No. 1036.

AMERICAN ASPHALT ASSOCIATION

v.

UINTAH RAILWAY COMPANY.

Submitted December 20, 1907. Decided March 11, 1908.

Where a railroad has been constructed for a special purpose, and does not form part of any general industrial development, it does not stand in the same relation to the public as a railroad chartered and built for general purposes, and the reasonableness of its rates must be determined by the financial returns which they produce rather than by comparison with rates in effect elsewhere.

Held, That under the peculiar circumstances of this case a rate of $8 per ton is a reasonable charge to be imposed by the defendant for the transportation of gilsonite, a low-grade commodity, a distance of 54 miles.

Dines, Whitted & Dines for complainant.

Vaile & Waterman and Henry McAllister, Jr., for defendant.

REPORT OF THE COMMISSION.

PROUTY, Commissioner:

The Uintah Railway extends from Dragon, Utah, to Mack, Colo., where it connects with the Denver & Rio Grande Railway. It was constructed and is owned and operated by the Uintah Railway Company, the defendant.

The Barber Asphalt Paving Company owns substantially all the stock of the Uintah Railway Company. It furnished the means with which to construct the railway and superintended its construction in the name of the Uintah Railway Company.

The Gilson Asphalt Company is engaged in the mining and selling of gilsonite, which it mines in the vicinity of Dragon, transports over the Uintah Railway from Dragon to Mack and thence forwards by the Denver & Rio Grande to various destinations.

The General Asphalt Company owns all or substantially all the capital stock of the Gilson Asphalt Company and the Barber Asphalt Paving Company.

The complainant is a corporation having its headquarters at St. Louis, Mo., engaged in the mining and selling of gilsonite, which it obtains from a deposit in the vicinity of Dragon, hauls by team to Dragon, thence transports over the Uintah Railway to Mack, and so via the Denver & Rio Grande to various points of consumption. In the transaction of its business its product comes into competition with the gilsonite mined and handled by the Gilson Company, and the allegation of the complaint is that the General Asphalt Company, or these allied interests, impose upon the complainant an unreasonable rate for the carriage of its commodity from Dragon to Mack and also practice against the complainant other discriminations in respect to such transportation; and that the effect of all this is to crush the complainant as a competitor of the Gilson Company in the mining and selling of gilsonite.

Gilsonite is a mineral, a hydrocarbon in character, brittle, of about the specific gravity of water, intensely black in color. It seems to have been named from the person who discovered it, and has been for some time and still is extensively used in the preparation of paints and varnishes and of insulating material. Its use in the preparation of roofing material is also becoming extensive.

The deposit of this mineral in the United States seems to be confined largely, if not entirely, to certain parts of Utah. In putting it upon the market it is picked out by hand, placed in sacks, and in this form carried to destination. The sole business of the complainant association seems to be the mining and selling of this commodity for the various purposes above specified.

The Barber Asphalt Company is extensively engaged in laying asphalt pavement. In the past the asphaltum used by it for that purpose has been mainly drawn from Trinidad. Gilsonite is kindred to asphaltum, and it may have early occurred to the Barber Company that it might be used for paving purposes; at any rate, that company seems to have interested itself for some time in this mineral. Those connected with the Barber Company either promoted the Gilson Company or some time ago obtained a controlling voice in it. At present, as already said, the General Asphalt Company owns both the Gilson Company and the Barber Paving Company, thereby working a practical consolidation of these companies.

For a considerable time the Gilson Company seems to have been the only party supplying gilsonite for the various purposes for which it was used, both in this country and abroad. The deposits from which this supply was drawn were approximately 100 miles

from the railroad, and the mineral was hauled by team for this distance at great expense. Upon the discovery of these deposits at Dragon and their purchase by the Gilson Company, the Barber Com pany made certain tests for the purpose of ascertaining whether this gilsonite could be used for paving purposes, and finally came to the conclusion that it might be profitably employed in that business providing some means could be found for transporting it to market at a more reasonable cost. Thereupon the Barber Company set about devising some method by which this commodity could be carried at reasonable expense from Dragon to Mack.

Its first move was to consult engineers with a view to ascertaining what means of transportation might be employed, and various propositions were submitted to and considered by it, with the final result that the company became convinced that the only practicable way of bringing this commodity to the Denver & Rio Grande was by the construction of a railroad.

Thereupon the Barber Company, which transacted a very large business and had a high financial standing, approached the Denver & Rio Grande Railroad Company, representing to it that if Dragon were connected by railway with the Denver & Rio Grande the Gilson Company or the Barber Company, which was the same thing, would transport large quantities of this gilsonite to market over the lines of the Denver & Rio Grande. The latter company declined to consider the idea of constructing this railroad since, when built, it would only be available for the single purpose of carrying this mineral to market and would become worthless if for any reason gilsonite was no longer used in large quantities. The Barber Paving Company offered to guarantee the shipment of a certain number of tons for a given period of time, but the Denver & Rio Grande still refused to entertain the proposition.

