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cents per ton as determined for the various districts, shall constitute the limits of the minimum market prices per ton f. o. b. transportation equipment at the mines for the various grades, sizes, and uses of coal produced in the several districts.
Senator MINTON. What does the 30 percent represent?
Mr. RENWICK. That would represent naturally a profit on a certain proportion of their coal, corresponding to the loss that you would have on another percent of the coal sold at just labor, compensation, and taxes.
Senator MINTON. Just out-of-pocket expense?
The Commission, taking account of the objects and provisions of this act, will also proceed to set similar limits for the maximum market prices per ton f. o. b. transportation equipment at the mines for these various grades, sizes, and uses of coal produced in the several districts; the spread between minimum and maximum prices to be no greater than 50 percent of the corresponding minimum price. As soon as the Commission has determined the minimum and the maximum price limits as herein provided, they shall transit them complete to the several district boards.
(b) The several district boards, upon receipt of the minimum and the maximum price limits from the Commission, shall thereupon respectively prepare and submit for the approval of the Commission a list of minimum and corresponding maximum prices f. o. b. transportation equipment at the mines for coals of the various grades, sizes, and uses as produced in their several districts, together with the necessary information upon which the prices are predicated. Upon failure or refusal of a district board on demand of the Commission to submit such lists and necessary information, or upon the refusal of a district board to modify any prices so listed at the discretion of the Commission, the Commission is authorized to fix the same within the limits already set forth and after a public hearing. Twenty days notice in writing shall be mailed to all known code members affected by the proposed order of the Commission fixing such prices, of the hearing at which anyone in interest may be heard. Upon approval of prices submitted or order fixing the same, notice thereon shall be mailed to all known code members in the district and no coal shall be sold f. o. b. transportation equipment at the mine by any code member within the district at less than the minimum no more than the maximum prices so established: Provided, that such prices shall be for periods of 6 months ending the last day of March and September of each year.
One reason for offering this change in the price structure is simply this: If you establish one minimum price, a small producer whose operation depends on the complete sale of all the sizes that he makes will be in competition with the large producer who can use the bestgrade and the best-size coal in competition with him at the absolute minimum price and have a tendency to put him out of the picture entirely.
Senator MINTON. Is that your reason for wanting this sliding scale between the minimum and the maximum?
Mr. RENWICK, No; that is a sliding scale of minimum prices. For instance, on the basis that we have set out here your labor costs that we include in the lowest minimum price would amount to about $1.30;Your highest minimum price, counting the 30 percent that we mentioned, would be about $2.60.
Now, I could sell my smallest and worst grade of slack for $1.30; I would sell my largest and best grade of lump for $2.60; and the other grades and sizes between those prices. I could not sell my largest and best grade of lump at the same price that I sold my smallest and worst, grade of slack in order to take business away from a competitor.
We think that is a very necessary arrangement in any price structure. There is no justice in allowing me to sell 4-inch lump coal of the best grade at the same minimum price that my competitor sells 2-inch nut slack of his worst grade. There has to be a slack there to get any justice in the picture.
Senator MINTON. Then do you propose to have the commission establish a minimum and a maximum for each grade?
Mr. RENWICK. Yes.
Senator MINTON. Where is this activity of the district board to come in and establish this in-between price that you were talking about awhile ago?
Mr. Renwick. When the coal is ultimately delivered to the consumer there are various transportation and other charges to be added to the f. o. b. mine price. You as a consumer in Buffalo may have the opportunity of buying your coal from, we will say, Ohio, western. Pennsylvania, or central Pennsylvania through a cost structure, or price structure, based on absolute cost.
Western Pennsylvania, on account of freight rates, may be able to destroy any competitive opportunities that Ohio and central Pennsylvania have. But if you allow the fixing of prices within the widelimits by districts, then you can fix a minimum price for western Pennsylvania that will allow Ohio to compete in the Buffalo market and will allow central Pennsylvania to compete in the Buffalo market; but if you determine that minimum price on cost alone, Ohio and central Pennsylvania would be eliminated on account of freight rates and other charges in getting coal to that market.
