PARAGRAPH 90-ASPHALTUM.

Is not manufactured here. The component parts of this brick have been found by analysis to consist of silica and other mineral substances, but does not contain any pumice. The crude material entering into manufacture, we understand, is native to the country in which it is produced, and none of the exact character has been discovered here to profitably make the brick in this country.

American labor: The raw material could not be imported into this country and then manufactured into a similar article with the protection of the present duty or even a higher one and compete with the foreign-made brick, as it is only produced by a few firms who have specialized on this commodity by many years of manufacture. It does not come in competition with American labor; in fact, it will benefit American labor to this extent, that we understand in some of the shops where this material is used the laborer buys his own bricks under contract or piece system. Therefore a reduction will operate as a benefit and not a tax to the American laborer.

Yours, very truly,

PARAGRAPH 90.

F. W. THURSTON, President.

Clays or earths, unwrought or unmanufactured, not specially provided for in this section, one dollar per ton; wrought or manufactured, not specially provided for in this section, two dollars per ton; china clay or kaolin, two dollars and fifty cents per ton; limestone rock asphalt, fifty cents per ton; asphaltum and bitumen, not specially provided for in this section, crude, if not dried, or otherwise advanced in any manner, one dollar and fifty cents per ton; if dried or otherwise advanced in any manner, three dollars per ton; bauxite, or bauxite, crude, not refined or otherwise advanced in condition from its natural state, one dollar per ton; fuller's earth, unwrought and unmanufactured, one dollar and fifty cents per ton; wrought or manufactured, three dollars per ton; fluorspar, three dollars per ton.

For clays and earths, etc., see R. J. Waddell & Co., page 478; for asphaltum, see Italian Chamber of Commerce, page 480; for fluorspar, see Worth Bros. Co., par. 151, Schedule C; for bauxite, see Merrimac Chemical Co., page 96.

ASPHALTUM.

STATEMENT OF ARTHUR W. SEWALL ON BEHALF OF THE BARBER ASPHALT PAVING CO.

The CHAIRMAN. The next witness is Mr. Arthur W. Sewall.

Mr. SEWALL. If you please, Mr. Chairman, and gentlemen of the committee, there are three points to be considered in connection with the item of tariff on asphaltum and bitumen to which I would like to call your attention. They are:

First. Why was asphaltum and bitumen, crude and refined, placed on the dutiable list in the first instance; and was this step wise or justifiable?

Second. Have conditions changed since the tariff on asphaltum was created?

Third. Should asphaltum and bitumen be removed from the dutiable to the free list?

As to the first question, the asphalt tariff is unique in that it was created to protect not an infant but an unborn industry.

Contrary to prevailing belief and assertion, the Dingley duties were not established for the protection of asphalt manufactured from petroleum, but for the benefit of California miners of an asphaltic sandstone, which through extraction of the bitumen it contained, by mechanical processes, was expected to have great commercial possibilities. But the scheme commercially was a failure.

There was no oil asphalt industry worth talking about at the time of the passage of the Dingley bill in 1897. In that year, according

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to the 1900 edition of "The Mineral Resources of the United States," page 655, the total production of hard asphalt of all kinds was 3,940 tons, and this production decreased to 1,876 tons in 1898, the year after the bill was passed.

Since 1900, however, first in a small way and later in a rapidly increasing degree, the oil asphalt producers had benefited by the tariff that was imposed to protect an industry that commercially never came into being, and they asserted, when the Payne-Aldrich tariff bill was being prepared, that they would be ruined unless the tariff was not only retained but materially increased. One applicant even asked that the duty be increased to $10 per ton.

There was not and is not now any domestic product which needs to be protected by a tariff, even the asphalt made from petroleum. As already shown, this product was insignificant at the time of the creation of the present duties, and the price charged for California asphalt up to 1901 was $35 a ton, delivered on the Atlantic seaboard (as shown by Exhibit A, a contract between the Alcatraz Co. and the Southern Asphalt Paving Co., filed with our brief). It was not until three or four years after the passage of the Dingley Act that the production of crude petroleum in California unexpectedly and rapidly reached enormous proportions with the opening up of the Kern River oil fields. In the distillation of part of this largely increased supply of oil-the vast bulk of which was used and continues to be used for fuel purposes by railroads, steamships, and otherwise there was made a large and increasing volume of by-product asphaltum, followed by a fall of prices, until it is now sold in the New York market at as low as $16.50 a ton in cargo lots.

