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stay out of that kind of organization, they stay out because they think they are better off on the outside.
Mr. Vinson. That is the same condition that applies to this bill. Mr. FRANCIS. No; I think not.
Mr. Vinson. In regard to this 25-percent tax. They can stay out, if they want to. Of course, it has been argued that the size of the tax is such that it amounts to compulsion. It seems to me that the size of the benefits that would flow under the proposal that you make could just as well be argued to be a club driving a man into that sort of arrangement as the tax would compel a man to become a member of the code. In other words, it is just the way you look at it.
Mr. FRANCIS. I think there is a difference in the way you look at it. One of them is taking a constitutional provision, or the lack of a constitutional authority and impressing it upon them, and the other is relaxing a statute that the Federal Government has full authority within its own hands to authorize.
Mr. Vinson. If you have not the constitutional power, there is no impression of that power. If the act is invalid and beyond the Constitution, why, it falls.
Mr. FRANCIS. That is one of the things I do not want to see happen in this industry. I do not want to build up a house that is going to fall, and that is one of the differences of opinion that I have had with some of my associates in the industry. My contention is that if we build this house, that it will fall, and then we will have to start over again, and then we will have another heavy fall.
Mr. VINSON. Of course, no one would want to start out on that premise, that they are building upon the sand.
Mr. FRANCIS. I would rather have a lot less house and build it on a good foundation than to have a big house which will spread out, that does not bave a solid foundation.
Mr. Vinson. Of course, nobody should attempt to build unless they feel that the foundation is strong enough to support the structure. I feel that that is a statement on which we can all agree.
Mr. FRANCIS. I agree to that, and I do not feel that this will has that foundation. That is one of the reasons I am opposing it.
Mr. Vinson. Judge-
Mr. VINSON. You know we all like it. Could we have for the purpose of the record a copy of the agreement that you use in the Appalachian Coals, Inc., so that we will know just what your plan is?
Mr. FRANCIS. I will be very glad, if you desire, to file a copy of the agreement and, further, we, at the time Appalachian was formed, put out a booklet showing the purposes of the contracts between the producer and the Appalachian Coals, and the contract between Appalachian Coals and its subagents who sold the Appalachian coals. I would be very glad to furnish the committee with as many copies as you would like to have, and file them for the record. Can you me how many copies you would like to have filed?
Mr. Vinson. I feel certain we would have to have 10.
Mr. Vinson. It might be well to file 25, one for each member of the committee, if you can.
Mr. Francis. I think I can have them tomorrow.
Mr. VINSON. That is all right.
Mr. VINSON. And we would like to have the contract filed separately, so that that could go in the record.
Mr. FRANCIS. Yes, I can do that. The contract which the Court passed upon?
Mr. VINSON. Yes, sir. Is there any difference between the contract which the court passed upon and the one under which you are operating now?
Mir. Francis. There are some questions now being discussed, certain minor phases of the contract, but that is the same contract.
There are just one or two other things in this bill which I want to mention. You have captive mines paying this tax. I very much fear that if this legislation is passed and prices are artificially fixed here that a great many more industries and carriers will lease or buy mines and operate them under this law.
Nír. Vinson. That is something that I do not quite get. According to this realization or sale price of coal, the average for the year 1934, under the N. R. A., was $1.82 a ton. That is the lowest average for any year subsequent to 1920, except 1929 when it was $1.78, 1930 when it was $1.70, 1931 when it was $1.54, 1932 when it was $1.31, and 1933 when it was $1.34.
Why, with that comparatively low price, I would say, when you take the 15-year period, why would you have fear of that price losing business for the coal industry, either in the captive mine or on any other phase of it?
Mr. FRANCIS. There is a wide difference in cost at mines within districts. You take this statement which I filed and you will notice on the second page, under the heading "Illinois”, the Belleville district, a production of 5,425,842 tons, at a cost of $1.37 a ton plus, as compared with this average cost of 50 cents. Large consumers of coal, if they can save and have any reasonable assurance of saving 10 cents a ton, will lease or buy coal mines of their own.
Mr. VINSON. You had the same condition before. I take it that the Belleville district in Illinois has been mining coal for a number of years, has it not?
Mr. FRANCIS. Yes, it is one of the oldest.
Mr. Vinson. You had an opportunity for their markets to buy in 1934 at $1.37 a ton, and they only mined 5,000,000 tons.
