Mr. HILL. Just briefly, could you tell us what, in your opinion, would be the factors entering into the determination of the cost of production? Mr. STEINBUGLER. Yes. Mr. HILL. And have you set that out in this bill? Mr. STEINBUGLER. Not beyond the statement of total cost, including, but without limitation, the things that are expressly referred to here, and as to which there might be some doubt otherwise as to whether they were intended to be included in total cost. Mr. HILL. When you say "but without limitation" that means that you are not limited by what you have stated there, but may go out and put in something else? Mr. STEINBUGLER. In other words, that the total cost consists of something more than just the three items that have been referred to here. Mr. HILL. Now, we are getting back to your statement about definite standards. It seems to me that it is still rather indefinite. The standards by which you are to calculate or determine the minimum price are still pretty indefinite in this bill. That is the point that I think is important. It may be that I am wrong about the lack of definiteness, but I think definiteness is a vital matter. The question in my mind is whether you have sufficient definiteness in this bill as to the factors to be considered in determining minimum price. Mr. STEINBUGLER. Yes. Mr. VINSON. The weighted average cost is the total tonnage in the minimum-price area divided into the total amount received for coal? Mr. STEINBUGLER. Divided into the total amount expended in producing coal, the total cost. The cost of production was so many million dollars. The actual coal produced was so many million tons. Dividing the production into the total amount of money expended in the production gives the weighted average cost of production. Mr. VINSON. That is what I want: The tonnage divided into the total cost. Mr. STEINBUGLER. Yes. Mr. VINSON. I cannot keep from going back to line 6, page 11, which is a change from the language in the Neely amendment. It seems to me there must have been some reason for that change. The bill that we have under discussion says: So as to yield a return per net ton for each district in a minimum-price area. Now, when you go down here further, you arrive at that minimum price, as I see it, the weighted average cost. Is that of the minimumprice area? Mr. STEINBUGLER. That is quite right. simple reason, for the change. Mr. VINSON. I would like to have it. There is a reason, a very Mr. STEINBUGLER. It is chiefly my responsibility. I drafted largely the provision as to price in the Neely amendment. Mr. VINSON. You drafted that, did you? Mr. STEINBUGLER. Yes. I thought I had made a fairly complete statement of the basis of minimum price fixing. When my committee got to analyzing it with other counsel, my attention was called to the fact that as it was drawn it did not give a handle to take hold of anywhere in fixing the price for the district. Of course, an analysis of the language makes that clear. There is no handle. You have no place to take hold. The provision is that the prices shall be fixed so that the realization for the entire area shall equal the cost of the area, but it had not a word to say as to how the prices shall be fixed for each district. In order to get an average for all, the price fixed by each district board has an effect upon the price fixed by every other district board, so there would be no place to start. We proceeded to amplify the provision and correct it as it now is in H. R. 8479. What happened was that the preliminary draft got into the Neely amendment. It was our preliminary draft and not the final draft of our own bill. That is the whole explanation of the change. Mr. HILL. We will adjourn until 10 o'clock tomorrow morning. (Thereupon, at 4:40 p. m., the committee adjourned until tomorrow, Thursday, June 20, 1935, at 10 a. m.) STABILIZATION OF BITUMINOUS COAL MINING INDUSTRY THURSDAY, JUNE 20, 1935 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE OF THE COMMITTEE ON WAYS AND MEANS, Washington, D. C. The subcommittee met at 10 a. m., Hon. Samuel B. Hill (chairman) presiding. Mr. HILL. The committee will come to order. Mr. Steinbugler, you may resume your statement. You have prepared an analysis of the marketing provisions of the bill before us, H. R. 8479, and you have kindly furnished each member of the committee with a copy of that analysis. Mr. Vinson, do you care to have this analysis go into the record? Mr. VINSON. Yes, I think it should go into the record, and then let the gentleman address himself to that. Mr. HILL. Then it will go into the record, either at the beginning of your remarks, or at this place, and you may proceed with your statement. (The analysis above referred to is as follows:) ANALYSIS OF MARKETING PROVISIONS OF H. R. 8479 PART II-MARKETING Subsection (a) PAGE 13 1. As soon as possible after creation, each district board shall (a) determine weighted average of total costs of ascertainable tonnage produced in district in 1934; (b) adjust weighted average costs to give effect to changes substantially affecting costs established since January 1, 1934; and (c) submit its determination and computations to Commission. 2. Commission shall (a) determine weighted average of total costs of tonnage of each minimum-price area in 1934, adjusted; (b) transmit it to all district boards within such minimum-price area. 3. Said weighted average of total costs shall be taken as basis of minimum prices effective until changed by Commission. PAGE 14 4. Thereafter, on satisfactory proof made by a district board of change exceeding 2 cents net ton in weighted average of total costs in minimum-price area, exclusive of seasonal changes, commission to increase or decrease minimum prices accordingly. PAGE 10 5. Each district board, on own motion or as directed by Commission, (a) shall establish minimum prices f. o. b. transportation facilities at mines for kinds, qualities, and sizes of coal produced in district; (b) shall, in so doing, have full authority to make classification of coals and price variations as to mines and consuming market areas it may deem necessary and proper. 6. Said prices to yield a return per net ton for each district in a minimum-price area equal as nearly as mathematically possible to, and not less than, weighted average of total costs, per net ton, determined as above, of the tonnage of such minimum price area, including, but without limitation, total cost of production, cost of selling, and cost of administration. PAGE 12 7. Minimum prices established shall reflect, as nearly as possible, relative market value of various kinds, qualities, and sizes of coal, shall be just and equitable between producers in district, and shall have due regard to interests of consuming public. 