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differential and 45 cents for difference in quality of western Kentucky and southern Illinois coals.

Now if the price structure of western Kentucky coal, f. o. b. mines, is to be maintained on a basis that will return that district $1.85, it necessarily follows that in the coordination of its prices with southern Illinois, the price structure of southern Illinois must be increased 80 cents per ton above what would be necessary to maintain an average return of $1.85 for the southern Illinois operators. On the basis of the differential contended for by western Kentucky, the southern Illinois price structure would, therefore, have to be fixed so as to return an average of $2.65.

Mr. Vinson. Of course, I take it that you are solicitous about the coal operator in western Kentucky?

Mr. WAFFLE. I hold no brief for western Kentucky. I am using that as an illustration, for the reason that western Kentucky freight rates are universally 35 cents per ton higher over the entire district north of the Ohio River. I could just as well have used eastern Kentucky, but they have no fixed differential there. There is a difference which varies with almost every destination.

As the southern Illincis prices would be related to the prices of other Illinois ccals, and to the prices of Indiana coals, the price structure of these latter groups would likewise have to be increased proportionately.

Such procedure would establish an exorbitant price on Indiana and Illincis coal, and if the operators were able to sell their coal at those prices, in competition with competing fuels, such prices would net the operators, in some instances, with a margin over cost of production of more than 150 percent.

Now if we proceed via the other route and coordinate western Kentucky and Illinois prices by reducing the f. o. b. mine prices of western Kentucky coals sufficiently to absorb the difference in freight rates and quality of coal, obviously that district would not receive an average return of $1.85, unless it was done by fixing an exorbitantly high price in their local market, if they have done any such thing, which they probably do not have except as to a very limited tonnage. This illustration strongly emphasizes the futility of the price-control plan set up in the bill.

The collapse of price fixing under the code of fair competition resulted largely from the futile attempts which were made to coordinate prices in common consuming markets. Coordination of prices has never worked and we do not believe it can be made to work satisfactorily. Of course, it may be argued that the Commission has power which did not exist under the code and can coordinate the district prices in common consuming markets. While that may be true, it does not necessarily follow that the Commission would be capable of establishing a coordination of prices which would be entirely fair and reasonable to each producing district, or to the operators within each district. We are convinced from our experience under code price fixing that coordination of prices by the Commission will result in endless litigation in the Federal courts and may eventually result in this provision of the bill being declared illegal, and the bill thereby be stripped of its most important feature.

We therefore submit that the bill should be amended so that each district will be permitted to base its prices on its average cost of production, without relation to the cost in any other district, and, further, that each district be permitted to set up prices in the various consuming markets independent of any other district, subject at all times to approval, disapproval, or modification by the commission, and with the further provision that the entire price structure in all consuming markets must yield a mine-run return of not less than the district average cost of production.

We also recommend that district boards should be permitted, from time to time, in order to meet changing market conditions, to revise their price structures upon notice to and approval by the commission, subject, always, to the provision that the entire price structure of the district must yield not less than the average district cost of production.

And finally, we recommend that the provisions published in subsections (b), (c), and (d) on pages 14, 15, and 16, be stricken from the bill. The adoption of this recommendation would result in completely removing from the bill the requirement that prices shall be coordinated in common consuming markets.

We believe the acceptance of these amendments will so simplify the price-fixing features of the bill as to avoid a vast number of hearings before the commission and an enormous amount of litigation in the Federal courts.

Even if the price-fixing provisions of the bill are held constitutional, unless they are workable, they will eventually fall of their own weight.

I have two or three other matters which I intended to refer to, but they have been covered by other witnesses, and in the interest of time I will pass them over.

Mr. Hill. Thank you very much.
Mr. HILL. Mr. Grant Stauffer.

STATEMENT OF GRANT STAUFFER, KANSAS CITY, MO., REPRE

SENTING SOUTHWESTERN COAL OPERATORS

Mr. STAUFFER. I represent the companies in which I am personally interested, operating in Arkansas, Oklahoma, Kansas, Missouri, and Illinois, and the operators of Missouri and Kansas.

I have been in the coal business since 1911, working for other people and myself. I have been operating since 1916.

