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plicable price, and also violates the wage and hour provisions. A gross violation is punishable to the same extent as a petty violation.

It cannot be contended that such an arbitrary penalty will be more readily enforceable than the more reasonable penalties of the National Industrial Recovery Act, If it be contended that the penalties under the National Industrial Recovery Act are not high enough, the answer is to raise the maximum limits of those penalties, not to substitute a fixed and arbitrary rule which might well put out of business producers who had only unintentionally violated the code.

There is perhaps one feature of the bill which would make for better enforcement than we have had under the code. Fnforcement would be in the hands of the Commissioner of Internal Rerere. The Commissioner would have the right to inspect the books of all companies to ascertain whether a tax was due. In fact, it would appear to be the Commissioner's duty to inspect the books of every company every month. We would doubtless have a horde of inspectors turned loose from the Bureau of Internal Revenue to ascertain whether the code was being violated.

Another very serious drawback to the enforrability of the Guffey bill would be the serious question as to its constitutionality: The greatest incentive to noncompliance with the coal code has been the feeling of many producers that the National Industrial Recovery Act is unconstitutional, and would be so declared. The administration was, for some time, apparently timid about making a test case, and this led the producers to feel that they could probably violate the code with impunity. It seems probable that there will be soon a decision from the Supreme Court of the United States as to the constitutionality of the National Industrial Recovery Act. If the act is upheld, and if it was announced that the administration was inclined to overlook past lapses, but future violations would be strictly prosecuted, there would be very little difficulty in enforcing the provisions of the coal code On the other hand, if the Guffey bill were enacted, even though the National Industrial Recovery Act were declared constitutional, there would remain grave doubts as to the constitutionality of the Guffey bill, and there would be the same period of uncertainty and the same incentive to noncompliance as there were in the first years of the coal code And, of course, if the National Industrial Recovery Act is declared unconstitutional, there can be little doubt but that the Guffey bill would be unconstitutional also, since it goes even further than the National Industrial Recovery Act and the code thereunder.


Title II of the bill provides for the issuance of Government bonds to purchase coal lands and provides also for a tax of 10 cents per ton on all coal produced, to pay for the interest and sinking funds on the bond issue, and to rehabilitate miners thrown out of employment by the operation of the title.

The provision of this fund for the rehabilitation of miners thrown out of work by the operation of the title is an interesting commentary on the faith of the proponents of the bill in the success of title I of the bill, containing the provisions for allocation and price control. It is apparent that if allocation should stabilize the industry at a point which would keep all of the mines in the industry operating on their respective quotas, everyone in the industry would be operating at a satisfactory profit (unless it were those who were discriminated against by the arbitrary minimum price provisions above discussed), and no one would be willing to sell operating coal mines to the Government for 3-percent Government bonds except at a valuation far in excess of reasonable. The provisions of the fund for rehabilitation of miners thrown out of work by the purchase of coal properties, therefore, must have been inserted either because the proponents of the bill did not believe that allocation would work or because they recognized that it would work in such a manner as to arbitrarily put low-grade properties or distant districts arbitrarily out of business, and hence induce the owners of such properties to sell them to the Government. It matters little which horn of this dilemma the proponents assume. Either position they take shows that their bill is a bad bill for the industry and for the country.

It is not believed that they will contend that allocation will bring prosperity to the industry, but that, nevertheless, they expect the Government to buy these properties for considerably more than a reasonable price. Nor is it expected that they will admit that their price provisions are designed to favor some sections or some mines at the expense of others, and thereby force upon the Government the properties which have been discriminated against. It seems, therefore, that they must be compelled to admit that there will be no miners thrown out of work by the operation of title II although, as above noted, there doubtless will be a number of miners out of work by the operation of the price provisions of title I.

The proponents of the bill must therefore admit that no operating mines will be voluntarily offered to the Government at any fair price after the bill becomes a law.

The bill contains no power of condemnation except to round out tracts already acquired by voluntary sale. Therefore, it is apparent that if the bill does what its proponents claim, no operating coal mines will be acquired by the Government.

Now, no stabilization of the industry is going to come from the acquisition of undeveloped coal lands. The Government could acquire millions of acres of such lands, but the problem of overcapacity would remain exactly where it is now. The difficulties of the industry are due to the fact that the existing mines can produce far more coal than can be consumed. Taking undeveloped coal lands off the market will not solve the problem. It is the developed coal lands that constitute the problem.

