ACTS THE BUREAU OF MINES HAS PERFORMED MUCH WORK UNDER VARIOUS FORMS OF COOPERATIVE AGREEMENTS. THE CONTRIBUTION OF THE COOPERATOR HAS FREQUENTLY BEEN IN THE FORM OF PROVIDING SERVICES, MATERIALS, OR SUPPLIES FOR THE COOPERATIVE WORK, EITHER BY DIRECT DELIVERY TO THE BUREAU OR BY PAYMENT OF THE BUREAU'S CERTIFIED INVOICES. THE ONLY DIFFERENCE BETWEEN SUCH COOPERATIVE AGREEMENTS AND THE ONE HERE IN QUESTION IS IN THE NATURE OF THE CONSIDERATION THAT RUNS TO THE COOPERATOR. IN THE OTHER COOPERATIVE AGREEMENTS THE CONSIDERATION RUNNING TO THE COOPERATOR IS GENERALLY HIS INTEREST IN THE EXPERIMENTAL OR RESEARCH WORK BEING PERFORMED, AND THE COOPERATOR GETS IT IN THE FORM OF REPORTS OR BY DIRECT OBSERVATION OF AND PARTICIPATION IN THE COOPERATIVE WORK. UNDER THE SUBJECT COOPERATIVE AGREEMENT THE CONSIDERATION RUNNING TO THE COOPERATOR WILL BE A BY PRODUCT OF THE OPERATIONS. IT IS BELIEVED THAT THE DIFFERENCE IN THE FORM OF THE CONSIDERATION RUNNING TO THE COOPERATOR HAS NO REAL SIGNIFICANCE AND CANNOT IN ITSELF MILITATE AGAINST THE VALIDITY OF THE COOPERATIVE AGREEMENT AS SUCH.

THE SYNTHETIC LIQUID FUELS ACT, SUPRA, PROVIDES THAT: "ALL MONIES RECEIVED FROM THIS CHAPTER FOR PRODUCTS OF THE PLANTS * * * SHALL BE PAID INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.' THE EXCESS ENERGY REFERRED TO IN THE CONTRACT WILL NOT BE THE PRODUCT OF A DEMONSTRATION PLANT TO PRODUCE LIQUID FUELS, AS THAT EXPRESSION IS USED IN THE ACT. THE POWER PLANT, AND IN FACT THE ENTIRE FORMER ORDNANCE PLANT AT LOUISIANA, MISSOURI, ARE NOT INTEGRAL PARTS OF THE SYNTHETIC LIQUID FUELS PLANT, BUT ARE INCIDENTAL FACILITIES USED FOR THE PRODUCTION OF PRODUCTS WHICH ENTER INTO THE OPERATION OF THE FUELS PLANT. THE STEAM AND ELECTRIC ENERGY FOR THE OPERATION OF THE FUELS PLANT COULD BE PURCHASED FROM OUTSIDE SOURCES IF THEY WERE AVAILABLE AND IF THAT WOULD BE ECONOMICAL. IT IS BELIEVED, THEREFORE, THAT EVEN IF THE EXCESS ELECTRIC ENERGY SHOULD BE SOLD FOR DIRECT MONEY PAYMENTS, THE MONEY RECEIVED WOULD NOT BE FOR DEPOSIT IN THE TREASURY AS MISCELLANEOUS RECEIPTS UNDER THE PROVISIONS HERE CITED.

TO BE SURE, THE CONTRACT COULD HAVE BEEN WRITTEN TO REQUIRE THE COOPERATIVE TO FURNISH AND DELIVER TO THE BUREAU SPECIFIED MATERIALS, SUPPLIES, AND EQUIPMENT INSTEAD OF PROVIDING THAT THE COOPERATIVE SHOULD PAY FOR MATERIALS, SUPPLIES, AND EQUIPMENT ORDERED BY THE BUREAU. IN THIS FORM, IT MAY BE THAT THE CONTRACT WOULD SEEM LESS LIKE A SALE OF ELECTRIC ENERGY. ON THE OTHER HAND, IT WOULD SEEM THAT TO PUT THE CONTRACT IN THAT FORM WOULD SERVE NO REAL USEFUL PURPOSE AND IT WOULD BE CUMBERSOME BOTH TO STATE AND ADMINISTER. IT IS BELIEVED BY THIS DEPARTMENT THAT A STATUTORY AUTHORITY TO COOPERATE WITH OTHERS IN CARRYING OUT SPECIFIED FUNCTIONS, NECESSARILY IMPLIES THE RECEIPT OF SOME FORM OF CONTRIBUTION FROM THE COOPERATOR. IF IT IS CONCEDED THAT THE CONTRIBUTION MAY BE IN THE FORM OF SERVICES, MATERIALS, OR SUPPLIES, NO SENSIBLE REASON CAN BE PERCEIVED WHY IT COULD NOT BE JUST AS WELL IN THE FORM OF PAYMENT FOR SERVICES, MATERIALS, OR SUPPLIES. AND INASMUCH AS SOME UNIT MUST BE ADOPTED TO MEASURE THE COOPERATOR'S CONTRIBUTION, THERE SEEMS TO BE NO APPARENT REASON WHY THE MEASUREMENT SHOULD NOT BE BASED UPON THE PARTICULAR THING, IN THIS CASE UNITS OF ELECTRIC ENERGY, WHICH THE GOVERNMENT MAY SUPPLY TO THE COOPERATOR.