Mr. FRANCIS. That is the cost per ton. I do not know what the selling price was.
Mr. Vinson. That is what I am speaking of.
Mr. FRANCIS. If you had this bill, with $1.84 as the minimum price, the difference between $1.84 and $1.37, is 47 cents a ton.
Mr. VINSON. You have had that as an actual fact last year, and why did not they sell more than 5,425,000 tons of coal? Was there something about the quality?
Mr. FRANCIS. That is one of the reasons. You go down into the smokeless region and you get from this graph which I filed costs starting at $1.50 a ton and running to $3 a ton. If we get the average, it takes $1.90 a ton instead of $1.85 to bring out half of the production in that field.
Mr. VINSON. How is that?
Mr. FRANCIS. It takes $1.90 a ton to bring out half of the production in that field. On the other hand, if a captive mine could step in there and instead of paying the average of that field can lease a mine and can produce at $1.60 a ton, and open up a new mine extending its operations, or open up two coal mines where it can get it for $1.60, and new mines usually have lower costs for a while, there is enough inducement there to cause the opening up of more captive mines and more tonnage.
Mr. Vinson. Why was not that done, to a very large extent, between 1920 and 1928? There you have the costs running from $1.26 to $3.75.
Mr. FRANCIS. The number of captive mines in the country were increased from 1920 to 1927 and 1928. Large investments were made in captive mines during that period.
Mr. Vinson. At any time that an industry can make money by going into a captive mine, they are going to do it, are they not?
Mr. FRANCIS. Yes; but we are, it seems to me, offering an additional inducement to do that, taking into consideration part of the business that would go to these commercial mines and all that would go to the captive mines to go under this.
Mr. Vinson. It occurs to me that the opportunity which they had to buy up mines has existed for the last few years, buying them at judicial sales. If they had been wanting to go into the coal business, and they had plenty of opportunity to get property for practically nothing. You will recall certain properties were sold for just a few thousand dollars, and a few years before had been getting out quite a tonnage.
Mr. FRANCIS. We had last year the Seaboard Air Line, although in receivership, go into the Virginia district and into the Williamson district and lease mines from producers in order to get coal at a lower price. That was done last year.
Mr. Vinson. It has been done all through the years, has it not?
Mr. FRANCIS. Whether they made any money or lost any money by it I do not know, but we both know that they did that in the hope of reducing their fuel cost. It has been done in other communities and other places by other industries.
Mr. Vinson. If this bill is as burdensome as you think it is, they might not want to go into the captive-mine business.
Mr. Francis. I do not see any particular burden upon the captive mine here, as it is on the commercial. All the captive tonnage has to do is to have their coal valued, pay the 1 percent out of the 100 of the tax, one-fourth of a cent tax, and abide by the labor provisions, and that is as far as they come under the bill, as I read it.
Mr. Vinson. I have not heard any of them testifying here as favoring the bill yet.
Mr. FRANCIS. No; I have not either, but I have not been here during all the testimony. You can extend the opportunity for opening up captive tonnage, and you can open up captive mines in a way you cannot commercial tonnage.
I think it is one of those things that may put an additional burden upon the producer in this business.
Now, as to title II of this bill I just want to say a word. I do not think the Government probably is properly in the business of buying
up coal mines. If the Government is going into the coal business, buying coal properties, I would hope that instead of buying coal lands, undeveloped coal lands, of which there are millions of acres for sale, that if it spends any money for that purpose at all, it would spend it for mines and not for coal acreage, because I do not believe that it is a wise, sound policy for the Federal Government to buy up the vacant coal lands of this country. Mr. CROWTHER. Mr. Chairman, is the witness through?
. ? Mr. FRANCIS. Yes, sir.
Mr. CROWTHER. I would like to ask a question or two. Mr. Francis, we have had a lot of wonderful information on this bill. We have had some fine legal opinions as to its probable constitutionality or unconstitutionality, and we have had a lot of technical information here as regards marketing, minimum prices, and maximum prices, but we do not seem to be getting anywhere.
As I understand it, the agreement ends this coming Saturday, that provisionally applies while we are considering this legislation. I do not know how we are going to proceed whether we are going to hear all the witnesses or adjourn and hear one or two a day. I do not know how long it will take us. I am not one for haste in considering a very serious matter of this character, and also I am not inclined to quarrel with anybody about it. I am the mildest mannered member of the committee.