We are suggesting no change in paragraph (c), but in paragraph (d) we would like to offer this as an amended paragraph:
The price provisions of this act shall not be evaded or violated by or through the use of yards, docks, or other storage facilities; or by or through. the use of transportation equipment owned or hired directly or indirectly by the producer ; or by or through the use of subsidiaries affiliated sales agencies or other intermediaries; and the Commission is hereby authorized, after investigation and hearing upon notice to the interested parties, to issue rules and regulations concerning such practices to make this section of the act effective..
Our explanation of that is this: Under the present condition of minimum fair-market prices established by the code, I operate a truck line. The code authority establishes a minimum f. o. b. mine price for my coal. I have been selling that coal to the consumer and absorbing the transportation cost in the mine price and delivering it to that point f. o. b. mine price, simply because there has been no. public tariff of transportation charges applying to the kind of equipment I use; and in the original section no mention is made of the possibility of evading the price by using your own transportation equipment. So we want that included.
As far as that goes, it we would let it stand the way it is, it would be a wonderful out for truck coal producers, but we do not want it.
The next change suggested is in section 4, part II, marketing (g), which has already been discussed under marketing-area prices. The change that we are suggesting is as follows:
Change the first sentence to read: In order to promote the service of the public in consuming markets by competitive districts, the Commission shall establish consuming market areas throughout the United States and may adopt rules not in conflict with this act whereby district boards may provide for agreements as to competitive prices and practices in such consuming-market areas.
In other words, the district boards, with the aid and advice and consent of the Commission, will establish minimum and maximum prices so as to permit competition in a market from several producing districts. Just that thing that I was mentioning to you a moment ago. If the basis were prices simply on cost, a fellow with
. the nearest and lowest transportation would control a market absolutely. I do not believe that is a good thing.
Senator MINTON. How do you propose to avoid that?
Mr. RENWICK. By setting prices that districts for their coal of equal grade will sell for approximately the same price in a market. You will absorb a proportion of the difference in transportation cost by making a variation in the minimum and maximum mine prices.
Senator MINTON. 'It will operate a little bit to the disadvantage of the consumer, though, would it not? It would make his coal cost him a little more money?
Mr. RENWICK, It will make the coal cost him a little more money, but it will give him a wider choice.
Senator MINTON. A wider choice of what?
Mr. RENWICK. Of coal. I do not want to confuse the issue with you. It is more to the advantage of the producer, possibly, than it is to the consumer, but it tends to give the producers a more stable production. If you would carry the thing to the logical conclusion, any customer within a mile of my mine could never think of purchasing coal from another producer that was 2 miles away, because I could always beat him by practically half; and my market would be limited to just a certain distance around my mine, and the other mine's market would be limited to the same thing; and there would be violent fluctuations in our production because we only had one place to sell our coal, and we are trying to avoid that.
In section 4, part III, which relates to labor relations, we are suggesting no change.
Senator MINTON. Are your mines unionized ?
Mr. RENWICK. Since the passage of the National Industrial Recovery Act; and when I say “yes” I really should qualify that. . The mines that I represent are, a good many of them, small truck mines that are operated really as family affairs, or with only 3 or 4 employees.
Senator MINTON. Do you pay a union scale there?
Mr. RENWICK. Most of them pay a union scale, but a great many of them are not signed up with the union. We believe that this act
will aid in bringing them all under the same wage scale and the same conditions, and we are very much in favor of the act for that reason, among others.
As a truck coal producer my worst competition comes from another truck coal producer who is not observing the State mining laws, code regulations, or anything else and is avoiding them, partly at least, on the proposition that he does not have to pay as much for his labor as I do.
There are provisions in this bill that make it a little easier for the labor organizations to bring them into the fold, and we are for that definitely.
In section 5 we would like to see the first sentence changed to read as follows:
Upon the appointment of the Commission, it shall proceed at once with the formulation of the bituminous-coal code and assist in the organization of the national and district boards, as provided for in section 4, and so forth.
