The commander of the Federal squadron reports that the severe naval engagement seen from Galveston Island a few nights ago was between the 290 and the United States war steamer Hatteras, and that the latter was sunk. Many fragments of the steamer floated ashore on Galveston Island. Our steamers in the late engagement were commanded by Captain Fowler and Johnson, sea-captains of Texas, and manned principally by volunteers from Pyron's regiment of cavalry, Cook's regiment of artillery, and Spaight's battalion of infantry.

As soon as I ascertain the names of the gallant commanders of the detachments and the particulars of the fight I will communicate the same for the information of His Excellency the President. The devotion of all cannot be too highly commended. I beg leave to ask the President that Major O. M. Watkins, assistant adjutant-general, C. S. Army, sent to Texas to command a conscript camp of instruction, be made lieutenant-colonel in the assistant adjutant general's department, with orders to report to me.

The expedition to the Rio Grande has, after many difficulties, probably reached that river by this time. The heavy guns stored at San Antonio are on their way for its defense. A competent corps of engineers, under the command of Major A. M. Lea, accompanies the expedition. Major Lea rendered efficient service on my staff at Galveston, and found his son, Lieutenant Lea, of the Federal Navy, wounded and dying on board the Harriet Lane. He is a graduate of West Point, of great merit, and well known to His Excellency the President, to whom I beg leave recommend him for the appointment of colonel in the C. S. Army for engineer duty with me.

I will add that I hope soon to have a squadron of four gunboats on the Rio Grande for further protection. The interior is tranquil.

Very respectfully, your obedient servant,

J. BANKHEAD MAGRUDER,

Major-General, Commanding.

General S. COOPER, Richmond, Va.

GENERAL ORDERS, HDQRS. DIST. OF TEX., N. MEX., AND ARIZ., No. 45. Houston, Tex., March 11, 1863.

The commanding general, having been prevented by various circumstances from acknowledging the services of the brave Major Watkins and the gallant officers and men under his command in the recent victory at Sabine Pass, takes this occasion to return them his public and official thanks for the accomplishment of a purpose of great importance to us and their participation in an exploit almost unparalleled in the annals of warfare. After driving the enemy's blockading squadron from our immediate waters these devoted and heroic men, in their frail boats, pursued him some 30 miles to sea, and after a fight of nearly hours, on an element on which he considered himself invincible, captured a ship of war of nine guns and an armed schooner of two guns of the U. S. Navy, forcing their commanding officers to surrender at discretion.

The perseverance, industry, and firmness of the commanding officer, Major Oscar M. Watkins, of the Provisional Army, were only equaled by his intrepidity, admirable coolness, and skill in battle. Entirely unaccustomed to the sea, his devotion overcame all obstacles. He was ably and heroically seconded by Captain Fowler and Johnson, respective commanders of the steamers Bell and Uncle Ben; by Captains Odlum,