In the repair of so many miles of railway great quantities of iron, burned and twisted by the contending forces, both of which, on occasion, destroyed railroads which they were obliged to abandon, come into our possession.

To make this iron serviceable in the repair of the railroads toward Atlanta and to the Gulf, should the same stubborn resistance be offered beyond Atlanta as was met with on the advance to the place, I directed the completion of an unfinished rolling-mill captured at Chattanooga.

For local military reason Major-General Thomas required that the mill should be constructed within the intrenchment of the city of Chatttanooga, instead of in the foundations of the mill, some two miles from that town. A rolling-mill capable of rerolling fifty tons of railroad iron per day was constructed and put in operation. It utilizer a large quantity of iron taken from the lines of Southern railroads, and was of important aid in restoring the railroad communication between Chattanooga and Atlanta, broken up by order of General Sherman when, in the fall of 1864, he destroyed the latter city and set forth on this adventurous march to the sea.

The termination of the war having relieved the War Department of the duty of repairs and reconstruction of railroads, this rolling-mill was advertised and sold at a satisfactory price. It will be of great advantage to the Southwestern railroads, on all of which the iron is much worn by constant use during the war, with little means of renewal.

Most of their iron will require rerolling, and this mill is now in full operation upon the work.

General McCallum reports 1,769 miles of railroads as operated during the fiscal year, with an equipment of 365 engines and 4,203 cars either in use or in reserve, and expenditure of $22,000,000. His report is among the papers submitted herewith.

The force employed in the repair, construction, and operation of the military railways has been very large. A table herewith shows the strength at several different periods. In April, 1865, the number employed in this branch of the service was 23,533.

TRANSFER OF MILITARY RAILROADS.

As soon as the surrender of the rebel armies and the cessation of hostilities made it possible, efforts were made to induce the railroad companies of the rebellion territories to reorganize by the election of loyal directors and managers, and to resume the charge of the lines which had fallen into the hands of this department and been repaired and used for the supply of our armies.

At this date nearly all the roads have been transferred, either to the president and directors or to boards of public works of the State in which they are situated. In the Atlantic States the policy pursued has been to deliver up the roads in whatever condition they were left by the fortune of war at the moment of transfer.

Question of ownership, claims to material of the road tracks transferred either by rebel or by U. S., authority from one road to another are left for decision of the courts. The United States merely retires leaving the lawful owners to resume their property. Such material as had been collected for repair or construction and not used, and such as was in depot, has been sold to the companies at a fair valuation, and upon credit of greater or less extent, as circumstaequire.