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sizes of coal produced, and inability to move any one size limits the entire production in direct proportion.
Should the minimum price for all grades and sizes of coal be fixed at cost of production as provided in the bill, inability to move any one size at the minimum price so fixed would affect the entire production, notwithstanding the average realization for all of the sizes might be considerably in excess of the minimum so fixed.
In our Williamson field during the period of April 1 to November 30, 1934, while operating under the present wage scale, our total average cost of production as shown by data compiled by our code authority, excluding depletion and depreciation was approximately $1.57 per ton. Under the proposed bill, assuming that other fields making up our district have the same average cost, the minimum price of our coal, irrespective of grade, would be $1.57 per ton. Under present competitive conditions this $1.57 minimum would become the maximum price for the fine or slack size of coal.
At the present time our code prices for 1%- to 2-inch slack ranges from $1.45 to $1.80, depending upon quality, and in practically every instance the mines having the quality slack coal at the higher prices are running more time than those mines having the lower slack prices.
Now, if the minimum price was fixed at $1.57, regardless of quality, those mines having the highest quality coal would have first opportunity to market those coals, while those mines having the poorer quality coal would have to take what is left. While some relief may be given through the proposed scheme for allocating tonnage, unless the total tonnage allocated was exactly in accordance with consumption, which is hardly possible, particularly on a declining market, those mines having the best quality would be able to ship their entire tonnage allotment while any shortage would fall on the mines with inferior quality coal. Then at the next period for again making allocations the allotment for those mines which ran 100 percent would be increased, while those mines which did not run 100 percent of their allotment would be decreased, and it would be only a matter of a few years until the inferior quality mines would be entirely eliminated, notwithstanding such mines might have only one size of coal constituting only a very small percentage of the total which might be of inferior quality and which could not be marketed at the minimum fixed price. The total cost of production of these mines might be considerably below the average cost in the field. In fact in some instances in our field where mines produce a premium coal for domestic purposes but have an inferior quality of slack, on the basis of the present range of prices as between the prepared sizes and slack coal if sold at cost, it would result in excessive profits on a mine-run basis.
Now, with reference to the minimum and maximum price to be established in each district, based upon the cost of production, this would have the effect of gradually eliminating those mines with costs considerably in excess of the average. I am attaching hereto a chart for our Williamson Field showing the tonnage produced at various total costs per ton for the period of April 1 to November 30, 1934, while working under our present wage scale, by which it will be noted that while the total average cost for the field, including depletion and depreciation, was $1.70 per ton, the cost for the various mines within the district making up that average ranges from $1.35 to $3.80 per ton.
The only reason the high cost mines can exist is due to superior quality of the coal, and any maximum price which might be fixed which will yield a fair profit to the field as a whole will be entirely inadequate for the high quality coals; or if the maximum is fixed so as to enable those mines to stay in operation, the margin of profit for the low cost mines will be excessive. I am advised by the Secretary of the Logan Coal Operators Association that similar differentials in cost per ton also exist in that field.
The above outlines some of the difficulties in fixing minimum and maximum prices for each district so as to give an equal opportunity to all producers to participate in the shipment of such tonnage as is available. The same difficulties arise in fixing a minimum price as between districts, particularly where freight differentials so seriously affect the movement of coal in competing territories. Our Williamson District is largely dependent on the markets north and west of the Ohio River as an outlet for its fine or slack size of coal. In shipping into those territories our field is required to meet freight differentials in favor of Pennsylvania, Ohio, Indiana, and Illinois, ranging from 35 cents to $1 per ton. The total cost of production in practically all of the northern districts with which we have to compete is in favor of those districts, as shown by data compiled by the National Recovery Administrator for the period of April i to June 30, 1934, which show as follows: Western Pennsylvania
$1. 9320 Indiana (deep). Illinois (deep)
1. 7725 Ohio..
1. 8123 Indiana (strip).
1. 4202 Illinois (strip).
1. 1948 High volatile southern subdivision no. 2.
1. 8124 It will be noted that the total cost of producing coal in the high volatile southern subdivision no. 2, of which our Williamson field is a part, is higher than that of any other subdivision with which we have to compete, except western Pennsylvania which is only 12 cents in excess of our subdivision, notwithstanding they have a freight differential in their favor estimated at an average of 30 cents per ton. It can readily be seen that if the minimum price of slack coal in all of the territories shown was fixed at the cost of production, our subdivision, with the exception of western Pennsylvania, would have the highest minimum for slack coal, notwithstanding the adverse freight differentials. This is not a new situation under our code. I am attaching hereto as exhibits graphic charts prepared by the United States Fuel Administration in September 1917, showing at that time the cost of production in the Williamson field was approximately the same as in the State of Ohio and western Pennsylvania.
