SIR: I have the honor to submit this my second annual report of the condition of affairs at this agency.
      If we have not accomplished all that we hoped for, we have at least made considerable progess in every department. With slight exceptions the year has been one of general good health.
      Our cultivated fields have yielded more than ordinarily, and our harvests, which are now nearly all gathered, place us in a much better condition for the coming winter than last year.
      The improvements upon the reservation within the last year have been made at great expense, for the reason that we have no mill to manufacture lumber.
      The failure to make allotment of land in severalty to Indians as was anticipated,

has been a source of uneasiness to the Indians, and has tended greatly to weaken their confidence in the good intentions of the Government, for when the surveys were commenced early in 1871, they were buoyant with the hope of being able to commence improvements of a permanent character upon their own land, but as instructions were received to make no allotments until further instructed, they have been compelled to follow the old system, of farming in patches, as directed by the agent or farmers; and, as a general rule, they have been successful in producing good crops of wheat, oats, and potatoes, and a general assortment of garden vegetables. Quite a number have worked outside the reservation during the season, and thus paid for work-horses, and, in a few cases, for wagons and harness.
      The limited supply of provisions produced upon the reservation the past year rendered it necessary to subsist a large proportion of the Indians at the expense of the Government; and, in order to realize some return for this large outlay, I employed all who were able to perform service as laborers, sometimes upon roads within the reservation, or on those leading from the reservation to prominent places near by, useful to the agency, and also in making rails, clearing brush-land, &c., allowing them, generally, wages at one dollar per day, and charging them for such articles of food and clothing as are given them, at actual cost and transportation; those unable to perform service were supplied, of course, without consideration.
      The usual practice has heretofore been to distribute such articles as were furnished by the Government gratuitously, giving alike to the loafing, indolent, and restless with the industrious and peaceably inclined. But I have adopted a different rule, requiring all who were able to perform service to engage in some useful employment, crediting them for their labor, and charging them for articles furnished. Thus, nearly all have contributed something, from which a return may be realized in due time, and at the same time encouraging self-reliance and industrious habits.
      Meddlesome persons, from envious feelings, spite, or a desire to gain favor from parties interested, or from sheer wantonness, have, however, sought to prejudice the minds of the Indians against us on that account, asserting that we had no right to charge them for such articles, and that it was a desire to speculate upon that which properly belonged to them. As a general rule, the Indians themselves have exposed such schemes, and denounced those who have made the attempt to create dissensions.
      A great deal of excitement was created upon the reservation, and in the adjoining settlements, early in July, on account of the shooting of one of the principal chiefs, by a white man, the cause of which was directly traced to the practice of selling and giving intoxicating drink to Indians. The party who did the shooting is now under bonds to appear at the November term of court, to answer for the killing. Complaints were made against parties for selling liquor to Indians at that time, and four convictions were obtained in the United States court, the effect of which, it is hoped, will deter others from like offense.
      There is also considerable excitement among a portion of the Indians, arising from the fact of a petition being circulated, with the view of requesting the Government to abandon this reservation, removing the Indians to some unknown country, thus opening the Siletz or Coast reservation to white settlement. This effort, on the part of few scheming, restless persons, is a source of constant uneasiness and fear on the part of the Indians, and will doubtless continue to be such, until the allotment of lands is made, as originally contemplated at the time of negotiating treaties with them, for, notwithstanding the treaty was not ratified, many of them recollect distinctly that they were promised lands of their own, and the fear of being driven away from this reservation to some remote and unknown region is a serious obstacle in the way of securing their confidence. Partial surveys have already been made, and it is hoped the plan may be fully matured and acted upon at an early day.
      There is a serious difficulty in successfully carrying out any plan or policy depending upon the outlay of funds for the benefit of these Indians, for the reason that there are no specific appropriations for any objects, and we are compelled to rely upon the "incidental fund," which is alike applicable to transportaion of annuity goods for all the tribes in the State, and all other incidental expenses of the service.
      I must therefore urge the necessity of specific appropriations for the erection of saw-mill, a flouring-mill, the establishment of a manual-labor school, and a hospital; the erection of buildings for three day-schools, a church, or council-house; and an appropriation to build and repair agency buildings for present use. I am of opinion that one of Blandy's portable saw-mills, with double saw, is best adapted to our use; the power could be so arranged as to propel a thirty-inch patent bur, with bolt attachment, which would answer all the purposes for several years, and could be, perhaps, shipped to this place and put in running order in less time and at less expense than any other style of mill with the same capacity. The arguments urged in my report for 1871 asking appropriations for this agency may again be used for 1872 and 1873, for the same necessity exists, and that for a flouring-mill more immediately, for the reason that we have tested the practicability of producing wheat upon the reservation to