8. Procedure for establishment of minimum prices to be in accordance with rules and regulations to be established by Commission. 9. Schedule of minimum prices with data on which computed to be submitted by district board to Commission. 10. Commission may approve, disapprove, or modify same to conform to requirements of subsection, and its action to bind all code members within district, subject to coordination provided for in subsection (b). PAGE 13 11. Minimum prices to be just and equitable as between producers within a district for coal for shipment into a consuming market area. 12. No minimum price to be established that permits dumping. PAGE 14 13. Each district board to establish rules and regulations incidental to sale and distribution of coal by code members within district, (a) to be not inconsistent with requirements of section and (b) to conform to standards of fair competition hereafter established. 14. Commission may approve, disapprove or modify same, and its action shall bind all code members within district. Subsection (b) 15. District boards shall, under rules and regulations established by Commission, coordinate in common consuming market areas upon a fair competitive basis the minimum prices and rules and regulations established by them respectively. PAGE 15 16. Coordination to take into account, but without limitation, the various kinds, qualities and sizes of coal and transportation charges upon coal. 17. Minimum prices for shipment into a consuming market area to be just and equitable and not unduly prejudicial or preferential between and among districts. 18. Coordinated minimum prices shall not (1) substantially reduce, as to any district, the return upon all coal produced therein below minimum return provided in subsection (a) and (2) nor increase such return per net ton by an amount greater than necessary to accomplish coordination, to the end that return per net ton upon entire tonnage of minimum price area shall approximate, as nearly as possible, weighted average of total costs per net ton of such minimum price area. 19. Such coordinated prices, rules, and regulations, together with data on which predicated, to be submitted to Commission, which may approve, disapprove, or modify same to establish and maintain such fair competitive relationship; and its action shall bind all code members within the affected districts. 20. No minimum price to permit dumping. PAGE 16 21. Commission to have right to fix minimum prices f. o. b. transportation facilities when it deems necessary in the public interest. Such prices (a) shall be established at uniform increase above minimum prices in effect within district, so that (b) in the aggregate the maximum prices shall yield a reasonable return above weighted average total cost of district, (c) no maximum price to be established for any mine which shall not return cost plus a reasonable profit. 22. Any code member or district board dissatisfied with (a) coordination of prices, rules or regulations, (b) failure to establish such coordination, (c) by maximum prices established, to have right of complaint to Commission. 23. Commission, under rules and regulations established by it, after notice and hearing, to make such order as required to effectuate purposes of subsections (b) (coordination) and (c) (maximum prices). Order to bind all parties in interest. 24. Pending final disposition of complaint (petition), upon reasonable showing of necessity, Commission may make such preliminary or temporary order as it may adjudge appropriate, not inconsistent with the act. PAGE 17 25. Subject to later provisions (a) no coal shall be sold below minimum or above maximum approved or established by Commission, and any such sale shall constitute code violation, and (b) a contract for the sale of coal below minimum or above maximum therefor approved or established by Commission at time of making contract shall constitute code violation, and such contract shall be invalid and unenforceable. 26. From date of approval of act, until prices established pursuant to subsections (a) and (b) of part II, no contract to be made for sale of coal providing for delivery for period longer than 30 days from date of contract. 27. While act in effect, no code member to make any contract for sale of coal for delivery after expiration date of title, below minimum or above maximum price therefor approved or established by Commission and in effect at time of making contract. PAGE 18 28. Minimum prices not to apply to coal sold by code member and shipped outside domestic market (domestic market defined). 29. Maximum prices not to apply to coal sold by code member and shipped outside continental United States. 30. Evasions or violations of price provisions by enumerated devices prohibited; and Commission empowered to issue rules and regulations to make subsection effective. PAGE 19 31. All sales and contracts for sale of coal made subject to operation of act and to code prices. 32. Commission to prescribe price allowance receivable by persons purchasing coal for resale, and reselling it in not less than cargo or railroad carload lots; and to require maintenance by such persons, in resale of coal, of minimum prices established under act. STATEMENT OF JOHN L. STEINBUGLER-Resumed Mr. STEINBUGLER. We were considering the question of the determination of the weighted average cost of coal yesterday, when the committee adjourned. We were discussing the question as to whether the reference in the bill to the weighted average and the total cost of production was sufficiently definite to establish a definite, exact standard for the fixing of the minimum price, and we had referred to interest, as to whether interest would or would not be included in that total cost of producing coal. I suggested that I did not think so. We were at the point as to whether there should be an enumeration of the items that would go to make up the total cost of production. Mr. HILL. The point was whether or not the provisions in this bill were sufficiently definite as to the factors entering into the determination of the cost and the minimum price provided for in the bill. Mr. STEINBUGLER. I am inclined to think, after consideration of the discussion we then had that probably the bill would be improved if there were an attempt to enumerate the cost factors, for the benefit and the guidance of the commission, which must pass upon the cost, and which must eventually approve prices, or establish prices, based upon that cost determination. |