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STABILIZATION OF BITUMINOUS COAL MINING INDUSTRY

FEBRUARY 28, 1935

UNITED STATES SENATE, SUBCOMMITTEE OF THE COMMITTEE ON INTERSTATE COMMERCE,

Washington, D. C. Pursuant to adjournment, the subcommittee reconvened in the caucus room, 318 Senate Office Building, at 10:30 a. m., Senator A. Harry Moore presiding.

Present: Senators Moore (presiding), and Minton.

Present also: Hon. Joseph F. Guffey, a Senator from the State of Pennsylvania.

Senator MOORE. The subcommittee will be in order. Mr. Duncan, you may proceed.

STATEMENT OF C. S. DUNCAN, REPRESENTING THE ASSOCIATION

OF AMERICAN RAILROADS

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Mr. DUNCAN. Mr. Chairman, my name is C. S. Duncan. I am in the employ of the Association of American Railroads located here in Washington, and I have been directed to present some testimony in behalf of that association and its membership before this comniittee in reference to Senate bill 1417, known as the “Guffey bill."

As I have just stated, Mr. Chairman, my appearance is in behalf of the Association of American Railroads with respect to Senate bill 1417 that proposes to stabilize the bituminous-coal-mining industry, promote its interestate commerce, and to provide for cooperative marketing of bituminous coal, and other purposes.

The rail carriers that I represent are interested in the proposed legislation as producers, as consumers, and as carriers of bituminous coal.

1. As producers: The railroads, like certain other industries, own and operate bituminous-coal mines, commonly known as "captive mines.” The last report by the Bureau of Mines on captive coal mines was for the year 1924, at which time the railroads owned and operated 135 mines and produced, in that year, about 27,000,000 tons, out of a total production of all captive mines amounting to slightl; more than 111,600,000 tons. In commenting on the ownership and operation of captive coal mines, the Bureau said:

In general, it may be said that industries in which the cost of fuel forms only a small part of the total operating expense and which do not need a particular grade of coal have not the same incentive for operating coal mines as industries in which the cost of fuel is a major item and which require coal of special quality. (Coal in 1926, p. 469.)

It is to the last group of industries that the rail carriers belong and the reason is clearly stated for the ownership and operation by then of captive mines.

What changes have been made in respect to captive mines owned and operated by the raill carriers, there is no specific information available to determine since this particular study was made. It is, however, a substantial element in the coal situation so far as the rail carriers are concerned.

2. As consumers: The class I rail carriers of the country, which most particularly I represent here at this time, and which are defined as rail carriers; that is, those that have $1,000,000 annual gross revenues or more, have a record of bituminous consumption in net tons as follows:

Locomotive

fuel

Total consumption

1929. 1930. 1931. 1932 1933.

Tons
113, 983, 839
98, 399, 643
81,724, 711
66, 497, 832
66, 198, 663

Tons 125, 866, 785 109, 076, 677 91, 707, 141 75, 537, 602 75, 012, 520

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In the year 1933 the rail carriers consumed about 22 percent of the total production of bituminous coal. During recent years railroad buying of coal has represented from 28 to 22 percent of the total annual production. The annual cost of locomotive fuel for class I rail carriers amounted to $336,650,000 in 1929 and was reduced to $158,397,000 in 1933.

Locomotive fuel represents from 5 to 5.5 percent of total operating revenues for rail carriers and about 67 percent in cost of operating expenses.

It is obvious, therefore, that as consumers of coal the rail carriers are important to the bituminous coal industry, and, on the contrary, coal is an important item in operation of railroads.

I would like to comment briefly on that point. While the rail carriers represent a large and important demand for bituminous coal, this demand is not an indiscriminating one. While the carriers must have coal to operate, for efficient operation they must have the right kind of coal and they must be sure of an adequate and continuous supply of the right kind of coal, for every service and at every point along their lines.

So vital is coal to the operation of a railroad that, despite all difficulties, complexities, and obstacles in the way, a carrier must be assured of a continuous supply.

