A second or alternative plan was proposed at the same time, by which the summit level was to be a lake formed by the Bohio dam, fed directly by the Chagres.  Work was continued on this plan until the rights and property of the new company were purchased by the United States.

The United States, not unmindful of the advantages of an isthmian canal, had from time to time made investigations and surveys of the various routes.  With a view to government ownership and control, Congress directed an investigation of the Nicaraguan Canal, for which a concession had been granted to a private company.  The resulting report brought about such a discussion of the advantages of the Panama route to the Nicaraguan route that by an act of Congress, approved March 3, 1889, a commission was appointed to “make full and complete investigation of the Isthmus of Panama, with a view to the construction of a canal.”  The commission reported on November 16, 1901, in favor of Panama, and recommended the lock type of canal.

By act of Congress, approved June 28, 1902, the President of the United States was authorized to acquire, at a cost not exceeding $40,000,000, the property rights of the New Panama Canal Company on the Isthmus of Panama, and also to secure from the Republic of Colombia perpetual control of a strip of land not less than 6 miles wide, extending from the Caribbean Sea to the Pacific Ocean, and “the right ... to excavate, construct, and to perpetually maintain, operate, and protect thereon a canal of such depth and capacity as will afford convenient passage of ships of the greatest tonnage and draft now in use.”

Pursuant to the legislation, negotiations were entered into with Colombia and with the New Panama Canal Company, with the end that a treaty was made with the Republic of Panama granting to the United States control of a 10-mile strip, constituting the Canal Zone, with the right to construct, maintain, and operate a canal.  This treaty was ratified by the Republic of Panama on December 2, 1903, and by the United States on February 23, 1904.

The formal transfer of the property of the New Panama Canal Company on the Isthmus was made on May 4, 1904, after which the United States began the organization of a force for the construction of the lock type of canal, in the mean time continuing the excavation by utilizing the French material and equipment and such labor as was procurable on the Isthmus.

President Roosevelt, in a message to Congress, dated February 19, 1906, stated:  “The law now on our statute-books seems to contemplate a lock canal.  In my judgment a lock canal, as herein recommended, is advisable.  If the Congress directs that a sea-level canal be constructed its direction will, of course, be carried out; otherwise the Canal will be built on substantially the plan for a lock canal outlined in the accompanying papers, such changes being made, of course, as may be found actually necessary, including possibly the change recommended by the Secretary of War as to the site of the dam on the Pacific side.”