Of the code subdivisions of division 1, the smokeless subdivision of southern West Virginia-district no. 6 in this bill has the smallest range and variety of prices; yet it has 10 different prices for slack coal. The eastern subdivision of central Pennsylvania has 11 or more prices for slack in different markets. In either district it is a fair assumption that if one price were applied to the slack from all the mines, the low-quality slacks would be difficult to market, if they could be sold at all.

One of the principal markets for slack coal from the smokeless district is the Atlantic seaboard points. Millions of tons move into these markets in competition with oil; water-borne, foreign and domestic oil. The markets for millions of tons of coal have already been lost to oil competition. To a large extent this slack moves at prices below the average district cost of production, less depreciation and depletion. The higher prices received for the more valuable prepared sizes, and the larger volume of business thus obtained, makes it profitable to hold the business against oil competition. There is a constant flow of one business from one commodity to another, as oil to coal or from coal to oil, owing to conditions existing in that marketing area in recent years and as they are today.

If the smokeless field is required to sell all its slack under the minimum prices formally stated in this statute, we will lose literally millions of tons of production in addition to the millions of tons lost through the proposed allotment scheme.

If the minimum-price standard fixed in this bill is applied to the lowest grade slack, then proper differences in price could not be made to reflect the difference in the market value between the other classes of slack and the various grades of coal and still keep the whole price range within proper limits.

A published minimum price would be used by buyers to force other prices down, regardless of the basis on which that minimum price was determined. Such a system would make it more difficult to secure the proper prices for the better grades of coal that must be priced substantially above the cost of production in order that there may be a fair average realization. The formula of basing the fixed minimum prices, for all coals in a district, on the cost of production averaged over the district would be a radical change in methods of price-making Cost does not fix prices of any article as varied in unit cost and unit value as coal. A miner in one mine mines, say 10 tons a day; in another 5. One miner loads over a pole tipple, another over a $500,000 cleaning and grading plant. One mine produces a lower-ash, high-grade, limited-quantity, highdemand coal, another a high-ash, low-grade, low-demand product. It is an economic absurdity to average cost and try to sell at the same price the lowest-price product from each mine.

You will probably be frankly told that one purpose of the bill is to narrow the range of prices-that good coals sell too high and poor coals too low. The suggestion does not regard the practical yardstick of useful values and competitive conditions and is therefore unattainable. In any event, such change should be attempted only through careful and well-tested processes, through experimentation or trial and error, if you please. Certainly it should not be imposed by an inflexible legislative fiat.

As I understand the bill, minimum prices are to be fixed annually, maximum prices twice a year. Prices normally and properly fluctuate with variations in seasonal and industrial demand. It is natural that domestic coal should sell for more in January than in July, and that reductions be made in the prices of industrial coal to save business from oil or hydroelectric competition. The price bracket will not take care of the necessities for fluctuation. I am not overlooking that by the legerdemain of making this business a public utility, these commercial considerations are to be wiped out and all prices for the same grade of coal are to be the same to all comers at all times. This would cripple the ability of the industry to compete for industrial business and leave it helpless to encourage the buyer of domestic sizes to stock coal in the off-heating seasons. It would, I take it, impose upon the producers of coal the obligation to deliver to every one his full domestic requirements of his choice grade of coal in the month of January-an impossibility.

The bill is sketchy on various points, passing lightly over the details of many difficult problems. In the first sentence it declares the distribution of coal, along with production, to be affected with a national public interest. The complications of distribution are many and varied. There are agents, factors, assignees, wholesalers, retailers, sales agents, supervisory sales agents, service engineers, railroads, storage yards, docks on the ocean and on the lakes, ocean and lake carriers, steamships, barges, and many combinations of these and other facilities serving the public in the distribution of coal.

Senator NEELY. Has the price fixing been satisfactory under the code?

Mr. HAWTHORNE. That has been the continuous problem of operation under the code; and, in my judgment, the plan devised in the code has in its essential provisions the best basis that could be devised for covering that commercial problem.

Senator NEELY. I have asked you a question and I should like for you to answer it.

Mr. HAWTHORNE. I am doing my best, Senator.

