Congress has made liberal grants of public land to corporations in aid of the construction of railroads and other internal improvements.  Should this policy hereafter prevail, more stringent provisions will be required to secure a faithful application of the fund.  The title to the lands should not pass, by patent or otherwise, but remain in the Government and subject to its control until some portion of the road has been actually built.  Portions of them might then from time to time be conveyed to the corporation, but never in a greater ratio to the whole quantity embraced by the grant than the completed parts bear to the entire length of the projected improvement.  This restriction would not operate to the prejudice of any undertaking conceived in good faith and executed with reasonable energy, as it is the settled practice to withdraw from market the lands falling within the operation of such grants, and thus to exclude the inception of a subsequent adverse right.  A breach of the conditions which Congress may deem proper to impose should work a forfeiture of claim to the lands so withdrawn but unconveyed, and of title to the lands conveyed which remain unsold.

Operations on the several lines of the Pacific Railroad have been prosecuted with unexampled vigor and success.  Should no unforeseen causes of delay occur, it is confidently anticipated that this great thoroughfare will be completed before the expiration of the period designated by Congress.

During the last fiscal year the amount paid to pensioners, including the expenses of disbursement, was $13,459,996, and 50,177 names were added to the pension rolls.  The entire number of pensioners June 30, 1866, was 126,722.  This fact furnishes melancholy and striking proof of the sacrifices made to vindicate the constitutional authority of the Federal Government and to maintain inviolate the integrity of the Union They impose upon us corresponding obligations.  It is estimated that $33,000,000 will be required to meet the exigencies of this branch of the service during the next fiscal year.

Treaties have been concluded with the Indians, who, enticed into armed opposition to our Government at the outbreak of the rebellion, have unconditionally submitted to our authority and manifested an earnest desire for a renewal of friendly relations.

During the year ending September 30, 1866, 8,716 patents for useful inventions and designs were issued, and at that date the balance in the Treasury to the credit of the patent fund was $228,297.

As a subject upon which depends an immense amount of the production and commerce of the country, I recommend to Congress such legislation as may be necessary for the preservation of the levees of the Mississippi River.  It is a matter of national importance that early steps should be taken, not only to add to the efficiency of these barriers against destructive inundations, but for the removal of all obstructions to the free and safe navigation of that great channel of trade and commerce.