us independent of the blockade as long as we can hold these passes. I have not even now engineers enough, and I fear the enemy will attack and carry the passes and break up the trade in cotton, &c., before we can possibly get ready.

I hope, therefore, that the Department will support me fully in,my efforts to accomplish these important purposes, and give my engineers rank for the want, to gratify a just pride,a nd salary enough to enable them to live. Their places cannot be supplied.

3. New Mexico nd Arizona.-I had the honor to forward to the War Department a proclamation some months since, made by the Federal commander in New Mexico, showing great fear of an invasion, and I learned through Captain Skillman, commanding our spy company, stationed on the confines of that country, that there were but 2,000 troops this side of California, and that these were ready to move off if threatened. I organized and expedition, to pass up the Canadian to New Fort Union, to cut off supplies from Kansas and Missouri, while a regiment of the same brigade would march on Fort Bliss. I kept these troops, however, in hand ready for service anywhere, and determined not to move them until the fate of the Mississippi was decided.

The operations of the enemy have for the present put a stop to any movements in that direction, but should there be a prospect for peace, and this part of the country should not be seriously threatened, I propose to take possession of New Mexico and Arizona, if possible, so that at the termination of the war they may remain ours.

The importance of this acquisition to us will be readily perceived.

4. Cotton and supplies.-Major Hart, quarters for the purchase of supplies with cotton, was progressing, I think, satisfactorily, when the order of the War Department, dated 26th January, 1863, if I remember aright, arrived, and by it my orders were annulled, and cotton was allowed to go out of the country without any return in supplies being secured. All restrictions being removed, cotton rose from 25 cents to 50 and 60 cents per pound, and Major Hart now writes me for authority to impress cotton to enable him to fulfill his obligations, as the price is so high that he cannot purchase it, even if he had they money, which he has not. Lieutenant-General Smith having refused to order money to be turned over to him by the public receivers here, I referred him to the impressment law, which gives him the power without reference to me, and stated that I would support him in any impressments he might make with whatever troops he might require. I have not yet heard the result, but consider it very unfortunate just at this time that my order on the subject, which gave general satisfaction, should have been revoked by the orders from Richmond, and that, in consequence, resort must be had to impressment of cotton. I am of opinion that it will create much dissatisfaction, if not serious trouble. The law of Congress authorizing the exportation of cotton by the Mexican frontier, evidently contemplated the introduction of goods for cotton sent out; hence the spirit of this law was not violated by my order, though the letter was. At all events, under the laws and orders from the War Department, as they now stand, vast quantities of cotton are going out and very little is coming in. I had hoped another law would have been passed by Congress repealing the pre-existing law, and made in accordance with my orders, copies of which I sent to the War Department. This, as far as I am informed, has not been done, and I confess that I am at a loss as to what steps I should now recommend to the Department to take.

If Congress will pass such a law promptly at its next session, a portion