If the Government takes these undeveloped coal lands off the hands of their owners at a fancy price, it will be very nice for the owners. As we have said, there are doubtless millions of acres of such coal lands. One company alone in this district, the J. M. Guffey Co., has over 100,000 acres of such lands. But, while it will be very nice for the owners to be able to unload on the Government, it will be very hard on the rest of the industry and on the public, which has to pay the price, even assuming that the figures set up in the bill are adequate for the purpose. The tax of 10 cents per ton would be just that much added incentive to purchasers of coal to turn to other fuels and to producers of coal to cut down the cost by further mechanization of their mines, throwing additional unemployment burdens upon the community.

On the other hand, if it be assumed, and it is so argued, that allocation will not be successful in stabilizing the industry, or, that the price provisions of this bill would result in ruining many operators, if not many whole districts, so that many operators would be only too glad to unload their operation properties on the Government, what result is reached? First, that the sum named in the bill is probably vastly less than would be needed to cure the problem of overcapacity in the industry by taking out of production all, or substantially all, excess mining capacity with the result that when this sum had been wasted to no effect, there would be a clamor for additional larger sums to accomplish the desired end, and additional and heavier taxes on the coal produced to finance the additional sums. And, second, that the Government, through a tax on industry, would be expending enormous sums of money to retire operating coal properties and permit the physical improvements so acquired to waste away through the inevitable depreciation which would occur while they were not in use. These properties would thus be a total loss to the economic structure of the Nation. From the economic point of view, it would be far sounder to let these properties depreciate gradually in use, thus solving the problem of overcapacity over a period of years, meanwhile discouraging the erection of new facilities by keeping the price of coal under the code at a point which, while yielding a profit on the average, would not yield enough profit to encourage the investment of additional capital in the industry.

In considering this question of a “National Bituminous Coal Reserve”, the the fact is emphasized that every increase in the price of coal will be reflected to some extent in a shrinkage of output. Customers will turn to other fuels. To try to cure the problem of overcapacity by purchasing it, thereby adding to the price of coal and thereby creating more overcapacity through the consequent shrinkage in demand is to start a vicious circle and is not unlike trying to pull one's self up by one's own boot straps. The resulting pyramiding of costs will handicap all industry, but most especially the coal industry, and will create an irresistible incentive to increased mechanization and thereby decreased employment.

The records of the Department of Mines in West Virginia show that there are 342 rail shipping coal mines closed in the northern West Virginia district, as shown next below.

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1 One-hall.


Each of these 342 mines represents some acreage of coal land. They were, in 1932, equipped mines, with railroad sidetracks. The acreage controlled by some of them is considerable. Few have exhausted their mineral lands.

Of the total fund of $300,000,000 appropriated in the bill, the share available for this district would be approximately $15,700,000—based upon its proportion of production allotment. The available money per mine would therefore be $46,000. There is considerable acreage of coal-equal in quality to that represented by the closed mines--which has never been developed for operating, These tracts, are, in every sense, marginal properties. The share of the fund which may be considered as this district's part, is inadequate effectively to retire from potential production the 342 idle properties, without consideration being given to the undeveloped tracts, or to retiring additional mines now in production.

As a matter of fact, 19 active mines are now producing approximately 54 percent of the district's tonnage. Concentrating the balance of the production at 50 other mines (each 1,000 tons daily) would throw 77 more mines idle, and available for purchases under title II of the bill. The unfortunate part of this program is that the district would have the same potential capacity with 69 operating mines, with a working force of 2,000 less mine workers.


1. Labor relations generally.Under article III hereof there has been a discussion of maximum daily and weekly hours of labor and wage scales. However, part III of the bill pertains entirely to labor relations and attempts to have Congress legislate in respect to collective bargaining and other matters pertaining solely and entirely to the production of coal. Concerning the production of coal and the incidents thereto, Congress has no constitutional authority to regulate or controi the same. Such matters are exclusively within the police powers of the sovereign state. The grant of power to Congress over the subject of interstate commerce does not give Congress authority to control the production of coal within a State, or any of the incidents to such production.

On February 27, 1935, Pederal Judge John P. Nields declared unconstitutional and void section 7 (a) of the National Industrial Recovery Act in the Weirton Steel Co. case on the grounds that any relations of the Weirton Steel Co. with its employees were not a part of interstate commerce and that any attempted control of the relations between the Weirton Steel Co. and its employees under the provision of section 7 (a) of the National Industrial Recovery Act was unconstitutional.

