Some steps have been taken with reference to a postal convention with Mexico. A mutual exchange of dead letters has already been agreed upon and carried into effect; and I now await a project which Mexico is to propose, for a more perfect arrangement, by which it is expected the rates of postage between the two countries will be materially reduced.

Under our postal convention with Great Britain, the Philadelphia post office, with the concurrence of that Government, has been constituted an office of exchange for United States and British mails. The articles of agreement on this subject are hereto annexed. I regret to state that my proposition for the reduction of pamphlet and magazine postage between the two countries to one cent an ounce on either side has been positively declined by the British Post Department. The combined rate is at present altogether too high, being eight cents an ounce for all works of this kind above the weight of two ounces.

In the month of March last an arrangement was made with the proprietors of the Australia Pioneer Line of monthly packets to convey mails regularly between New York and Port Philip, Australia, at two cents a letter, one-half cent per newspaper, and one-quarter cent an ounce for pamphlets and magazines, and, with the view of affording to our citizens the cheapest practicable means of communication with that country, I have fixed the rates on all outgoing matter by that line at five cents a letter, two cents each for newspapers, and one cent an ounce or fraction of an ounce for pamphlets and magazines, prepayment required. These rates embrace both the United States inland and sea postage. As the United States postage cannot be prepaid on incoming letters by this line, they are treated as ordinary ship letters. Similar arrangements have been made during the year with the proprietors of the steamers Black Warrior and Cahawba to convey mails semi-monthly between New York and Havana, and New Orleans and Havana, at two cents a letter, and also with the proprietor of the steamship Jewess to convey mails once in every twenty days between New York and Nassau, New Providence, returning by way of Havana, at the same rate of compensation.

By these agreements an important point has been gained in sustaining the department in the efforts which should be made in all future arrangements to keep the cost of the ocean service, if possible, within its receipts.

To the appendix (marked A) I invite your particular attention and that of Congress.

It exhibits full statistical information on the subject of the foreign mails; embracing the amount of postages, inland, sea, and foreign, on mailable matter received and sent by the different mail steamship lines during the year; the amounts of letter postages on British, Prussian, Bremen and Havre mails; the portion thereof collected by the United States, Great Britain, Prussia and Bremen, respectively; and the amounts of unpaid and paid matter received and sent by each of the lines of mail steamers. The gross and net revenues received by the department from each of the trans-atlantic mail lines are shown, and also the revenue derived from the correspondence with Great Britain, Prussia, and Bremen, respectively, under the existing postal arrangements with these countries, both including and excluding the United States inland postage. It also shows the number of letters and newspapers exchanged during the year between the United States and Great Britain in British mails, between the United States and Bremen in Bremen mails, and between the United States and the Kingdom of Prussia in closed mails; the number of letters (in ounces) received and sent in closed mails under each of our closed mail arrangements, and the number of letters and newspapers conveyed by the several home lines of ocean steamers. Other valuable statistics connected with the foreign mail service are also fully stated.

The usual report of fines and deductions will be duly furnished for the information of Congress. These fines and deductions for the year ending the 30th June, 1854, amount to $110,486 59. The amount for the previous year was $37,920 31. The increased amount has been mainly caused by a more rigorous exaction than heretofore of forfeitures incurred for defective service. The aggregate amount of fines and deductions for the last year has thus been greatly increased.

I am pleased to say that the introduction into the post offices of a better system of responsibility for mail bags has resulted in checking the waste of this species of property. The consequence has been a decrease of twenty per cent. in the number of letter mail bags procured during the year ending 30th of June last, as compared with the preceding year; though the ordinary increase in the transportation of letters has required the use of a greater number of bags than were actually used before.

My assistants and chief and other clerks have faithfully attended to all their duties during the past year. JAMES CAMPBELL.

To the PRESIDENT.

VI. THE INTERIOR.

REPORT OF THE SECRETARY OF THE INTERIOR.

DEPARTMENT OF THE INTERIOR,

December 4, 1854.

SIR: I have the honor to submit the usual annual report of the operations of this department.

The business of the General Land Office has greatly increased, but has been conducted with vigor and ability.

The surveys of the public lands have progressed rapidly, and the necessary preparations, so far as appropriations will permit, have been made for extending them into new Territories.

The quantity of land in market has been largely augmented, and every facility given to the hardy pioneers to secure eligible and permanent homes.

