Reference: Your letters X-1689 of Dec 13/55 and X-1380 of Sept 29/55.

CHICAGO DIVERSION

When Congress adjourned in August last year, the status of legislation on the Chicago diversion was as follows: Bill H.R. 3210 (introduced by Representative O'Brien of Illinois) had been approved by the House of Representatives and sent to the Senate, where it was referred to the Committee on Public Works.

2. In the Senate, Senator Dirksen of Illinois introduced Bill S-1772 about midway through the session, and on July 14 he and Senator Douglas, also of Illinois, co-sponsored a second bill, S-2550. S-1772 and S-2550 which were both identical to H.R. 3210 were referred to the Committee on Public Works also. At the end of July Senator Dirksen wrote to the Secretary of State requesting the State Department to examine all aspects of the Chicago diversion in detail while Congress was in adjournment, so that full information would be available to all interested parties when the Senate reconvened.

3. The present situation is as follows. The Senate Committee on Public Works has not yet scheduled hearings on any of the three identical bills that are before it. It is likely that hearings will not be scheduled until the State Department have given Senator Dirksen the information he requested last July. We were told today by the State Department that their reply may be sent fairly soon. We suspect that Senator Dirksen has been in touch with the State Department at either the Secretary or Under-Secretary level about a reply to his letter, and that instructions have been issued in the State Department that the reply is to be sent as soon as possible.

4. As far as the State Department is concerned they have not yet decided whether or not they will oppose legislation aimed at increasing the diversion at Chicago. Their final decision will not be made until their legal advisers have completed the study they have been conducting as a result of Senator Dirksen's letter. We have not been able to obtain any definite information on what the results of that study may be, but we were told today that the study is expected to be completed by the end of this week. When the results of that study are available they will be examined by the State Department's Office of British Commonwealth and Northern European Affairs, who, taking into account the results of that study and other relevant circumstances, will recommend a final State Department position. It is expected that the State Department's reply to Senator Dirksen will be sent almost as soon as their own position (which is almost certain to be reflected in their reply) has been decided.

5. As for the tactics to be adopted by Canada, we think it would be wise to make our views known before the State Department send their reply to Senator Dirksen, or, failing that, before the Senate Committee on Public Works begins hearings on any of the bills now before it. The advantage, as we see it, would be that any members of the Committee who are opposed to the diversion would be able to refer to Canada's opposition in support of their attempts to prevent approval of this legislation. If our views are not known, supporters of the bill will almost certainly use the absence of Canadian views (as they did last year) as an indication that Canada no longer is opposed to an increased diversion at Chicago. As you have suggested, our views could be made known by submitting either a formal note or an aide mémoire. We agree that an aide mémoire might serve the purpose. It seems to us, however, that it is possible that a change from a formal note to a less formal aide mémoire might be interpreted in certain quarters as an indication that our views now are not so strong as they were in the past. On balance, therefore, we are inclined to favour a formal note. If you agree, we would propose to deliver to the State Department, at the earliest possible opportunity, a note along the lines of that given in your teletype EX-1339 of July 26.¹⁵⁶ The only change that we might suggest in the text of that note, in order to achieve the transition from a protest based primarily on the possibility of damage to Canadian navigation interests, to a protest based on a possible reduction in power potential, would be to add to it a reference to the fact that in our previous notes, specifically No. 70 of February 1, 1954¹⁵⁷ and No. 169 of March 10, 1954,¹⁵⁸ we pointed out that any increase in the diversion at Chicago would impair the power potential on the Niagara and St. Lawrence Rivers. This addition might be made by inserting a new second sentence in paragraph 2 of the proposed note. We should be grateful for your views on this suggestion.

When we were discussing this subject with George Vest of the State Department's Canadian Desk today, he told us that one of the other relevant circumstances which would be taken into account by the State Department in arriving at their final position, would be the relationship between on the one hand a protest on the increased Chicago diversion and request for compensation for damages done to Canadian power interests and on the other hand a possible similar protest and request for compensation for damages done to United States interests in the lower Columbia River. In Vest's view a Canadian request for compensation in the context of the Chicago diversion would serve to justify a similar United States request for compensation with respect to the Columbia. It was Vest's opinion (and on this his view is subject to change in the light of the State Department's legal division's study) Canada is entitled to protest an increased diversion at Chicago under the terms of paragraph 1 of Article II of the Boundary Waters Treaty of 1909. According to Vest's interpretation this paragraph would give the Hydro Electric Power Corporation of Ontario, for instance, the right to sue the State of Illinois and the Sanitary District of Chicago for damages in a United States Court. He indicated that there might be some question whether HEPCO would be properly regarded as a Party (with a capital P) or a party (with a small p).

6. Another of the other relevant circumstances is the Niagara Treaty of 1950. It is still Vest's view that an increase in the Chicago diversion would be a direct infringement of this treaty, but again this may not be the State Department's final opinion. He indicated that there was some doubt in the State Department whether the amount of water authorized for use for the production of power at Niagara was an absolute and fixed figure, or whether the phrase less the amount of water used and necessary ... could be interpreted as permitting an increased diversion at Chicago for domestic and sanitary purposes.

7. With respect to the International Lake Ontario Board of Engineers Interim Report to the International Joint Commission, we are inclined to think that it might be to our advantage to authorize its release. In our view it would be advantageous not to release the report only if we intended to protest again on the grounds of damage to Canadian navigation interest. But since the report seems to make such a protest by Canada impossible, that advantage disappears. Further, if our next protest is to be made on the grounds of reduced power potential in the Niagara and St. Lawrence Rivers, it seems to us that the evidence in the report showing that the proposed increased diversion at Chicago will result in a substantial loss of power to Canada should become public knowledge. Although we do not know what measures may have been taken to keep the contents of this report confidential, we would be surprised if most of the important information in it is not by now known to all those who are interested in the Chicago diversion.