Senator MOORE. How does the bill deny him that supply? : Mr. DUNCAN. I am going to undertake, if I may, to answer that question. I do not mean not to reply to you, but I want to lay the foundation here.

Senator MOORE. Proceed.

Mr. Duncan. This paramount responsibility faces the fuel purchasing department of each and every railroad.

In distributing the purchases of coal, the purchasing agent for a carrier must, among other things, give consideration to

(a) The ability of mines to produce the character and sizes of coal required;

(6) The ability of mines to make delivery when and as needed, adequate both as to quantity and quality;

(c) Cost, convenience, and reliability of deliveries;

(d) The past experience with the mine as to its willingness to accept a fuel contract and ability to undertake the performance called for thereunder;

(e) The suitability of the coal for the purpose required, when properly prepared;

) The equipment of the mine for proper removal of impurities and the good faith of the mine in doing so as determined in the course of past experience.

These conditions demonstrate the need for the free exercise of a flexible, experienced judgment on the part of the rail carriers in the purchasing of their coal. This applies both to the existing sources of coal; that is, the mines now operating, and the potential sources of supply.

The record of railroad operation during recent years shows the improvements which the carriers have been able to make in the performance of their transportation service. Long experience in the handling of the fuel problem, among other factors, has enabled the railroads to meet satisfactorily the public demand for transportation service. Any interference in the fields of purchase of fuel supplies, which have been carefully selected by the railroads, could result in nothing but an interruption to the present efficient and economical railroad operation. It is not believed that the shippers of the country would willingly see legislative action taken which would imperil in any way the high standard of transportation service which is now being rendered them, nor would they support legislative action which would unnecessarily increase the operating expenses of the rail carriers and call for increased rates.

The third interest which the railroads have is as carriers of the coal. The railroads are also interested in the problem of the bituminous coal industry as carriers of coal. The total number of tons of bituminous coal carried in 1933 by these railroads was 429,674,221 net tons. For the first 9 months of 1934, total tons carried amounted to 333,767,926 net tons.

Former Senator STANLEY. Mr. Chairman, may. I interrupt the witness at this point to get into the record something that I think is important?

Senator MOORE. Certainly.

Former Senator STANLEY, I want to get the total tonnage carried by trucks. Mr. Duncan, is that total that you mentioned as being carried exclusive of the amount used by the railroads and the amount delivered by trucks and other instrumentalities?

Mr. DUNCAN. Yes, sir; this is net tonnage carried by rail.
Former Senator STANLEY. That does not include the tonnage

you use?

Mr. Duncan. Do you mean the tonnage that we consume?
Former Senator STANLEY. Yes.
Mr. DUNCAN. Yes; it does include that tonnage.

Former Senator STANLEY. That is included in the 400,000,000 tons?

Mr. DUNCAN. Yes; that is true.

Freight revenue on the railroads, derived from the transportation of bituminous coal, amounted to $508,116,843 in 1933. For the first 9 months of 1934 the freight revenue from this source was $381,827,843.

119739—35

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In the year 1933 bituminous coal tonnage equaled 34.1 percent of total tonnage carried by class I roads and represented 19.7 percent of total freight revenue. In the first 9 months of 1934, bituminous coal tonnage was 32.5 percent of total tonnage and represented 18.6 percent of total freight revenues. Of course, the situation is different in different parts of the country. I would like to point out the essential difference.

In the eastern district, the bituminous-coal tonnage represented 43.4 percent of total tonnage and 29.6 percent of total freight revenues in 1933. In the first 9 months of 1934, bituminous-coal tonnage amounted to 41.8 percent of total tonnage and 28.7 percent of total freight revenues.

In the southern region, bituminous-coal tonnage amounted to 34 percent of total tonnage and 17.8 percent of total freight revenues for 1933. In the first 9 months of 1934, bituminous-coal tonnage amounted to 37.3 percent of total tonnage but 18.9 percent of total freght revenues.

