HEADQUARTERS TRANS-MISSISSIPPI DEPARTMENT, Shreveport, La., July 12, 1863.

Major General RICHARD TAYLOR,
Commanding, &c.:

GENERAL: I have the honor to acknowledge the receipt of your report of the 4th instant. Again I take pleasure in expressing my satisfaction at your operations. The results are beyond my expectation. Should the siege of Port Hudson be raised, your campaign will be crowned with entire success.

The fall of Vicksburg, which now seems to be a certainty, has important bearings on your movements. Could we retain possession of the Mississippi,the occupation of New Orleans should be hazarded at all risks. The loss of Vicksburg entails the loss of Port Hudson and the Mississippi. Any occupation of New Orleans can now only be temporary. You inflict a severe blow upon the enemy by destroying the stores collected there, but to throw into the city in the hopes of holding it would be placing your command in a cul-de-sac, from which there could be no extrication.

I yesterday inclosed you a copy of instructions to General Walker. I do not think any serious occupation of Louisiana will be attempted by the enemy this summer. Monroe and Alexandria may be the objective points of their campaign. Still, you should endeavor to make such disposition of your command as will defend the upper valley of Red River. Its occupation in force by the enemy loses us its supplies, and endangers the wheat-growing region of Texas; it cuts the department in two, and renders the concentration of the troops from Arkansas difficult,if not impracticable.

In withdrawing the brigade organized at this place under General Polignac, the depot, shops, and machinery are exposed to capture by cavalry excursions from either the Indian country or the Mississippi. Should they be removed from Natchitoches, the battery at that place will be without support. If your dispositions are such that you can dispense with them, arms should be immediately sent them from your captured ordnance, and they should be ordered back to this vicinity. They marched with 1,200 enlisted men. Should this command be required from below, you will make same disposition for the defense of this depot and battery.

The extract from General Johnston's letter, quoted by you, was unjust both in fact and implication. Had I not known the nobleness and generosity of his disposition, I should have credited him with wrong motives. The letter was received by me at Monroe, where I had gone on the receipt of General Elgee's communication. I answered General Johnston's letter, corrected the exaggerated estimate of our force, and explained, with the nature of the peninsula and the weakness of the force, the utter impracticability of relieving Vicksburg whilst the Mississippi rolled between us. I referred him to his own letter, the only communication received from him,in which he announces his arrangements for the relief of Vicksburg, and calls upon this command " to do something to succor Port Hudson." I shall communicate the facts to the War Department, inclosing a copy of the letter referred to, in the event of any attempt being made to throw the blame on the troops in this command.

I am, respectfully, yours, &c.,

E. KIRBY SMITH,

Lieutenant-General.