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there should be a natural flexible shift of tonnage to best serve the public interest.

I might cite another example of a shift of tonnage due to the utilization satisfactorily of coal that has very low fusion in these pulverized fuel plants incapable of using the stoker or hand card equipment, because in the pulverized-fuel plant they can have fusion of the ash and remove the ash after it has formed a slag. We have had considerable development for the utilization of coal in the past few years. I think unquestionably we are going to have considerably more development, and it may reach the point of being very important from shifts of tonnage from fields as they are now.

In regard to the injustices of the quota system, I present a concrete example of injustice to the companies I represent, injustice both to the investors and the employees. This will be offered with full understanding of and belief in the social interest associated with the ownership of property.

The lands of the Pocahontas Mining Corporation and the coal produced by the Jewell Ridge Coal Corporation are in no sense of the word submarginal. The production record and the quality of coal remaining unmined justify continued production. Nevertheless, under the production control plan as outlined in the Guffey bill in its present form my company's mines stand to lose 55 percent of its present production, and more than 500 of its employees, if not all of them later. Taxes have been paid for 30 years on this land, railroad facilities were made available at the expense of my company, a highway several miles in length was graded by the company. Production has increased steadily from 1919 when it was about 95,000 tons annually to 500,000 tons in 1930, 1931, 1932, 1933, and 615,000 tons in 1934. The number of idle days due to lack of market demand averaged 30 days annually from 1926 to 1930 inclusive, 80 days in 1931. 98 days in 1932, 33 days in 1933, and not a single day in 1934.

This record of days worked and days idle was not dependent upon price cutting under the market price of coal of similar quality. We have not violated the provisions regarding prices under the Bituminous Coal Code, but in 1934 we did not miss a single day's operation. The stabilization of prices helped and it indicates clearly that we did not have our large percentage of running time due to a cut in the prices of the coal.

Senator NEELY. The National Recovery Act and the subsequent adoption of the code evidently helped your business?

Mr. Sr. CLAIR. That is correct.

Senator NEELY. Were you in favor of governmental regulation before the recovery act actually went into operation, or did you oppose it?

Mr. St. Clair. It happened at the time it was proposed that my father devoted quite a lot of his time to the consideration of the act. His time was devoted also to the policy of the company toward the act. I was given at the time some other duties. I do not think that I gave enough time to it to be fully informed as to the contents and the provisions.

Senator NEELY. What was the attitude of your company toward the passage of the law? Did your company favor the regulation which has resulted from the adoption of the National Industrial Recovery Act before you had experience with it, or did your company as a whole oppose it?

Mr. St. CLAIR. I do not know whether I can answer that correctly. I do not now remember any opposition on the part of our company. We did oppose, prior to the adoption of the Recovery Act, or immediately subsequent to the adoption--I do not remember which time it came up—the allocation plan that was proposed for the southern field.

Of our employees 40 percent live in their own homes and 30 percent in company-owned houses; the remaining 30 percent live in houses rented elsewhere. We have leased small farms to many individuals for $1 per year and have loaned money to others for use in construction of their own homes.

We built a school paid for partly by the county of Tazewell, chiefly by Jewell Ridge Coal Corporation.

Senator NEELY. How are the loans that you have made your miners secured?

Mr. St. Clair. They were secured as the loans in the old days were, at the small town banks on the reputation of the men that made them. Most of the men had been known for years. They were natives there on that property.

Senator NEELY. You neither asked nor received any security, except the character of the persons?

Mr. St. Clair. I do not know of any instance in which we required security.

Senator NEELY. What rate of interest did the company charge on those loans; or do you know?

Mr. St. CLAIR. I do not even know that interest was charged. I cannot say that it was not.

The company supplements the teachers' salaries 6 months of the year and pays their entire salaries for 3 additional months. There is à minister who devotes his full time to the community. He is a graduate of the Union Theological Seminary of Richmond. There are 2 doctors supported by assessment from the employees, 1 nurse, 1 social worker, a small hospital, and a free library, all supported entirely by the company.

More than 99 percent of the employees are native white Americans of Anglo-Saxon origin, the very great majority of them natives of the vicinity.