You may be seated, if you will, because it is going to take me some little time. I am going to make a speech here, and then I want to ask you a question, Mr. Francis, at the conclusion of it, which I think will be germane and constructive, at least I hope so.
I am just going to quote, because I want it in the record, what was said upon the constitutional and economic aspects of the question in the brief submitted by Mr. Emery of the National Association of Manufacturers. While this is gone into in sequence it is very short, and it will not take any great time. These are the points that he makes in that brief. [Reading:)
The bill presents a plan whereby the mining and shipment of bituminous coal is declared to be affected with a public interest to the extent that the Congress may treat it as a public utility. This is not so in any legal sense.
II. Even though the bituminous coal industry were so affected with the public interest, in the legal sense, as to justify regulation by the respective States, this fact would not confer upon Congress the power to regulate. For the mining of coal has been repeatedly held to be an act of local production and may not be directly regulated by the Congress under the commerce power.
III. If Congress may not directly regulate the production of bituminous coal under the commerce power, may it do so indirectly by the taxing power to compel acceptance under penalty of the regulation imposed, although, on the face of the bill, it is evident that the purpose of the tax levied is not to produce revenue but compel under penalty the acceptance of the regulation?
IV. Part III of the pending bill proposes a detailed statement of employment relations in the mining of bituminous coal. Such regulation is not a valid exercise of the commerce power nor would it be if the industry were held to be affected with the public interest as that term is legally defined.
And number 5 is in a sense a conclusion:
The state of the law and the character of the problem suggest that the most constructive approach to the elimination of unfair and oppressive methods of competition and the maintenance of fair labor standards is through voluntary cooperation, encouraged by sympathetic Federal administrative action and under rational Federal regulation.
Now, what I want to ask you is this: This industry needs some legislation without doubt. I think the history of the coal industry, as I have heard it given by members, and the deplorable conditions existing in the mines shows that. They may not exist in yours, because my colleague, Mr. Vinson, has attributed to you and your company a very high degree of humanitarian impulse in connection with the coal business, but it evidently needs some regulation. Now what I want to ask you is this: Under the N. R. A. the conditions were better. I think everybody who has testified here has agreed to that. That was an emergency proposition. Now the coal industry can no longer be considered as an emergency proposition. It seems to me it is a going concern, and it is going along as it always has been. There has been some evidence given here by some witnesses that it is likely to be a developing and growing business. There are other witnesses who have testified about different materials being used for combustion, and with this development, and the development of hydroelectric power which is coming in the future, that it is going to be a slackening industry and going down hill.
Evidence has been given here to show that hydroelectric development will reduce the necessity for bituminous coal around 150,000,000 tons annually, not immediately, but as the years go on, within a few years.
Now, what I want to ask you is this—and I think you are essentially qualified to answer it, and I want to ask you as a coal producer, with 25 years' experience in this business, and I intend to ask this same question of Mr. Lewis later on, the head of the United Mine Workers of America, who I think is also competent to answer it from his point of view: Do you think it is possible for us to write legislation which will help this condition, that will be free of these contentious sections regarding unconstitutionality, coercion, regulation, and so forth, and rid of the taxing section, which is to be used in this bill merely for the purpose of coercion and regulation? Is it possible for us to write legislation that will help the coal industry to stabilize and be fair to the producers, be fair to the miners, and be fair to the general public?
For instance, the Northern West Virginia Subdivisional Coal Association prepared a memorandum here in criticism of this bill, but it also had the good grace, in an appendix, to submit its constructive criticism in the shape of a bill, which they say would be constitutional, and would take out a great many of those contentious questions, and it contains the National Bituminous Coal organization, Bituminous Coal Code, marketing agreements, minimum-price area, tables, standards of fair competition, organization of the code and penalties, and various definitions of the duties of the Commission, and then the segregated areas with a schedule of the districts in them. They have done that. Have you seen that?
Mr. FRANCIS. I have not.
Mr. CROWTHER. You have not seen that. I just want to ask you, if you think it is possible for us to do something?' Time is slipping by . I understand action under the agreement was postponed until we could consider this bill, which I thinks ends the 30th of June, if that is the time.
Mr. FRANCIS. That is right.