Many cases of the United States Supreme Court support this position and especially the case of Hammer v. Dagenhart, 247 U. S. 251, wherein the court states this principle of law as follows:

“When offered for shipment, and before transportation begins, the labor of their production is over, and the mere fact that they were intended for interstate commerce transportation does not make their production subject to Federal control under the commerce power.

Commerce 'consists of intercourse and traffic * * * and includes the transportation of persons and property, as well as the purchase, sale, and exchange of commodities.'

The making of goods and the mining of coal are not commerce, nor does the fact that these things are to be afterwards shipped or used in inter2. Membership on the commission.-One member of the commission is to be a representative of the producers and another a representative of the employees. We do not think anyone should be allowed to sit on the commission who has an active personal interest in the coal industry at the time. It is obvious that such an interested commissioner would have great difficulty in avoiding the suspicion of partiality in his decisions. And it appears equally improper that any Commissioner should be actively connected with an organization of employees while a member of the commission.

state commerce make their production a part thereof. (Delaware, Lackawanna & Western R. R. Co. v. Yurkonis, 238 U. S. 439.)

“Over interstate transportation, or its incidents, the regulatory power of Congress is ample, but the production of articles intended for interstate commerce is a matter of local regulation.

'When the commerce begins is determined not by the character of the commodity nor by the intention of the owner to transfer it to another State for sale nor by his preparation of it for transportation but by its actual delivery to a common carrier for transportation, or the actual commencement of its transfer to another State.' (Mr. Justice Jackson in In re Green, 52 Fed. Rep. 113.) This principle has been recognized often in this court. Coe v. Errol, 116 U. S. 517; Bacon v. Illinois, 227 U. S. 504, and cases cited. If it were otherwise, all manufacture intended for interstate shipment would be brought under Federal control to the practical exclusion of the authority of the States, a result certainly not contemplated by the framers of the Constitution when they vested in Congress the authority to regulate commerce among the States. Kidd v. Pearson, 128 U. S. 1, 21."

“We are clearly of the opinion that the scheme of proration is not invalid as a regulation of or burden on interstate commerce. It is true that a substantial portion of the oil produced in this State goes into the channel of such commerce. But in order to conflict with the regulatory power of Congress, there must be a direct burden thereon. In this case, the interference is entirely too remote in character. The principle is too well settled to require citation, that the congressional power of regulation attaches only when interstate transportation has begun. Proration enforced under State powers cannot be said to affect commerce in oil to which producers have acquired no title. While they have a right to take the oil, yet title does not vest in it until it is reduced to possession. Ohio Oil Co. v. Indiana, supra; Rich v. Doneghey, 71 Okla. 204, 177 P. 86, 3, A. L. R. 352; Alerander v. King (C. C. A.), 46 F. (20) 235. The production of oil is analogous to the manufacture of goods or the mining of coal. Neither is interstate commerce, although the product may be later shipped to other States. Hammer v. Dagenhart, 247 U. S. 251, 38 S. Ct. 529, 62 L. Ed. 1101, 3 A. L. R. 649, Ann. Cas. 1918E, 724; Delaware, L. & W. R. Co. v. Yurkonis, 238 U. S. 439, 35 S. Ct. 902, 59 L. Ed. 1397. See, also, West v. Kansas Nat. Gas Co., 221 U. S. 229, 31 S. Ct. 564, 55 L. Ed. 716, 35 L. R. A. (N. S.) 1193; Pennsylvania v. West Virginia, 262 U. S. 553, 43 S. Ct. 658, 67 L. Ed. 1117, 32 A. L. R. 300; Foster-Fountain Packing Co. v. Haydel, 278 U. S. 1, 49 S. Ct. 1, 73 L. Ed. 147.

Champlin Refining Co.'v. Corporation Commission of State of Oklahoma. 51 Fed. 2d, 829.

However, there would appear to be no reasonable objection to a provision to the effect that at least one member shall have been interested in the industry at some time and that at least one member shall have been a member of an organization of employees at one time, provided they dissociate themselves from such interest or activities while upon the commission.