The production of coal in January 1935 was 70,000 tons. Our allotment under the Guffey bill per month would be 31,500 tons, or 3,500 tons less than half the January production, with the result that a happy industrial community would be largely, if not completely, destroyed. The employees could not readily be freighted to another industrial district and there would be no other source of employment except on the farms located in a section where an optimist could have nothing less than gloomy thoughts at the prospects of obtaining subsistence from the land. These people are good citizens, of a type important in our social structure, and deserve consideration of their rights as citizens. We will bitterly contest any plan that will arbitrarily destroy them and are convinced that their loss will exceed any gain to individuals who, under the Guffey bill, would be employed elsewhere. We also have a responsibility of protecting the interests of the stockholders. I am aroused by the injustice of the proposal and consider that the injustice applies not only to those dependent for income on the companies I represent, but to the States of Virginia, West Virginia, and every other State in which coal mines are located, and every State in which there are no coal mines.

The Guffey bill is predicated upon the assumption that the difficulties of the coal industry are insurmountable. To this I do not subscribe. I believe the difficulties of obtaining sound permanent regulation by the Government are insurmountable.

I suggest continuation of N. I. R. A. with such modifications considered desirable, and with continued, increased serious thought by members of the industry of solution of the next step, whether by additional temporary measures or permanent legislation after expiration of a period of at least 2 more years of code operation. It is reasonable to assume that no one, either within or without the coal industry, has sufficient information to justify a plan conceived at this time that will be permanently beneficial to the industry or to the public interest.

If enforcement of the Guffey bill is possible, enforcement of provisions of the N. R. A. measures is possible. No one has denied the fact that there has been in the past 16 months a period in which the industry was very materially benefited.

I probably should qualify that by saying that no one has denied the fact that there has been a period of practically 3 months in which the industry was materially benefited.

The only criticism I have heard is criticism in regard to compliance, with no criticism of importance of the provisions themselves.

Lastly, a sincere, cooperative effort under continuation of the Coal Code will give essential information in regard to future desirable governmental supervision and will far more equitably and with far less disruption and with necessary flexibility bring about the protection of public interest, the stabilization of the industry, the enjoyment within the industry of fair wages and fair profits, and the elimination of unfair trade practices.

I thank you for this opportunity to testify before this committee and I hope, as I am sure do the majority of the members of the coal industry and the members of the Senate committee, that your findings and your recommendations will be those of greatest benefit to the coal industry and to the Nation.

Senator NEELY. Have you any exhibits that you wish inserted in the record, Mr. St. Clair?

Mr. St. Clair. No, sir; I have not. I wanted my endorsement of Mr. Carter's testimony of the past 2 days to be considered a repetition on my part, without actually making the repetition.

Senator NEELY. You stated earlier in your testimony that you endorsed what Mr. Carter said.

Mr. St. Clair. Yes, sir.
Senator NEELY. Mr. McAuliffe?

STATEMENT OF EUGENE MCAULIFFE, ON BEHALF OF THE UNION

PACIFIC COAL CO.

Mr. MCAULIFFE. My name is Eugene McAuliffe, residence Omaha, Nebr. I appear in behalf of the Union Pacific Coal Co., operating bituminous coal mines in the State of Wyoming, the output of which, totaling 2,402,563 tons in 1934, is almost wholly used by the owner company, the Union Pacific System Lines. I also speak by request

for the remaining operators in district V, Bituminous Coal Code, including the States of Wyoming, Colorado, New Mexico, Utah, Montana, Washington, and the Dakotas.

Senate bill 1417, written to control the bituminous-coal mining industry of the Nation, is foundationed on the statement that coal is "affected with a national public interest." The further statement is made that "the general welfare of the Nation requires that the bituminous-coal industry be regulated as a public utility.” It is generally assumed that when an industry, occupying a monopolistic or semimonopolistic position, upon which the general public must depend for service, requires control, such control is universally administered in behalf of the public which the industry serves.

Public utilities subject to Federal and State control are invariably controlled by a body wholly detached from property so controlled, as well as the labor employed therein. Any other form of control would not be in the public interest and therefore not adapted to publicutility requirements

S. 1417 is unique in that it undertakes to assume for the coal industry the privileges of a public utility, obtaining however a specie of bipartisan control, the various initial boards and commissions almost wholly representative of the industry, the National Bituminous Coal Commission to be made up of 5 members, 3 of whom shall have no connection with the coal, oil, or gas industries, 1 member to be a representative of the producers of coal, and 1 member representative of the labor employed therein.