The adoption of the graduation principle introduced into the land system a novel and important feature, and stamped it with a character almost entirely new. The labor on the part of the bureau produced by it is immense, and has involved the office in difficulties that cannot be easily or effectively surmounted without the further aid of Congress. The law may be so modified as to preserve its distinctive features, relieve its provisions from the uncertainty that now attaches to them, and at the same time more effectually accomplish the grand object to be attained. No doubt the intention was to aid and protect the actual settler, and not promote the schemes of mere speculators. This being assumed, the law, according to the plausible construction of the latter, will be found lamentably defective. It could not have been enacted to subserve their interests at the expense of those seeking permanent residences; and yet, unless it be more strictly guarded, its provisions more clearly defined, and its objects more fully declared, it is feared such will be the result.

During the last fiscal year, 11,070,935 acres have been surveyed, and 8,190,017 acres brought into market. Within the same period there were sold for cash...... 7,035,735.07 acres. Amount received therefor, $9,285,533 58. Located with military scrip and land

warrants.......

3,416,802.26

Swamp lands, selected for States.......11,033,813.53 acres. Selected on donations for roads, &c.

Making a total of

1,751,962.19

23,238,313.05 acres;

exhibiting an increase of 5,952,240.07 acres over the previous year, of lands sold for cash; and a sensible diminution in the amount located with scrip and land warrants, and selected for States.

The quantity of land sold during the second and third quarters of the present year was about 5,436,538 acres, being an increase of about 3,826,619 acres (in cash of $3,642,496 44) on that of the corresponding quarters of the last year. This extraordinary difference is owing to the remarkable advance in the price of real estate over the whole country, and to the operation of the law graduating the prices of the public lands.

The quantity of land granted to satisfy the warrants issued to soldiers of all the wars since 1790 amounts to 31,427,612 acres. To satisfy Virginia land warrants, scrip embracing 837,356 acres has already been issued, and the balance yet required is estimated at about 200,000 acres.

In my last annual report donations of public land for the construction of great leading highways in the new States were recommended, for reasons therein stated. Although nothing has since transpired to change or modify the views then entertained and advanced by the department, yet it would be folly to attempt to conceal the fact that, through the popularity of the scheme, the apparent prospect of being able to prostitute it to mere purposes of gain has induced many projects which are totally unworthy of public confidence.

It may therefore be difficult, under existing circumstances, to discriminate between those worthy of governmental aid and those urged for mere speculative purposes. But if the application proceeds from the legislature of the State in which the improvement is contemplated, and, upon a thorough examination and rigid scrutiny, it is found to be promotive of the development of the country and the enhancement of the value of the adjacent lands, there can be no reasonable objection to the grant.

By confining it to the land in the vicinity of the projected thoroughfare, restricting the amount at any time to be patented to the construction and completion of a given number of miles of road, and throwing such guards around the grant as legislative wisdom may devise, there can be little danger of the donation being improperly used.

The applications to Congress at its last session contemplated the construction of 5,056 miles of road, (exclusive of the great Pacific railroad and its branches,) and assuming six sections to each mile of road, would have required in round numbers twenty millions of acres.

In compliance with the urgent solicitations of the representatives of the several portions of country where these contemplated improvements were to be made, large bodies of land, estimated at about thirty-one millions of acres, were withdrawn from market in anticipation of the grants being made; but this not having been done, the lands were restored to market immediately after the adjournment of Congress.

The withdrawal of lands from market under such circumstances, was found, on examination and reflection, obnoxious to several objections, viz: Its effects in retarding the settlement of the country, its questionable propriety, the difficulty in discriminating between cases in which it should be done and those in which it should not, and the injury that might be inflicted upon the section of country the proposed grant was intended to benefit, by turning the tide of emigration elsewhere. For these and many other equally obvious reasons, it was determined that there should hereafter be no reservations for such purposes until grants are actually made by Congress.

The department would reiterate its recommendation that officers connected with the survey and sale of the public lands be prohibited, under severe penalties, from becoming purchasers.

Such is the general rule in regard to ordinary agents and auctioneers, and it is essential that it should be applied here. Experience shows its absolute necessity.

After the passage of the act of 1850, granting the swamp and overflowed lands to the several States in which they lie, many of them were entered at the government land offices, and now the purchasers claim their patents, and are equitably entitled to them. It is therefore recommended that, with the concurrence of the respective States in which the lands are situate, the patents be issued; and that where the land was sold for cash, the money be paid to the State in which the land lies; and where it was located with scrip or land warrants, the proper State be authorized to enter the amount of land so located from the public lands in that State subject to private entry. As the lands belonged to the respective States from the date of the act, this will be the most equitable and perhaps satisfactory manner of settling the difficulty. Some mode should be speedily devised to relieve the general