I believe, speaking for the companies in which I am interested and the operators of Missouri and Kansas, that this House bill 8479 would do the opposite of what it is intended to do, of what it says on the face of it. I believe it would do just the opposite of stabilizing the industry. That is, I have heard the proponents of the bill here say that we should have one wage scale as a standard for the whole country. I am a believer in paying just as high wages as one can pay, and I think that makes for prosperity, but we have gas and oil competition that is a pretty serious matter in our section. In fact, we made a poll by telephone and mail of all the operators in Missouri and Kansas, about 700 of them, and we failed to find one in favor of this bill, for the simple reason that in our experience and we believe it—that any such legislation as this will increase our cost of production. We have gone from 21,000,000 down to 8,000,000, or down to 6,000,000, in Missouri and Kansas, annual production. Probably 85 percent of that has gone to competitive fuels. We gentlemen who have spent all our lives in the business do not want to lose the 6,000,000 which we have left. Our experience under the N. R. A., shown by the N. R. A. figures, was that we did not receive in our returns the increased costs under N. R. A.

We realize that the coal districts of Kentucky, Ohio, and West Virginia have a problem, but we do not like very much to be put out of business because of rules and regulations that operators and miners in the East think they must have in the form of rules and regulations to regulate their business.

As an illustration of how correlation would work, in our opinion, under this bill:

During N. R. A. we were asked, or rather ordered, by the administration at Washington to raise our price 75 cents a ton in central Kansas and Nebraska in order to correlate with another mining district. We already had our highest price.

Mr. VINSON. What district?

Mr. STAUFFER. Colorado. We already had our highest price that we had in effect in any territory in central Kansas and Nebraska. We wanted to hold the business out there against gas, which we had lost, probably, over a period of years, 65 to 70 percent of it, to gas.

Mr. Vinson. That was not due to either N. R. A. or this bill, was it?

Mr. STAUFFER. No. But we believe in the correlation plan laid out under this bill the same problem will come up. Those farmers out there have not any too much money, and if they could have a lower price, it would be a good thing for us, and we could produce more coal, and the miners get more work.

Mr. Vinson. What did you charge?
Mr. STAUFFER. I think our price was about $2.50 average.
Mr. Vinson. Was that your N. R. A. price?
Mr. STAUFFER. Yes, sir; that was our N. R. A. price.
Mr. Vinson. What was your price pre-N. R. A.?

Mr. STAUFFER. Of course, when I say that was our price, we have various prices for the different sizes.

Mr. Vinson. I am speaking about an average price per ton, which is the best we can get.

Mr. STAUFFER. Our costs under N. R. A. went up about 30 cents a ton, on an average, I should say, and we probably increased our price about 15 cents under N. R. A. We lacked 15 cents of getting the additional cost.

I have not answered your question. You asked me to give you the exact figure. I did not come here to take a lot of your time, and I did not bring any statistics or facts and figures with me.

Mr. VINSON. We are not going to indict you or to do anything to you, if you make a mistake, but want your best judgment.

Mr. ŠTAUFFER. I think our mine realization has been running during the last 10 months about $1.80. So that, prior to N. R. A., it would be about $1.65.

We are a little afraid that this bill, if passed, and if we are required to operate under it, would cause us to violate the Missouri antitrust laws, until this bill is declared constitutional. We have very stringent antitrust laws in Missouri, and we have an attorney general that is anxious to enforce the law, as he should be.

Mr. VINSON. Tell us about that. That is interesting. What is the law?

Mr. STAUFFER. I am not a lawyer, Mr. Vinson.

Mr. VINSON. Just tell us about it.

Mr. STAUFFER. When two or more people get together out there, if it is possible for them to raise the price, whether they do or notif I have made it clear-we are in violation of the law.

Mr. Vinson. If two or more people get together and do what?

Mr. STAUFFER. Agree on prices, whether they actually raise prices or not.

Mr. Vinson. What did they do to you under N. R. A.?

Mr. STAUFFER, If I recall correctly, our attorney general succeeded in stopping the retailers in the city of St. Louis from agreeing on prices.

Mr. Vinson. Did they do anything to you?
Mr. STAUFFER. I beg your pardon?
Mr. Vinson. Did they do anything to your operations?
Mr. STAUFFER. No, sir.
Mr. Vinson. Or any other operator that you know anything about?
Mr. STAUFFER. No.