In order to compete with those districts, on account of their freight differentials, our present agreement with the United Mine Workers of America provides for a differential in wages of 40 cents per day in favor of the South. However, in actual operation, while that differential does exist for our men employed by the day, the actual differential in earnings of our piece workers, which represents approximately 55 percent of our total labor compared with approximately 75 percent for the northern districts, as between West Virginia and Indiana, Ohio, Pennsylvania, and Illinois, is in favor of the latter districts, as shown by data compiled by the National Recovery Administrator for the month of December 1934, which shows as follows:
While we have no figures for the year 1935 for the northern fields, based upon tonnage produced per man per day, as shown by data compiled by the National Recovery Administrator for those fields, the differential in earnings of piece workers at the present time, as between West Virginia and the other districts, has increased an additional 50 cents per day. Therefore, in order to move our fine sizes or slack coal it is often necessary for us to dispose of it at a price below the cost of production and depend upon the prices obtained for the prepared sizes to bring the average realization for all sizes up to the cost of production.
For the reasons above stated, we believe that a minimum price based upon cost of production for all sizes of coal is not practicable and that there should be some method whereby the price can be based upon quality, cost at point of consumption and other competitive factors, regardless of cost of production. We believe this can be accomplished by providing that either the district boards or marketing agencies for one or more districts shall fix a minimum and maximum price for each size of coal produced at each mine on the basis of quality and competitive marketing conditions, regardless of cost of production so long as the total realization for all grades sold within a district shall equal the average cost of production for the district, with similar enforcement features with reference to taxes, and so forth, as are contained in the proposed bill.
The Commission should then have the power to determine whether or not the prices so fixed by each district are fair in relation to each other, with authority to order such changes in price as are necessary to allow the coal to move in the market in proportion to the allotment made for each district.
We believe that any attempt to allocate tonnage either between various districts, or between mines within a district, based upon long experience, will cause hardships both between and within districts. The bill as proposed would result in a switch of tonnage between various districts of approximately 30 million tons, or 8.4 percent. If the period since 1923 is considered instead of 1918, the switch in tonnage will amount to approximately 21 million tons, or a switch or 6 percent. If experience since 1928 is used it would further reduce the switch to approximately 11 million tons or 3 percent. In our Williamson Field the bill as proposed would reduce our tonnage in comparison with that produced in 1934, approximately 660,000 tons or approximately 9 percent. This would be in addition to a loss already sustained in 1934 under 1933 of approximately 4 percent. We, therefore, believe that any proration of tonnage should not consider experience over a longer period than 10 years.
In prorating between mines within the various districts, any proration based on past experience computed on tonnage actually shipped will cause even wider variations in tonnage than between districts.
In our Williamson field if the proposed bill had been in effect in 1934 and we apply the proposed 5-year method in allocating between mines within our district to that year, a comparison of the tonnage ellotted and the tonnage actually shipped would have been as follows:
We therefore believe that in prorating tonnage between mines within the district, the capacity of the mines should be considered and not tonnage over any given number of years. We suggest this be done by each company selecting any two years it chooses out of the past 5 years and divide that tonnage produced during those years by the number of days the mine operated, thus getting the capacity of the plant. Then use that daily capacity as the basis for determining the percentage of total tonnage in the district to which the plant is entitled. This will more nearly assure equal operating time as between the various mines, which we are trying to accomplish, than any other method which might be used. In addition, the district boards should be authorized to further adjust tonnages for such mines as are becoming depleted, new mines which have not been in operation for a period of 5 years, and mines which have been only partially operated during that period.
Under the proposed bill our Williamson district would be partially in District No. 5 and partially in District No. 7. In some instances the mine being operated by some companies would be in District No. 7, while the tipple would be located in District No. 5. District No. 5 takes in what is known as the "Virginia field.”
A very large portion of the tonnage from that field moves east and south, while a large percentage of the tonnage from the Williamson, Logan, and Kanawha fields moves west and north, and these two areas are not highly competitive for the bulk of their respective tonnages. We therefore suggest that District No. 5 be changed to include the present districts of Kanawha, Logan, and Williamson, and read as follows:
All of the coal-producing counties in West Virginia, not included in Districts Nos. 1, 2, and 4, and not including areas and operations producing smokeless or low volatile coal; Buchanan County, Virginia; and areas and operations in Martin and Pike Counties, Kentucky, from which coal is shipped over the Norfolk & Western Railway.
We propose that instead of the description of District 5 as it now appears in the bill.
Mr. Chairman, I would like to leave these exhibits with the committee.
(The tables presented by Mr. Woods are as follows:)
Statement by Operators' Association of Williamson Field showing proposed pro
ration of tonnage in Williamson district under provisions of Guffey bill, and effect on distribution of tonnage, if this bill had been in effect during year 1934
166, 453 1. 94 Grey Eagle.
109, 962 138, 779 23, 438
3, 420 19, 315
62,948 .74 Katona
71, 501 52, 936 58, 515
.68 12, 693 Landstreet.
207, 744 2. 43 126, 859 173, 832
Operated part of year 1933 and year 1934.