Chapter V Governmental Acquisition of Property

In recent years the federal government has set up programs for the acquisition or disposition of productive facilities and natural resources. These programs have had various objectives, as for example the acquisition in conjunction with its parity payments policy of surplus agricultural commodities. Later acquisition programs, justified in terms of national defense, include the following: stockpiling of strategic raw materials; acquisition of land and equipment for military sites and for federally-owned productive facilities; the lending or leasing of federally-owned productive equipment to private producers; and the acquisition of plants and raw and finished materials incidental to enforcement of emergency control programs.

STOCKPILING

The Government may acquire natural resources in an effort to stockpile for defense purposes, in the course of expanding the military establishments or governmentally owned productive facilities, or it may acquire such resources to facilitate a privately financed defense project. This last purpose sometimes leads the Government to lend its power of eminent domain to private business concerns.

In June 1939 Congress assigned to the Secretary of the Interior and the Army and Navy Munitions Board the task of determining which materials are strategic and critical to American defense, and provided for acquisition of stocks of these materials. Congress also encouraged the development of mineral resources within the United States. Two months later Congress approved the exchange of surplus agricultural commodities held by the Commodity Credit Corporation for stocks of strategic and critical materials produced abroad. Under the fiscal 1941 Appropriations Act, the Navy Department obtained funds for procurement of strategic and critical materials in accordance with the Act of June 7, 1939. In this statute, and in a July 1940 Act to expedite the strengthening of the national defense, the President also was authorized to expend large sums on acquisition of such materials.

The Defense Production Act of 1950 empowers the President to make provision either for purchases of, or commitments to purchase metals and other raw materials, including liquid fuels. The government may use the acquired items or offer them for resale. The same Act also empowers the President to encourage the exploration, development, and mining of critical and strategic minerals and metals. The Mutual Security Act of 1951 also provides sustenance for the stockpiling program. The Director for Mutual Security is authorized to initiate projects designed to increase production and help in obtaining raw materials in which deficiencies exist among the United States’ free world allies. The purpose of aiding recipients of American aid to develop their own stockpiling program of critical materials is to reduce the steady drain on United States resources. The power of condemnation was added to the power of requisitioning granted in the 1950 Defense Production Act when Congress in a 1951 amendment empowered the President in the interest of national defense, and when deemed necessary by him, to acquire materials needed by the government. Acquisition may be by transfer, donation, purchase, or, if needed, properly instituted judicial proceedings.

The Domestic Minerals Program Extension Act of 1953 sought to reduce American dependence on overseas sources of supply for strategic or critical minerals and metals during periods of threatening world conflict. This was to be accomplished through a united effort on the part of each department and agency of the government having responsibility for the discovery, development, production, and acquisition of strategic or critical minerals and metals in order to decrease further and to eliminate where possible the dependency of the United States on overseas sources of supply of each such material. The Act extended for an additional two years the termination dates of all purchase programs designed to stimulate the domestic production of tungsten, manganese, chromite, mica, asbestos, beryl, and columbium-tantalum-bearing ores and concentrates and established by regulations issued pursuant to the Defense Production Act of 1950.

MILITARY SITES AND PRODUCTIVE FACILITIES

Scattered through the statute books, of course, are numerous authorizations to defense agencies to acquire land for specific projects. For example, a July 1939 statute authorized the Secretary of War to acquire fourteen described plots, and a May 1949 statute authorized the Secretary of the Air Force to establish a joint long-range proving ground for guided missiles and other weapons and to acquire lands and rights necessary to set up the project. An Act of 1951 authorized the Secretary of the Navy to enlarge existing water-supply facilities for the San Diego, California area for the purpose of insuring the existence of an adequate water supply for naval installations and defense production plants in that area. Of equal, if not greater significance than the scope of the delegation contained therein are the provisions for extension of Congressional control set-out in these authorizations for acquisition of specific items.

In the Second War Powers Act, breadth of Congressional delegation rather than intensity of control is the dominant fact. For example, the President was authorized to permit the Secretaries of War and Navy, or any other officer, board or commission, to acquire real property by any means necessary, including condemnation, to insure its use by the Government when needed. Immediate possession might be taken after filing of a condemnation petition. Among the many powers granted to the Federal Civil Defense Administrator in the 1951 statute creating the FCDA was that of procuring by condemnation or otherwise, constructing, or leasing materials and facilities.

Because they are extremely scarce or non-existent in their natural state in the United States, a few elements or other commodities have been the object of intensive government efforts to either directly produce them on a full scale, or to encourage private production by acquiring and transferring to private firms certain of the assets requisite to production. These are nitrogen, helium gas, fuels, rubber, synthetic liquid and abaca (a plant the fiber of which is used in making hemp). Thus the Board of Directors of the Tennessee Valley Authority were given power to exercise the right of eminent domain and to make and sell fixed nitrogen and fertilizers with the specific injunction that it maintain in stand-by condition suitable facilities for the production of explosives in the event of war or a national emergency. The plant might be used for the fixation of nitrogen for agricultural purposes or leased, as long as conversion to war production could be made quickly. The TVA of course was authorized to produce and sell electric power, but the government reserved the right in case of war or national emergency declared by Congress to preempt TVA-produced electricity as well as nitrogen. The Helium Gas Conservation Act of 1937 authorized the Secretary of the Interior, through the Bureau of Mines, to acquire lands, and acquire or construct such plants as were necessary to establish a federal monopoly of helium.