The bill throughout wholly disregards the rights and interests of the consumer upon whose support the industry depends for its existence. In substance, it was written primarily in the interests of coal-mine labor with such price safeguards surrounding the production and sale of coal as will presumably meet the requirements of the owners and the labor employed therein.

The Union Pacific system lines are interested in the bituminouscoal industry from several standpoints, including a dependable and economical supply of coal for the operation of its locomotives, shops, and other operating facilities. It is also interested in the bituminouscoal industry from the standpoint of the coal traffic received. It is also interested in the welfare of the labor employed in its mines.

We submit herewith the following specific comment regarding the effect

of the passage of this bill or legislation of like character: 1. The bill, if passed, would increase the cost of railway-fuel coal, whether produced in railway-owned mines or purchased in the market under contract, not less than 30 cents per ton, or on the basis of current fuel requirements, $24,000,000, annually. It is not improbable that, in the event a radical method of allocation and tonnage control is established, the added cost would in certain cases run up to 50 cents per ton to the certain railroads so affected. It should be borne in mind that the weighted average cost of railway-fuel coal increased, in the first 10 months of 1934, 17 percent, these increases amounting to 30 and 40 percent in many cases, and 75 percent in a few cases.

2. Railroads depend upon revenues from freight, passenger, mail, and express service, for their continued existence, freight traffic thé most important revenue producer. The tonnage of coal moved by the railroads has not only suffered loss of volume due to the growing use of other forms of transport, but it has to an even greater extent

lost tonnage by reason of the growing volume of natural gas, fuel oil, distillate, and gasoline used as substitute forms of fuel and power. The relative delivered price of the competing fuels is the dominant factor in determining what fuel will be used, and for years the substitute fuels mentioned, which require but little labor for their production and transport, have steadily displaced coal. Every cent added to coal costs accelerates this substitution process.

3. The bill makes specific reference to "captive coal", lines 14-15, section 3. There is no justification for bringing captive-coal tonnage under price regulation, allocation, or other repressive forms of regulation. Captive mines should pay a fair wage to the labor employed therein, and all of the necessary Federal and State regulations pertaining to safety should be impartially enforced on all coal-producing properties regardless of ownership. Outside the items of wages, hours of work, and mine safety, there is no necessity for, or justification in, bringing captive mines under the drastic measure of Federal control which the bill provides. It is not unreasonable to ask why bituminous coal is singled out for repressive legislative control when all other branches of mining, including anthracite, are not included in this supposedly beneficient measure. We object to the inclusion of captive mines in the bill for the following reasons:

(a) Any plan of allocation involves long and tedious study and experiment. Great Britain and Germany have experimented with allocation for years and although their situation, due to fewer grades of coal and shorter transport distances, is infinitely simpler than is ours, great difficulties have been encountered in administration. The relative volume of domestic and export demand, which, while not governing, will provoke trouble, but most of all, will the American industry suffer from its multiduinous grades of coal and its widely separated markets, where wide variations in yearly demand oceur, due to varying business conditions, which largely originate with agriculture.

(6) Captive mines owned by and operated for the railroads are an integral and important part of the transportation machine and the railway's investment. Such mines are quite as much a part of the owner railroad as are its shops and its tracks. Coal can, it is true, be purchased, and, likewise, tracks and terminal facilities can be, and are, secured from outside sources by many railroads.

(c) Railroad fuel requirements vary due to seasonal spreads in traffic. In certain cases the maximum demand for railway fuel coal reaches 250 percent of the minimum demand. When transportation is demanded the railroad must be in a position to handle same. Cars, locomotives, and fuel coal must be forthcoming. It is when these periods of heavy railroad-fuel demands appear that the general commercial demand is likewise heaviest.

(d) The question of the economical operation of the railroad is of paramount importance. No obstacle that interferes with a legitimate control of railway operating costs should be counternanced. The railroads use 25 percent of the Nation's bituminous coal, and the interests of the industry and the labor employed therein require the wider use of coal. To the extent that railway coal costs are increased, fuel-oil products consumed through oil-fuel locomotives will displace coal. Equally important to the railroads is the loss of coal traffic that will result from the repressive regulation proposed by the bill.

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