In the western district, bituminous-coal tonnage amounted to 14.4 percent of total freight tonnage and 7.1 percent of total freight revenues in 1933. For the first 9 months of 1934, bituminous coal represented 11.9 percent of total tons carried and 5.6 percent of total freight revenues. There is evidence here of the warm winter of 1934 in the western district.

These figures demonstrate the substantial interest which the rail carriers have in the movement of bituminous coal and the vital interest they have in the welfare of that industry. They obviously want to see the bituminous-coal industry revived; they want to see it prosperous; they want coal to move by rail in ever-increasing volume.

Because of these interests as producers, as consumers, and as carriers of coal, the railroads have given attention to the proposed legislation in Senate 1417.

BITUMINOUS-COAL INDUSTRY AS A PUBLIC UTILITY

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Our attention has been directed with great interest to title I, section 1, of this bill, which states (reading]:

It is hereby recognized and declared that the production and distribution of bituminous coal in and throughout the United States are affected with a national public interestand that the general welfare of the Nation requires that the bituminous-coal industry be regulated as a public utility.

The rail carriers, as is well known, have for many years been regulated as a public utility and, out of this extended experience they are in a position to comment with some authority with respect to what constitutes a public utility, what kind of regulation is required, and what type of regulatory body should administer the regulation.

Former Senator STANLEY. At this point may I interrupt to ask a question?

Mr. DUNCAN. Yes, sir.

Former Senator STANLEY. The railroads necessarily and obviously are a public utility. The president of a railroad is a public officer. Now, if this bill makes coal mining a public utility will it not make it a Federal public utility just as the railroads are?

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Mr. DUNCAN. It is my understanding that it would; yes, sir, in the purpose of this bill.

Former Senator STANLEY. That would give to Congress the same rights, if this bill were passed, with those two words in it, to regulate every detail of the mining of coal, just as it now has control over every detail of the operation of the railroads from the cleaning of the water closet to the opening of a new railroad line or the operation of a Pullman car?

Mr. DUNCAN. That is correct. I want to speak just a moment on that very thought.

Former Senator STANLEY. I was very much interested in that proposition, and I wanted to get it clear.

Mr. DUNCAN. It is well established, of course, as has just been brought out, that when a private industry is entered into the category of a public utility, it is so entered on the basis of fact and not mere declaration.

Senator MOORE. I should think the courts would decide that point. If we can get down to why you are against this bill, we will be getting somewhere.

Mr. Duncan. I am trying to move right that way as fast as I can.

Former Senator STANLEY. Senator, I do not want to interrupt again, but I want to call your attention to this fact: This is to my mind a very serious question, and I have not yet determined it; that is, whether in a mere matter of nomenclature it can be said that a thing that is not a public utility is a public utility; and, having made it a public utility, that can change its status in such a way as to practically repeal all the laws with reference to utilities and these other enterprises that are not utilities that have been enacted within the last 500 years.

Senator MOORE. If they cannot do it, the court is there to tell them they cannot do it, as they did yesterday.

Former Senator STANLEY. I am not so sure. The common law can be repealed at any time by act of Congress. It exists only because Congress is silent.

Senator MOORE. The only value of this discussion is simply to pile up the same testimony that we have had. This question has been raised before. Senator Neely limited the time of each witness to half an hour. We will take for the record anything that you have to give, Mr. Duncan, but if you can go along smoothly with your statement we can save some time.

Mr. Duncan. Yes. I am not going to discuss the legal question at all, but I want to make it clear that when regulation is applied "the theory of regulation rests upon the assumption of private property devoted to public use.” (Î. C. C. 226.)

Further, as the Supreme Court has said:

An owner of property, devoting it to a use in which the public has an interest, in effect, grants the public an interest and must, to the extent of that interest, submit to control by the public (Munn v. Illinois, 94 U. S. 113).

This theory of public interest in a public utility has led, in the case of other industries, to a regulation or control over such important items as operating expenses and revenues, amount and character of service required, rates or prices charged the public for that service or community, and others.

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