In section 6, after the word “taxes”, add " and code assessments." We are suggesting no changes in sections 7 to 14, inclusive. In section 15 a definition of “captive tonnage " should be added. However, we do not feel competent to make that definition, but we would like to make the suggestion that the act contain a definition of what is meant by “captive tonnage." It is referred to often as an important subject.
Senator MINTON. What do you understand by it!
Mr. RENWICK. It is production owned and controlled by a definite consumer.
Senator MINTON. Who is also a producer?
That is not a complete definition, but that is just a quick definition. However, we believe the act should specify exactly, because there are some relationships between consumer and producer that are almost on the basis of captive but possibly not quite, but the differentiation between captive and otherwise should be stated definitely in the act so as to avoid future confusion.
Title II we believe to be absolutely necessary. If it is administered with any degree of success, then the continued necessity for title I will become greater in regard to allocation and price structure and also for the labor provisions.
Companies with the reserve acreage will be anxious to open up new territory in proportion as stabilizing increases the profitable operation of mines, and there will have to be some control of that as well as the retirement of acreage from production by the application of the rules under title II. But the changes in title II recommended by the Coal Control Association of Western Pennsylvania in Mr. Hosford's statement yesterday are endorsed by us rather than in the form in which it is presented in the regular bill.
That is the extent of what I have to say, gentlemen.
Senator NEELY. Are there any questions? If not, Senator Camden is recognized.
STATEMENT OF JOHN M. CAMDEN, OF KENTUCKY
Mr. CAMDEN. Mr. Chairman and gentlemen of the committee, with your permission, I would like to make a plea in behalf of the
holding company that I represent and of which I have the honor to be president.
The holding company that I represent is the Kentucky River Coal Corporation. It was incorporated in about 1915 and embraces about 150,000 acres. About 50,000 acres are under production; that is, they are under lease. We have about: 28 lessees.
In the multiplicity of things to be considered by the Guffey bill and also the committee here, there is no provision as to how the holding companies will come in on this.
I have prepared an amendment that I would like to file and have go into the record. With your permission, I shall read it.
Senator NEELY. We shall be glad to hear it.
Mr. CAMDEN. This is to amend Senate bill 1417. Amend paragraph (d), line 22, page 8, so as to read as follows:
Provided, That the mean average royalty tonnage quota of all land-holding companies receiving royalties on tonnage since 1918 and including 1934 shall be computed on the same basis as figured for the operating districts. In the case of all land-holding companies owning coal reserves, all such land-holding companies shall be permitted to open new mines, make additional leases, and/or make new leases out of their reserves to operating companies in order to maintain their royalty tonnage now and thereafter on coal mined since 1918 and including 1934.
Any increase in the quotas of a district will result in a due proportional increase in the quota of such royalty property.
Senator NEELY. Subject to that amendment, Senator Camden, do you favor the passage of the bill?
Mr. CAMDEN. Mr. Chairman, I will say that through my father I have been identified with and have a pretty good working knowledge of the coal properties, mining conditions, and so forth, going back over 40 years. Under the N. R. A., which was pretty good control but not permanent and you might say conclusive, we experienced relief. We had better conditions in the past 14 months than we have enjoyed for some time; more assurance, more confidence and peace of mind, beside a more fixed and steady income; and I feel that it would be a very stabilizing thing if that could be continued and made permanent. It looks like this bill might accomplish that.
I am for the bill with certain amendments or provisions, which, of course, will have to be worked out. But I think it would be a beneficent thing if we can get it through under those conditions.
Senator NEELY. You believe that it would have a further stabilizing effect on the industry!
Mr. CAMDEN. I do, with those amendments or provisos that I have mentioned.
Senator NEELY. As the Chair understands it, you propose that the amendments which you have just read shall be inserted from and after the word “Board” in the twenty-second line of page 8. Is that correct?
Mr. CAMDEN. Yes; that is correct.
Senator MINTON. Will you tell us briefly what the purpose of your amendment is?
Mr. CAMDEN. The purpose of this amendment? You see we have a holding company and we are not operators.
Senator MINTON. What do you hold, the land or stock in the operating company?