I was indicted during the war, I think by the attorney general of Missouri, and the retail lumber interests have been indicted and fined--that was many years ago-and told they could not do business in the State.

Mr. VINSON. At retail transactions?
Mr. STAUFFER. Yes, sir.

Mr. Vinson. I take it your business is in some degree, at least, interstate?

Mr. STAUFFER. Most of our business is interstate. We ship into South Dakota, the corner of Minnesota, Iowa, Nebraska, Kansas, Missouri, Texas, Oklahoma, and Arkansas.

Mr. Hill. Do you have mines in Missouri?

Mr. STAUFFER. Yes, sir. We produce about 28 percent of the total coal produced in the State of Missouri.

Mr. Vinson. How much is produced in the State?
Mr. STAUFFER. About 3,700,000 tons.
Mr. Vinson. What tonnage do you represent?
Mr. STAUFFER. A little over 1,000,000.
Mr. VINSON. I mean in the whole area.

Mr. STAUFFER. A little over 1,000,000 in Missouri, one million and a quarter last year, and this year we are producing at the rate of about 1,600,000.

Mr. Vinson. You are stepping up a little. Have you got a market for your coal?

Mr. STAUFFER. Sometimes.
Mr. Vinson. You are not producing it for fun, are you?

Mr. STAUFFER. No, sir. We are competing keenly with gas, and any small increase in the cost of our production will be immediately reflected in reduction in tonnage, reduction in working time for our miners.

A lot of my competitiors in the coal business have wanted to tax the gas fellow, but my position has been that he is entitled to have the right to sell his product the same as we.

Mr. Vinson. Have you reduced your production costs since N. R. A. went out of the picture?

Mr. STAUFFER. No, sir.

Mr. Vinson. How can you explain the increase in your production, without any decreased cost, and with this competition?

As I understand it, you have competitive fuels, and I think I understand that problem fairly well. You have had that out there for several years.

Now, in the face of that competition, you say where you produced 1,000,000 tons last year, or 1,100,000, whatever it was, that you are now producing 1,600,000.

Mr. STAUFFER. We have a new operation.

Mr. VINSON. In other words, the field was so attractive that you opened up a new mine? Mr. STAUFFER. Not in Missouri.

Mr. Vinson. I do not know where it was, but, wherever it was, is that correct?

Mr. STAUFFER. That is the usual reason for opening up a new mine.
Mr. Vinson. That is the reason?
Mr. STAUFFER. That is the usual reason.

Mr. Vinson. Then just how fearful are you of the competitive fuels at the N. R. A. price?

Mr. STAUFFER. I think I can make that clear: The increased production is on account of a new mine we put in in Illinois. My conversation is altogether from the standpoint of the situation west of the Mississippi River. I am not speaking of the State of Illinois.

Mr. VINSON. We have been told that gas is a competitive fuel in Illinois. Just a few minutes ago a gentleman on the stand told about the big pipe line going into Chicago from Amarillo, Tex., 3 or 4 years ago. Mr. STAUFFER. That is serious. They do not know how far that

Mr. Vinson. But, in the face of those competitive fuels, you have opened up an operation in Illinois ?

Mr. STAUFFER. That is right.

Mr. Vinson. Which will increase your operation one-half million tons?

Mr. STAUFFER. That is right.

This is a new thought which I have had, and I have not heard it. expressed here, and I do not want to unduly take up your time, but I do not think the small operator can sell his product at the same price that the larger operator can, and if you compel the smaller operator to make the same price as the larger operator, you will put him out of business. I know from experience that when I was trying to start in the coal business myself, that I could not make the price that the operator who had 25 or 40 salesmen out, and a welladvertised product, and who had been in business 40 years, could.

Our code authority out there tried, to some extent, to police prices and wages in the State of Missouri. I think it is as impossible as it was to police the Volstead Act, even harder. When a farmer has . two or three sons, with a bed of coal on his farm, and he wants to sell coal to his neighbor, he will find ways of violating the law, I believe, the same as a man who wanted to sell a little liquor down in the Arkansas or Oklahoma hills. I would like to see a law, if there is a law, that will be observed, that will fit both the larger operator and the smaller operator. I think if it had not been for the N. R. A., the Appalachian Coals idea would have spread, and I think where

will go.

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