In 1942 the Secretary of Agriculture was authorized to construct or operate factories for the growth and processing of guayule and other rubber-bearing plants. In 1947 Congress proclaimed the continued existence of a short supply of rubber, a highly strategic and critical material needed for the common defense and which cannot, in its natural state, be grown in the United States. It reaffirmed the policy that there shall be maintained at all times in the interest of the national security and common defense, in addition to stock piles of natural rubber, a technologically advanced and rapidly expandable domestic rubber-producing industry. To this end, the powers of the United States to manufacture and sell synthetic rubber were to continue in force and the government would retain at least the minimum copolymer plant capacity to produce “not less than six hundred thousand long tons per year.” A year later, in March 1948, a policy of reliance upon the development of a free, competitive synthetic-rubber industry and the termination of government production was enunciated, the President to exercise certain powers of control to insure the existence of an extensive government demand for domestic synthetic-rubber.

The synthetic liquid fuels program was established in 1944. The Secretary of the Interior, acting through the Bureau of Mines, was authorized to develop and maintain one or more demonstration plants to produce synthetic liquid fuels from coal, oil shale, and other substances, and one or more demonstration plants to produce liquid fuels from agricultural and forestry products. The Bureau of Mines would also develop all facilities and accessories for the manufacture, purification, storage, and distribution of the products. Unlike the other plans for production of essential defense elements or commodities, this program was not designed directly to meet a major portion of defense needs for the commodity produced. Rather, the plants were to be of the minimum size which would allow the government to furnish industry with the necessary cost and engineering data for the development of a synthetic liquid-fuel industry.

In the Abaca Production Act of 1950, Congress declared that abaca, a hard fiber used in the making of marine and other cordage, is a highly strategic and critical material which cannot be produced in commercial quantities in the continental United States, and of which an adequate supply is vital to the industrial and military requirements for the common defense of the United States. The federal government was therefore to continue the program for the production and sale of abaca in which it was engaged at the termination of hostilities and to encourage abaca production throughout the world. The total acreage produced by the government was not to exceed fifty thousand, fluctuating below that upper limit at the discretion of the President.

The year of Dunkirk witnessed a number of Congressional authorizations to the Executive to acquire and either directly utilize, or pass on to private enterprise, material of war, or productive equipment and facilities. In mid-1940 the President was given power to authorize the Secretary of War to manufacture in factories and arsenals under his jurisdiction, or otherwise procure, coast-defense and anti-aircraft material, including ammunition therefor, on behalf of any American Republic. He might also establish repair facilities for such equipment. This was shortly extended to manufacturing for the government of any country whose defense the President deemed vital to the defense of the United States. Later in 1940 he was authorized to requisition and take over for use of the United States any military or naval equipment or munitions which had been ordered for export, but which then could no longer be exported. Certain items of a military nature could not, for example, be sent to France once the Germans had occupied that country. The President could dispose of such material to a private corporation or individual if such action was deemed to be in the public interest. The June 30, 1942 termination date was moved forward to June 30, 1944, and the President’s power enlarged to requisition in the interest of national defense or prosecution of war in July 1942.

In June 1940 the Secretary of the Navy was authorized to provide necessary construction facilities or manufacturing plants on federal land or elsewhere, and to man them with federal employees or otherwise whenever he found it impossible to make contracts or to secure facilities for procurement or construction of items authorized in connection with national defense. By October 1941 this authority had grown to a general authorization to the President, that if he found that the use of any military or naval equipment, supplies, or munitions, or machinery, tools, or materials necessary for the manufacture, servicing and operation of such equipment, were needed for the defense of the United States the President could requisition such property. Only two conditions prevailed: first, that the need was immediate and impending, and second, that just compensation was paid to the owners. The original expiration date of June 30, 1943 was later changed to June 30, 1944. But long before the Second World War, Congress gave the President authority to requisition merchant vessels. In Section 902 (a) of the Merchant Marine Act of 1936 the government reserved the right to requisition any vessel documented under the laws of the United States, during any national emergency declared by proclamation of the President. In authorizing the President to utilize the power of eminent domain to acquire land needed for pipe-line construction by private firms, Congress provided that in the event it was impracticable for any private person promptly and satisfactorily to construct such lines, the President could provide for the construction by such department as he might designate. The government thus was privileged to go into the pipe-line business, constructing and operating defense needed pipe-lines. Among the prerogatives which Congress made available to the Secretary of the Navy for purposes of insuring adequacy of maritime salvage operations during the war, was that of acquiring such vessels and equipment as he might deem necessary therefor. The Secretary also was empowered to transfer, by charter or otherwise, such equipment for operation by private salvage companies.