meet all the demands, and that the use of flour has become an indispensable article for food among a people undergoing the process of civilization.
      I would suggest the propriety of holding a council with all the tribes and bands upon this reservation, and perhaps include those upon the Alsea agency, and negotiate a treaty or compact, confederating all these tribes, specifying the amounts, time, and modes of payment in such detail as to simplify and bring to the comprehension of all parties interested. As it now stands, there is a great responsibility resting upon the agent in charge, without any corresponding remedy in his hands to fulfill its requirements.
      A large portion of the purchases made for the last fiscal year were on time, as no funds were in my hands to meet the requirements of the service, and the amount of indebtedness of this agency at the commencement of this fiscal year, to wit, July 1, 1872, was more than the entire amount turned over to me on the 2d day of September by Superintendent Odeneal, thus leaving the agency without means to meet the current quarter's expenses, or even to liquidate all the outstanding liabilities.
      From this time forward the expenses will be materially lessened, as a large proportion of the Indians have the means of subsisting themselves; still, the amount of indebtedness against this agency is not less than $7,250. A considerable portion of this amount, however, is on account of the purchase of work-horses and farming-implements. At the opening of the working season last spring, the teams were found to be inadequate to meet the requirements, and I had either to purchase additional horses, seed, and plows, or fail to put in a crop; whereas, by making these purchases, we have secured a harvest, believed to be sufficient not only to subsist the Indians until another harvest, but afford forage for the department stock, and supply seed for another year. But to transport our wheat fifty miles over these mountain-roads to have it manufactured into flour, and then back again to the reservation, is not economy to the Government, as our teams should be engaged in plowing under our foul ground for another crop; for we have tested the advantages of fall plowing, and twice plowing in the spring before sowing. In this way alone can we hope to subdue the dense and rapid growth of sorrel, lupin, and other weeds peculiar to this soil and climate.
      I must again urge the importance of an appropriation of five or six thousand dollars to purchase a band of cattle and a flock of sheep, to be retained a few years in the charge of the agency, and then distributed among the Indian families. As I stated in my last annual report, with the exception of George Harney, a young Rogue River chief, not a hoof of cattle is owned by Indians upon the reservation; yet the grazing facilities are ample for over 10,000 head, and the habits of these Indians are better suited to a pastoral people than exclusive cultivators of the soil.
      The larger proportion of the Indians upon this reservation have always been accustomed to reside along the sea-coast, relying chiefly upon the different varieties of fish for their food; hence their unwillingness to wholly abandon the district thrown out of the reservation by opening the Yaquiua Bay to white settlers, as the waters of the bay and the small streams emptying into it abound with their favorite varieties of fish; but the extent to which the whisky traffic has reached within the past year in that locality, renders it unsafe as a place of general resort for them.
      I have recently purchased a fish-net, be used at or near the mouth of the Siletz River, where there is usually a full run of salmon, of an excellent quality, and have encouraged the taking and drying in large quantities, of smelt, furnishing barrels and salt to put them up for winter use.
      As soon as our crops are harvested, a large number of the Indians will repair to that locality, to put up fish in various ways.
      Our day-school has not been attended with the results hoped for. The number of families at present outside the reservation, the absence of suitable school-houses, the limited amount of supplies upon which to subsist, and their repugnance to restraint, all tend to operate against its success; still, considerable proficiency is manifest among those who have attended.
      The Sabbath-school has been kept up with considerable interest, and while we cannot claim any very marked results in the religious training, there is a visible change for the better in the general deportment of the Indians, and they are throwing off many of their long-cherished superstitious ideas, and a manifest willingness to approve of many things heretofore rejected by them is apparent.
      The new policy of the Government, in seeking to encourage Christian civilization, by placing the agencies under the charge of persons recommended by the different religious denominations, if carried out in good faith, can but be approved by all good men. But even in this errors will sometimes occur, for men sometimes overlook their obligations to God and their reputations as ministers of the gospel while scheming for place and profit, and very many pious, good Christians are wholly unsuited for agents or employes upon an Indian reservation.
      The Christianizing these Indians is a work of time; for if, with all our superior advantages of education and Christian teachings, we fail to recognize its blessings, how

can we expect these ignorant, superstitious savages to accept at once that which so many intelligent people reject?
      Very many of their dealings with whites, and even with agents of the Government, have been at variance with the teachings of Christianity, and calculated to destroy their confidence in the good intentions of the Government. The great effort with us has been to convince them that we were laboring for their good; that the object of the Government in locating them upon reservations was to protect and preserve them as a people; that while the Government labored to advance them in knowledge and add to their comfort and happiness, very much depended upon their own exertions and industry to accomplish that object.
      The petty jealousies and bickerings of the fourteen different tribes and bands upon this agency, whose habits in some respects are dissimilar, have been almost a constant source of contention among them; yet these misunderstandings are less frequent than last year, and it is but seldom now that one assumes to redress his own wrongs.
      But those who expect and believe that these people, with all their superstitions, prejudices, deep degradation, and immoral habits and practices, some of which have existed for generations, and others acquired from contact with reckless white men, can be reclaimed and brought to the knowledge and practice of all the Christian virtues in a short time, have but little knowledge of the obstacles to overcome.

I am, very respectfully, your obedient servant,
JOEL PALMER,
United States Indian Agent.

T.B. ODENEAL, Esq.,
Superintendent Indian Affairs, Salem, Oregon.