Senator NEELY. I did not ask you whether you think it is the best that can be devised. I want to know whether you think it has been satisfactory.

Mr. HAWTHORNE. Well, if you mean to inquire whether, in my opinion, it has worked entirely satisfactorily, I should have to say no, because there have been many people and many times when there has been dissatisfaction with particular things that have happened under the operation of that machinery. It has been a continuous process of readjustment and consideration of readjusting, so that in that sense I do not think the price experience has ever been at the point where everybody in the industry was satisfied, that that thing is just right. In my opinion, if you mean as to the machinery, it is the most satisfactory machinery that could be devised in its general application, and by that I mean that in carrying it out it may require continuous consideration and revision of detailed methods.

Senator NEELY. Do you believe that the minimum market price now established for coal can be enforced under existing laws, so that the operator who is ethically living up to the requirements of the

code can be protected against cut-throat operators in various sections of the country who are notoriously violating the provisions of the code?

Mr. HAWTHORNE. Yes; subject only to the qualification that the Supreme Court should hold the whole National Industrial Recovery Act illegal. I understand the National Industrial Recovery Act is founded on the same principle of authority for Federal law that this bill is, so that it is at least as sound a basis for enforcement as this bill operating as to the coal industry could be.

Senator NEELY. Mr. Hawthorne, you were a member of the committee that prepared the so-called "proposed committee draft plan for the rehabiltation and stabilization of the bituminous coal-mining industry, dated October 19, 1934, which was submitted to the United Mine Workers of America?

Mr. HAWTHORNE. I acted on that committee.

Senator NEELY. You and Messrs. J. D. Francis, John Morrow, Charles Dickinson, Charles O'Neill, Walter Robinson, Peter Williams, and George Harrington constituted that committee?

Mr. HAWTHORNE. We all worked on the committee. There might be some question whether we were on it or had a proxy.

Senator NEELY. Did you not participate in the preparation of a proposal, and approve it after it was reduced to writing, as follows:

The fair minimum market prices are not being enforced

That is, referring to results under the code

and probably cannot be enforced under the method of fixing such prices and administering the fair minimum-price provisions of the code. Increasing disregard of those code prices, in many instances upon advice of counsel, is making it increasingly difficult and dangerous for competing operators to adhere to the code minimum prices.

You helped prepare that paragraph, or you approved it after it was prepared, and prior to the time the proposal which contains it was submitted to the United Mine Workers of America for their favorable consideration in trying to work out a plan of governmental regulation that would stop the cut-throat competition in the coal fields which had kept the industry in the poorhouse for 25 years.

Mr. HAWTHORNE. I sat in and worked with and as a part of the committee working on that attempt to study the working out of a bill.

Senator NEELY. Do you approve or disapprove the paragraph I just read?

Mr. HAWTHORNE. I was going to say I have no recollection as to the particular conditions governing that particular draft of the committee's activities. We had a number of drafts. I should think 14 would be more nearly accurate than 4. I know nothing whatsoever about the circumstances under which this particular draft may have been handed to the United Mine Workers of America. Members of the committee were in consultation at different times with the representatives of the Mine Workers, all directing our efforts in the study of the question of legislation.

Senator NEELY. What I read to you a moment ago from the proposal to which I referred is the first clause of paragraph 3. That is followed by a second clause, which is as follows:

These defects

The ones mentioned in the preceeding paragraph

are breaking down the present price stabilization. When operators come to make the customary yearly contracts for the sale of their coal for next year they will be compelled to disregard the price minimums and a complete smash, therefore, is inevitable early in 1935 unless effective remedial measures are adopted promptly.

Did you share that view at the time the proposal was submitted to the United Mine Workers of America; and if so, do you share it now; if you do not, when did you change your mind about it, and why?

Mr. HAWTHORNE. That seems a fair question in view of the fact that my name is associated with that report. I have no recollection of the drafting of that particular provision. I have no recollection of having it submitted for consideration by the committee as a whole. The committee in its various meetings had different groups working together. A certain amount of consideration and privilege was given to everybody concerned in formulating statements and positions. Insofar as my personal views are concerned, I do not share the sentiment expressed there.

