[Inclosure No. 3.]

HEADQUARTERS DEPARTMENT OF THE GULF,
New Orleans, La., August 2, 1862.

Brigadier General J. W. PHELPS:

GENERAL: By the act of Congress, as I understand it, the President of the United States alone has the authority to employ Africans in arms as part of the military forces of the United States. Every law up to this time raising volunteer or militia forces has been opposed to their employment. The President has not as yet indicated his purpose to employ the Africans in arms. The arms, clothing, and camp equipage which I have here for Louisiana volunteers are by the letter of the Secretary of War expressly limited to white soldiers, so that I have no authority to divert them, however much I may desire so to do.

I do not think you are empowered to organize into companies negroes and rill them as a military organization, as I am not surprised, but unexpectedly informed, you have done. I cannot sanction this course of action as at present advised, especially when we have need of the services of the blacks, who are being sheltered upon the outskirts of your camp, as you will see by the orders for their employment sent you by the acting assistant adjutant-general.

I will send your application to the President, but in the mean time you must desist from the formation of any negro military organizations.

I am, your obedient servant,

BENJ. F. BUTLER.

[Inclosure No. 4.]

HEADQUARTERS DEPARTMENT OF THE GULF,
New Orleans, August 2, 1862.

Brigadier General J. W. PHELPS:

GENERAL: I was somewhat surprised to receive your resignation for the reasons stated.

When you were put in command at Camp Parapet I sent Lieutenant Weitzel, my chief engineer, to make a reconnaissance of the lines of Carrollton, and I understand it was agreed between you and the engineer that a removal of the wood between Lake Pontchartrain and the right of your entrenchment was a necessary military precaution. The work could not be done at the time because of the stage of water and the want of men, but now both water and men concur. You have 500 Africans organized into companies, you write me. This work they are fitted to do. It must either be done by them or my soldiers now drilled and disciplined. You have said the location is unhealthy to the soldiers; it is not to the negro. Is it not best that these unemployed Africans should do this labor? My attention is specially called to this matter at the present time because there are reports of demonstrations to be made on your lines by the rebels, and in my judgment it is a matter of necessary precaution thus to clear the right of your line so that you can receive the proper aid from the gunboats on the lake, besides preventing the enemy, from having cover. To do this the negro ought to be employed, and in so employing them I see no evidence of slave-driving or employing you as a slave-driver.

The soldiers of the Army of the Potomac did this very thing last summer in front of Arlington Heights. Are the negroes any better than they?