These developments, together with a decrease in freight rates to $12 per ton all rail, and $11 by rail and Gulf, and $6 by Cape Horn, have made it possible for California asphalt to be sold in the East at prices as last named, which are much below those that must be charged for the imported asphalts, because the latter are costly to mine, transport, and refine, represent a very large capital investment, and pay the tariff duties originated in the Dingley Act.

I might state for the information of the committee that our plant investment in Trinidad and Venezuela and near Perth Amboy, Ñ. J., is over $7,000,000.

The McKinley and Wilson tariffs ignored asphalt, and when, with the inspiration already mentioned, the asphalt duties which have ever since been maintained were proposed in the law of 1897, Senator Chilton, of Texas, made this protest, which is as sound to-day as it was 15 years ago, when the only California asphalt on the market was Alcatraz, the product covered in the original selling contract referred to as our Exhibit A.

Senator Chilton said:

It seems to me that this is a case where the American industry is clearly able to stand alone. It needs no protection. This is an unnecessary charge upon the taxpayers of a large section of the country and can do no possible good. The product is one that can not be locally developed by a protective duty, and being so largely used in the work of municipalities, it is not an appropriate subject for revenue duty.

It is important to consider that the residual or by-product asphaltum forms an insignificant part of the petroleum industry as a whole. Of the total California crude-oil production in 1911, 81,134,391 bar

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rels, not more than 3 per cent (see detailed memorandum illustrative of this field with the committee) was necessary in the manufacture of the amount of California asphalt produced in that year. This product, therefore, can not be an important factor affecting the welfare of California oil producers, so far as the tariff is concerned.

Their immense oil-refining capacity, primarily provided for the production of distillates, results in an amount of by-product or residual asphalt that has always been far in excess of market demands. The existence of this opportunity-in the course of obtaining distillatesfor producing a vast quantity of residual asphalt is the inspiration of the demand for tariff protection. This demand persists in spite of the fact that its sponsors are asking for protection for a by-product created with the full foreknowledge that the market could not normally absorb it. The most extreme protectionist would hardly claim that it is incumbent upon Congress to rescue deliberate overprotection from its natural economic fate certainly not when the commodity is not a principal product, but one that occurs as an incident in an industry that is made sufficiently profitable by its main products.

One hundred and forty thousand dollars was all that should have been paid in 1911 for labor employed in producing that year's output of 139,000 tons of asphalt from California oil, and this is the measure of the extent to which American labor is interested in this matter.

I say, "should have been paid." I say that advisedly. For more than 10 years the Barber Asphalt Paving Co. has owned and operated in Los Angeles a refinery for the making of asphaltum out of crude oil. Prior to the rapid development of the petroleum industry in California this company had shipped Trinidad Lake asphalt as far west as Portland, Oreg., but it was not commercially possible to do this after the development of petroleum refining in California with its resultant by-product of asphaltum. The refinery referred to was acquired to enable the company to compete in point of price in obtaining asphalt street-paving contracts on the Pacific coast. That plant has a capacity of, and does actually produce, 1,400 tons of asphaltum per month. The pay roll, details of which will be filed with the committee, amounts to $1,397 per month. Thus you will see that the labor cost per ton of asphaltum produced is $1, if the entire labor charge is placed against the asphaltum product, and no part of it against the gasoline, engine, and fuel distillates, which are driven off in the refining process and which constitutes three-fourths of the volume of the petroleum put through the stills. Certainly it would be more accurate to make a pro rata portion of the labor charge against the distillates, they being in bulk and value the principal products.

The plant, at 1,400 tons per month, has a capacity of 16,800 tons per annum. Nine such plants, running full time, could make a production of asphalt equal to the output of 139,000 tons produced in 1911, as shown in "Mineral Resources of the United States." But there are many more than nine such plants in California, with a great overcapacity of manufacturing ability, and if the overhead charges of this excess capacity were added it would increase the cost for labor above $1 per ton.

In view of these facts, there seems to have been and to be now no justification for the imposition of the tariff on asphalt, a tariff that

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has directly and indirectly taxed the many for the benefit of the few, and even these few do not appear to need the protection unintentionally given them.

Secondly, have conditions changed since these products were placed on the dutiable list?

Not only have conditions changed, as already described, since the enactment of the Dingley law, but a further and more radical change has come about in consequence of the removal of the countervailing duty on petroleum at the time of the passage of the Payne-Aldrich

law.

Since petroleum was by it admitted free, there have come to our markets large quantities of Mexican asphaltic oil, which is similar to the California oil, and from which asphalt is being made by the great eastern refining companies at far below the delivered prices of California oil asphalt, no more, in fact, than the rail freight charges on the latter product.