IT IS FUNDAMENTAL THAT FEDERAL AGENCIES CANNOT MAKE USE OF APPROPRIATED FUNDS TO MANUFACTURE PRODUCTS OR MATERIALS FOR, OR OTHERWISE SUPPLY SERVICES TO, PRIVATE PARTIES, IN THE ABSENCE OF SPECIFIC AUTHORITY THEREFOR. 15 COMP. DEC. 178; B-69238, JULY 13, 1948. HOWEVER, IT HAS LONG BEEN HELD THAT, WHERE A GOVERNMENT AGENCY IN THE COURSE OF ITS OPERATIONS PRODUCES ELECTRIC CURRENT IN EXCESS OF ITS NEEDS, DISPOSITION OF THE SURPLUS BY SALE TO A NON-GOVERNMENT ACTIVITY IS NOT LEGALLY OBJECTIONABLE. 5 COMP. GEN. 389; 11 ID. 144. THEREFORE, IF IT BE ADMINISTRATIVELY DETERMINED TO BE IN THE INTEREST OF THE GOVERNMENT TO OPERATE THE GENERATING PLANT INVOLVED AT ITS CAPACITY, NO OBJECTION WILL BE INTERPOSED TO THE DISPOSITION OF THE EXCESS ELECTRIC POWER BY SALE TO THE NORTHEAST MISSOURI POWER COOP IN THE MANNER CONTEMPLATED BY THE TERMS OF THE PROPOSED AGREEMENT.

CONSIDERATION OF THE QUESTION AS TO THE DISPOSITION OF THE RECEIPTS FROM THE SALE OF THE POWER NECESSARILY INVOLVES THE PROVISIONS OF SECTION 3618, REVISED STATUTES, 31 U.S.C. 487, WHICH REQUIRES THAT ALL PROCEEDS OF SALES OF OLD MATERIAL, CONDEMNED STORES, SUPPLIES OR OTHER PUBLIC PROPERTY OF ANY KIND (WITH CERTAIN EXCEPTIONS NOT RELEVANT HERE) SHALL BE DEPOSITED AND COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, ON ACCOUNT OF "PROCEEDS OF GOVERNMENT PROPERTY," AND SHALL NOT BE WITHDRAWN OR APPLIED, EXCEPT IN CONSEQUENCE OF A SUBSEQUENT APPROPRIATION MADE BY LAW.

BY REASON OF THE PLAIN AND UNAMBIGUOUS TERMS OF THIS PROVISION OF LAW, THE DECISIONS OF THE ACCOUNTING OFFICERS HAVE ESTABLISHED THE RULE THAT, IN THE ABSENCE OF SPECIFIC STATUTORY AUTHORITY OTHERWISE, ANY AMOUNTS RECEIVED FOR GOVERNMENT PROPERTY DISPOSED OF BY DIRECT SALE OR IN ANY OTHER MANNER MUST BE COVERED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS. SEE 27 COMP. GEN. 117 AND CASES CITED THEREIN. NO REASONABLE BASIS APPEARS FOR NOT APPLYING THE CITED RULE TO THE INSTANT CASE. IF, AS YOU CONTEND, THE EXCESS ELECTRIC POWER TO BE PRODUCED DOES NOT FALL INTO THE CATEGORY OF ,PRODUCTS OF THE PLANT" WITHIN THE MEANING OF THE PROVISION IN THE ACT OF APRIL 5, 1944, WHICH REQUIRES THAT MONEYS RECEIVED FOR SUCH PRODUCTS BE PAID INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, THEN IT NECESSARILY FOLLOWS THAT GENERAL STATUTORY PROVISIONS ARE APPLICABLE AND THAT THE DISPOSITION OF THE PROCEEDS OF THE SALE MUST BE IN ACCORDANCE WITH THE TERMS OF SAID SECTION 3618, REVISED STATUTES. MOREOVER, IT IS IMMATERIAL THAT REIMBURSEMENT FOR THE ELECTRIC ENERGY WILL BE BY PAYMENT OF THE BUREAU OF MINES' CERTIFIED INVOICES FOR MATERIALS, SUPPLIES, OR EQUIPMENT USED IN THE OPERATION OF THE PLANT, RATHER THAN BY DIRECT MONEY PAYMENTS TO THE BUREAU.

FURTHER, IT IS IMPORTANT TO OBSERVE THAT THE PRINCIPAL POINT DETERMINED BY THE DECISIONS IN 5 COMP. GEN. 389 AND 11 COMP. GEN. 144, ABOVE CITED, WAS THAT THE PROCEEDS OF THE SALE OF THE ELECTRIC POWER THERE INVOLVED COULD NOT BE USED FOR OPERATION OF THE PLANTS BUT WERE REQUIRED TO BE DEPOSITED INTO THE TREASURY AS MISCELLANEOUS RECEIPTS.

ACCORDINGLY, IT MUST BE HELD THAT THE USE BY THE BUREAU OF MINES OF THE CREDITS WHICH WILL ACCRUE TO IT UPON THE DELIVERY OF ELECTRIC ENERGY, WITHOUT MAKING CORRESPONDING TRANSFERS FROM ITS APPROPRIATED FUNDS INTO THE TREASURY AS MISCELLANEOUS RECEIPTS, IS NOT AUTHORIZED.