Senator NEELY. You are not going to lay the responsibility for the drafting of that proposal and its submission to the United Mine Workers of America upon somebody like Mr. Francis or Mr. Morrow, are you?

Mr. HAWTHORNE. I really don't know the circumstances under which it was submitted.

Senator NEELY. Have you any idea whether Mr. John Morrow, Mr. Dickinson, Mr. O'Neil, Mr. Robinson, Mr. Williams, or Mr. Harrington was responsible for the drafting of that proposal and its submission to the United Mine Workers of America?

Mr. HAWTHORNE. Senator, I do not know.

Senator NEELY. You were a member of the committee and signed the proposal.

Mr. HAWTHORNE. I must repeat again, however, that as a member of the committee I have very clearly in my mind that that was not submitted to the United Mine Workers of America or to anyone else as a definitive plan supported by the committee. May I ask you what the caption is on the front sheet?

Senator NEELY (reading):

Proposed Fourth Committee Draft of Plan for the Rehabilitation and Stabilization of the Bituminous Coal Mining Industry.

It is dated October 19, 1934. In order that you may have no doubt about the nature of this plan, I hand it to you and call your attention to the fact that it contains 16 closely typewritten pages. Mr. HAWTHORNE. I am familiar with it.

Senator NEELY. Is it not rather a definitive outline of somebody's views?

Mr. HAWTHORNE. I am familiar with the document, and many others of the same form. That committee met over a period of 6 months, spent days and days studying these different subjects, studying this question of price fixing, studying this question of allocation, and studying various and many suggestions that were made, and in the end the committee reached the conclusion that it could not formulate a legislative program for the industry. As I said to you this morning, it was my study in connection with that committee work

than convinced me that it is entirely impractical to formulate a legislative program of that kind and apply it to that industry.

Senator NEELY. Was not your inability to reach an agreement with the other operators on that important matter characteristic of the inability of the coal operators of the entire country for the last 25 years, to agree on any plan that would save their industry from ruin? Mr. HAWTHORNE. No; I will not agree to that. I do not agree that the job has been as well done as we might have liked for the industry, but that very matter that you speak of was a genuine effort to work and to deal with that problem. So far as I am personally concerned, I do not think that I reached the conclusion that the thing we were considering, the project we were considering, the suggestions we were considering from different people, were not impractical, visionary, and contrary to our whole commercial problems or experience in the commercial problems we were dealing with, and one that should not be attempted, and I feel it is not in any sense an indication that I had not cooperated or that I had not worked with the members of that committee in an effort to work out a solution, and an effort to give intelligent consideration to the suggestions that came, not merely from the members of the committee, but from many sources in the industry. The committee, I may say, was open, and frequently its meetings were participated in by other operators than the members of the committee.

Senator NEELY. You understand that I have made no charge against you personally, but I know operators who live in the same county who have been practicing cut-throat competition against each other for a quarter of a century or more.

Mr. HAWTHORNE. You also know, of course, and recognize, Senator, that for the 25-year period that you speak of these neighboring operators have been rather restricted and restrained from doing anything other than engaging in competition in the conduct of their business. Do not misunderstand me as defending carrying that to an unreasonable extreme at times, but we have never understood until the National Industrial Recovery Act was passed that we had the privilege of sitting down and setting up the machinery under which we could cooperate.

Senator NEELY. But since you have enjoyed that right under the law, a substantial part of your industry has refused to utilize it.

Mr. HAWTHORNE. I think that is correct. I think there is a substantial part that is. By that I do not mean to say it is a major part. But I think also that in any kind of program that may be devised, whether you leave it to the ordinary play of unrestricted human factors involved, or whether you set up machinery, you are going to have a substantial part of that industry that will have to be forced to deal with and observe rules that the great majority may approve of.

Senator NEELY. Mr. Hawthorne, I understand that you disclaim personal responsibility for the first two sections of paragraph 3 that I read from this report. Will you tell me whether you share responsibility for the submission of the following, which is contained in the proposal:

Some may assert that price stabilization in the bituminous-coal industry has served its purpose, is not in the public interest, should be allowed to become ineffective, and no effort made to continue it, even in modified form.