Thereupon the Barber Company considered the advisability of constructing a railroad as an independent proposition by the sale of bonds and stocks upon the open market and applied to certain financial interests for the purpose of obtaining their assistance in this enterprise. Upon investigation, however, the same difficulty developed here. So long as this railroad was only capable of being used for a single purpose and was dependent for its income upon that one source it was said to be impossible to sell bonds or stocks for anything like the face value, and this scheme was also abandoned.

Being convinced of the advisability of using this mineral in its business, the Barber Company now determined to construct a railroad for itself, and did so. A charter was obtained, which was put in evidence in this proceeding, and the road was constructed under that charter and in the name of the railroad company, and it is now

operated entirely distinct from either the Barber Company or the Gilson Company, but the Barber Company furnished the money for the construction, superintended that construction, and virtually owns and operates the railroad to-day.

This road extends, as already said, from a junction with the Denver & Rio Grande at Mack, Colo., to Dragon, Utah, a distance of 54 miles. It crosses a mountain range, the highest elevation being 7,500 feet above the sea, and 3,500 feet above Mack. The road runs for about 24 miles up a valley which is rough and unproductive, but which presents no serious obstacle to the building of a railroad, although the grades are heavy and the expense of construction, owing to numerous culverts, etc., was considerable. At the end of 27 miles this valley closes in and becomes a canyon and finally runs out altogether. The little station at the head of the valley where the serious climb begins is called Atchee, and the station on the other side at the foot of the mountain is known as Wendella. From Wendella to Dragon the character of the road is much the same as from Mack to Atchee, the distance being some 20 miles. From Atchee to Wendella is about 7 miles, and this portion of the construction was exceedingly difficult and its operation is unusually expensive. The road over this distance is one series of curves, the original curvature, as constructed, being in some instances 75 degrees. The ruling grade upon the north side of the mountain is 5 per cent, while upon the south side the heaviest grade is 7 per cent. This renders it necessary to haul trains between Atchee and Wendella by means of the Shay locomotive, which is an engine so constructed that the cylinders are vertical instead of horizontal.

The Uintah Railway Company owns four ordinary locomotive engines and two Shay locomotives. It has 1 passenger car, 3 water cars, and about 35 freight cars of various kinds. The country through which it runs is a desert. The character of the soil is alkali. The snows are sometimes heavy in winter, and severe rains also occur at times, so that the waters from the melting snow and the rains are difficult to control. The road is subject to both snow blockades and washouts, to landslides and rockslides. It is a narrow-gauge road, and it does not seem to have been practicable to construct or operate one of any other kind.

When the road was put into practical operation it was found that the rail as originally constructed for a part of the way where the grades were the heaviest was too light, and this portion was relaid with heavier steel. It was also found that the curves were too sharp, and at considerable expense the curvature was considerably reduced, so that at the present time the maximum curves are about 65 degrees.

13 I. C. C. Rep.

When this road was constructed there was practically no business in sight except the transportation of this gilsonite. Some few cattle and sheep were raised in that region, but the entire business from this source would be almost nothing. Going on from Dragon in a northerly direction to Vernal and Fort Du Chesne a much better, indeed an extremely fertile country is found. Wherever irrigation can be secured farming operations are already conducted in this section to a considerable extent, and when further irrigation is provided, as it undoubtedly will be in the future, those operations will be very much more extensive.

The supplies brought into this country and the commodities shipped out from it had, previous to the construction of the Uintah Railway, reached the Rio Grande Western at Price, Utah, the wagon haul from and to the interior point being from 80 to 90 miles. The Barber Company conceived the idea of extending at some time its railroad from Dragon to Vernal and Fort Du Chesne, and caused a survey to be made of a proposed line. It did not seem advisable to construct the railroad then, but the Barber Company did in the name of the Uintah Railway Company, and on its account, build an excellent wagon road to these points from Dragon, mainly upon the survey of the proposed railroad, and established between those points and Dragon a wagon service for the transportation of freight and passengers for the purpose of attracting business to its line of railroad between Dragon and Mack. The Uintah Railway Company now makes through rates from Vernal to outward destinations via Dragon over the Uintah Railroad and the Denver & Rio Grande, and it also makes rates via Mack and Dragon in the reverse direction upon freight which it transports from Dragon by wagon.

In this manner the Uintah Railway has managed to secure a considerable amount of freight in addition to gilsonite. During the year 1906 about 20 per cent of the entire traffic of this railroad was from other sources than gilsonite.

The Uintah Railroad was completed and opened for business in the latter part of the year 1904. Previous to that time, the complainant had been engaged in mining and selling gilsonite, its mines being at some distance from Dragon and its product being transported by wagon to Rifle, Colo. As soon as it learned that the Uintah Railway was to be constructed it realized that the Gilson Company would thereby acquire a cheaper means of transportation, which would give that company the command of the market and ruin the business of the complainant. Thereupon, and for this reason the complainant purchased its interest in the mines near Dragon which it is now working and began the operation of those mines, so that when the