3. Payment of the tax.—The proponents of the bill have contended, and in our argument above we have accepted at face value their contention, that the drawback would be credited against the tax at the same time the tax became payable, so that no tax would in fact be paid unless the producer violated the so-called “Code.” The bill, however, does not seem to so provide. Section 3 provides that the drawback shall “be allowed and credited thereon in such manner as shall be prescribed by the Commissioner of Internal Revenue." It would seem that the Commissioner could allow the credit at the same time the tax became due or in some subsequent month.

4. Employees representation on boards.--Section 4, part 1 (a), provides that five members of the National Coal Producers Board shall be selected by the union. We question the wisdom of this provision, but more particularly we question the wisdom of the following provision, which provides that each district board shall have among its membership one member "selected by the national organization of employees above mentioned.” “Above mentioned” refers to the organization


representing the largest number of employees in the industry. Under this provision, all the employees in a certain district might belong to an independent union, but their representative on the board would be appointed by the United Mine Workers. It is apparent that this should be changed to provide for representation on the district boards through the unions having the predominant membership in the particular district.

5. Transfer of quotas.--Section 4, part 1 (h), prohibits the transfer of quotas by a producer from one of his mines to another except with the approval of the Commission. If allocation is to be adopted, there should, we think, in the interest of flexibility, be a right not only to transfer a quota from one mine to another owned by the same company, but also a right to sell and transfer quotas from one company to another. The British act contains this right and obviously it tends toward a sounder economic situation than would be the case if small mines were compelled to function part time on low quotas with consequent extremely high costs.

6. Adjustment of quotas. --We have already commented on the singular provisions of section 4, part 1 (i). This provides for adjustment of quotas every 2 years on the basis of the actual output in the preceding 2-year period. Thus, if å producer is so unfortunate as to fail to get out his quota either because the arbitrary provisions of the minimum price clauses keep him from selling his coal or because his competitors violated the act and produced more than their quotas, the unfortunate producer is nevertheless at the end of 2 years permanently penalized for his misfortune and cannot get back his rights except by violating the Code himself for the next 2 years and taking the chance of being penalized by paying the so-called "tax" which he is required to pay in that event. And by the same token those who are fortunate in extracting additional quotas from the Commission by alleging a special demand for their coal or who deliberately violate the act by overselling their quotas are rewarded for so doing at the end of 2 years by being given a permanently larger quota.

7. Minimum prices.-If the vicious provisions in regard to the minimum price are to be retained, provision should be made to add royalty to depreciation and depletion among the items that are not to be included in arriving at the expense. Royalty takes the place of depletion where the mine is operated on a lease, and treating it on a different basis than depletion would give an unfair advantage to districts where there are comparatively few leases.

8. New mines.- We wish merely to call attention to the grave constitutional question involved in section 10, undertaking indirectly to prohibit the opening of new mines. The same question is involved in section 4, part 1, (j) dealing with the assignment of quotas for new mines.

9. Use of the mails.-Section 11 requires every corporation engaged in mining bituminous coal which it ships in interstate commerce or which uses the mails or other means of communication in interstate commerce to dispose of its coal to file its acceptance of the act. We assume, despite the reference to the mails, that there is no intent to require a company which uses the mails to dispose of its coal in interstate commerce to file acceptance of the act. This is far from clear, however, from the language used.

10. Investigations. At the hearings the proponents of the bill have made considerable play of the waste now involved in mining coal, and one would think the bill undertook to remedy this situation. The only reference to it, however, is found in section 13, and this merely provides for a study of these questions by the Commission.

11. Schedule of districts.- We think the districts should conform more closely to those now in existence under the coal code.

12. Double benefits to employees.— Title II, section 9, provides that 60 percent of the 10-cent tax levied under that title shall be deposited in a fund to be expended for the rehabilitaton of miners displaced by reason of the provisions of the title. Assuming that any miners are so displaced, as to which our doubts have already been noted, it would clearly appear, as already brought out in the hearing, that the benefits given them under this bill would be in addition to those to which they might be entitled under the proposed unemployment insurance act.

13. Guffey bill threatens the economic stability of West Virginia.—Title II of this bill provides for the purchase of coal properties which will become part of the public domain and thus removed from the property books of the State. Consequently, any land so purchased will be permanently exempt from property taxation. If $300,000,000 were spent in the purchase of coal lands it is not unreasonable to assume that almost $100,000,000 would be spent for this purpose in West Virginia. In so doing, property having an approximate assessed value in the

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