This is the real competition that the California producers have to meet; and with the appearance of the Mexican oil, the last vestige of a reason for a tariff on lake asphalt has disappeared.

Prior to the removal of the countervailing duty the very high import rates on petroleum and petroleum products in Mexico operated automatically, of course, and they were very high-in fact, such as would have been prohibitive on Mexican petroleum if then shipped to the United States.

The imported asphaltum from Trinidad and Venezuela or elsewhere can not possibly compete in price with the residual asphalts made from Mexican and California petroleum; but the lake asphalts have qualities of their own that make them supremely valuable, and of which those who pay for streets and roads should be permitted to take advantage without the additional cost imposed by the tariff.

The reasons that led to the removal of the duty on petroleum are equally applicable to asphalts. The Mexican oil, already mentioned, like California oil, is raw material, from which residual asphalt is made. In a similar sense crude lake bitumen is the raw material from which paving and road asphalt is made, and with petroleum it should be placed on the free list. The reasons for placing refined, as well as crude, asphalt on the free list are mainly that this would not menace any considerable interest of American labor, while it would enable producers, American producers, to ship the refined product to points nearest the consuming markets and thus save the cost of freight from main refineries to cities in certain sections, notably in the Southern States, remote from them.

For the information of the committee I would state (by way of parenthesis) that, having such an immense investment of capital in its plant at New Jersey, as heretofore referred to, the Barber Asphalt Paving Co. could not undertake to build and operate additional refining plants at other points along the Atlantic seaboard or on the Gulf coast. From our small refinery at Trinidad there has been imported in 1912, up to the end of November, 16,260 tons of refined asphaltum, of which about one-half is landed at Mobile and the other half at New Orleans.

Mr. PAYNE. Are there any by-products manufactured from the Trinidad asphalt ?

PARAGRAPH 90-ASPHALTUM.

Mr. SEWALL. None whatever.

In shipping refined lake asphaltum from Trinidad to the Gulf ports for consumption in Alabama, Mississippi, Louisiana, and Florida we have to pay the higher import rate which applies to refined asphalt; but, per contra, this higher tariff on the refined is less in amount than railroad freight rates on the same article when shipped from our works in New Jersey to the Southern States mentioned. From the standpoint of fairness to the consumers in those sections, I think it would be most just and proper if the duty on imported refined asphalt were removed.

As a matter of fact, American labor has but a very small interest in this matter, either as to the refining of United States oils or imported native asphalt.

The amount of labor used in refining crude lake asphalt is nearly three times as great as in manufacturing asphaltum by distillation from crude oil, because the crude asphaltum when placed in the hold of a ship amalgamates into a mass and must be dug out by mattocks at destination. It has then to be hoisted from the ship, moved on cars, and placed in bins, again dug from the bins and refined; so that American labor is more interested in this than in the other case.

The company that I represent is not asking for a removal of the duty on refined asphalt with the expectation, in case the tariff is removed, of refining a larger percentage of its imported asphaltum at its place of origin. It has, as shown, a very great investment in a refining plant in this country and will continue to operate it always to its fullest capacity. The direct benefit of the removal of the tariff would inure to the consumer in the form of lower prices-not to the importers of asphalt-and these lower prices would not be obtained at the expense of American labor.

Finally, should asphaltum and bitumen, crude and refined, be removed from the dutiable list to the free list?

Without doubt there will be strenuous opposition to the removal of the duty from manufacturers of asphaltum from crude oil in California and those who manufacture asphalt therefrom. There will be opposition from the great refining companies in the East, who are making asphaltum out of the Mexican commodity from oil, but, Mr. Chairman, I assure you you will never receive any protest from any disinterested taxpayer anywhere in the United States if asphaltum is put on the free list. Without doubt, the reasons why the tariff on asphalt should be removed are:

First. Because the present duties of $3 per ton on refined asphalt and $1.50 per ton on crude are a tax on good roads and streets, and in this connection I have a paper which will be filed with our brief, which contains information from the United States Department of Agriculture, Office of Public Roads, in which is given the figures that have been expended in the various States during the current year under State appropriations and other appropriations which have gone hand in hand with and supplemental to the State appropriations. It states, in summing up, that in addition to the amounts already given, a summary of the statistics received from 30 States shows that $72,458,716 has been expended by the counties and other municipal units for highway construction during the last fiscal year. I venture to say that never in the history of our country has a nonpolitical