The Defense Production Act of 1950 gave the President powers virtually equal to those granted by Congress to the President in 1941. Again the President was empowered to requisition needed materials for the defense of the United States. And in July 1953 the three armed service secretaries were empowered to acquire, construct, establish, expand, rehabilitate or convert industrial plants, either publicly or privately owned, as might be needed for the defense of the United States. The statutory language followed the familiar prescription that acquisition could be by purchase, donation, lease, condemnation or otherwise as necessary.

FACILITATING ACQUISITION BY PRIVATE ENTERPRISES

In July 1941 Congress used the power of eminent domain to facilitate the construction of public utilities for defense purposes. Upon finding that the construction of any pipe-line for the transportation and/or distribution of petroleum or petrol products moving in interstate commerce was or might be necessary for national-defense purposes, the President was permitted to acquire such land or interest in land, including rights-of-way or easements, by the exercise of the right of eminent domain, as, in his opinion might be necessary. The President invoked this Act on a number of occasions.

The Second War Powers Act earlier mentioned not only authorized the acquisition of real property by the Secretaries of War and Navy or their agents, but permitted them to dispose of such property or interest therein by sale, lease or otherwise. The Small Business Concerns Mobilization Act of June 1942 empowered the Smaller War Plants Corporation, established under the Act, to purchase or lease land, to purchase, lease, build, or expand plants, and to purchase or produce equipment, facilities, machinery, materials, or supplies, as might be needed to enable the Corporation to provide small business concerns with the means and facilities to engage in the production of war materials. The Corporation could also enter into contracts with the United States government and any department, agency, or officer of the government having procurement powers and obligate the Corporation to furnish articles, equipment, supplies, or materials to the government.

AVAILABILITY OF FEDERALLY OWNED PROPERTY TO PRIVATE ENTERPRISE

Actually no clean demarcation can be made between this and the preceding section. A graduation can be established, moving from statutes lending the power of eminent domain to private enterprise, to those emphasizing government acquisition and lending or leasing, and ultimately to those principally concerned with providing government-owned equipment to private enterprise--the equipment presumably already in the hands of the government or subject to acquisition under other statues.

One of the very first Acts to provide for placing educational production of munitions of war stipulated that initial orders placed with any person, firm, or corporation for supplying such munitions, accessories, or parts, could include a complete set of such gages, dies, jigs, tools, fixtures, and other special aids and appliances, including drawings as needed for the production of munitions in quantity in the event of emergency. The title to all such facilities was to remain in the government of the United States. The fiscal 1941 Navy Department Appropriations Act granted the Navy funds to furnish Government-owned facilities at privately owned plants, and a July 1940 Act to expedite the strengthening of the national defense accorded like authority to the President. Section 303 (a) (d) of the Defense Production Act of 1950 gave the President a general power to purchase raw materials including liquid fuels for government use or for resale, and when in his judgment it would aid the national defense, to install government-owned equipment in plants, factories, and other industrial facilities owned by private persons.

ACQUISITIONS INCIDENTAL TO ENFORCEMENT OF A CONTROL PROGRAM

Of the acquisition statutes hitherto discussed, most required that an effort be made to negotiate a fair price with the individual or concern whose property was acquired and, failing that, recourse might be had to eminent domain proceedings. By the terms of the latter, private entrepreneurs or investors in effect are confronted with the option of utilizing their property in conformity with the Government’s mobilization program or, in lieu thereof, of relinquishing it to the Government. The statutes now to be considered sanction acquisition of private property in those cases in which the owners or operators are not managing it to the Government’s satisfaction.

A June 1940 Act to expedite national defense empowered the Secretary of the Navy, under the general direction of the President, whenever he deemed any existing manufacturing plant or facility necessary for the national defense, and whenever he was unable to arrive at an agreement with the owner of any such plant or facility for its use or operation, to take over and operate such plant or facility either by Government personnel or by contract with private firms. The Selective Training and Service Act of 1940 authorized the President, acting through the Secretaries of War or Navy, to take immediate possession of any plant or plants which in the opinion of the Secretary of War or the Secretary of the Navy were capable of being readily geared to war production. This drastic action came only when the owners refused to give to the United States preference in the matter of the execution of orders, or refused to manufacture the kind, quantity, or quality of arms or ammunition, or who refused to furnish the materials demanded at a reasonable price.

The War Labor Disputes Act gave the President a similar power to seize struck industries. It might be exercised with respect to any plant, mine, or facility equipped for the manufacture, production, or mining of any articles or materials which might be required for the war effort, or which might be useful in connection therewith. But a presidential finding was necessary first, that there was an interruption of the operation of the plant, mine, or facility as a result of a strike or other labor disturbance, and that the war effort would be unduly impeded or delayed by the interruption, and that the exercise of such power and authority was necessary to insure operation in the interest of the war effort.

Not, perhaps, punitive in its object, but nonetheless related to enforcement of a control program, was the provision of the Emergency Price Control Act of 1942, permitting the Price Administrator to buy or sell commodities and goods or grant subsidies to assure necessary production.