STABILIZATION OF BITUMINOUS COAL MINING INDUSTRY

THURSDAY, JUNE 27, 1935

HOUSE OF REPRESENTATIVES,

SUBCOMMITTEE OF THE COMMITTEE ON WAYS AND MEANS,

Washington, D. C. The subcommittee met at 10 a. m., Hon. Samuel B. Hill (chairman) presiding.

Mr. HILL. The committee will be in order. I will call Mr. Fleming.

Mr. CALDWELL. Mr. Chairman, my name is Caldwell. Mr. Fleming is a partner of mine. He had to go back to Chicago, and I am here in his stead. My name is on the list also.

Mr. HILL. We have some other witnesses who are entitled to be heard first. I thought were we accommodating him by calling him first today.

Mr. CALDWELL. I may say that my clients are here also. They have been here some time.

Mr. HILL. You live here in the city?

Mr. CALDWELL. I live here; yes, sir.

Mr. COOPER. I think it would be fairer to take some of these men who have come from a distance, Mr. Chairman.

Mr. HILL. Mr. Fleming had said that he had to be away, and we therefore would hear him today.

Mr. CALDWELL. He had to go back, Mr. Chairman.

Mr. HILL. Then we will hear you later, Mr. Caldwell.

The next witness is Mr. D. T. Buckley, Washington, D. C., representing the American Wholesale Coal Association.

Mr. Buckley, we shall be glad to hear you. The committee will allow you 2 minutes; and if you do not finish your statement in that time, you have permission to extend your remarks.

STATEMENT OF DANIEL T. BUCKLEY, REPRESENTING THE AMERICAN WHOLESALE COAL ASSOCIATION, WASHINGTON, D. C.

Mr. BUCKLEY. My name is Daniel T. Buckley, and I appear before your committee in behalf of the American Wholesale Coal Association, which represents 1,100 wholesalers of bituminous coal in the United States who annually distribute 20 percent of the commercial tonnage produced by mines of the United States. On the basis of 288,000,000 tons produced for commercial use during the year 1934, this would amount to approximately 57,000,000 tons distributed through wholesalers.

We are not appearing in opposition to the enactment of this legislation, neither are we appearing in favor of the bill as now written, because we consider that it is essentially a producers' bill.

Title I, section 2, on page 3 of H. R. bill 8479 establishes a National Bituminous Coal Commission, which, as set forth in the bill, would comprise 9 members appointed by the President for a term of 4 years, 5 of whom shall be so-called "impartial members", 2 shall represent the employees, and 2 shall represent the producers. We feel that the wholesalers should be represented on this commission by one member, because:

The National Bituminous Coal Commission has the power under this bill to prescribe the amount of commission that shall be allowed. to the wholsealer for the services that he renders for the producer in the sale and distribution of his coal, and our experience under the N. R. A. has made us very skeptical and suspicious as to the treatment that we might receive at the hands of any commission.

Under the N. R. A. there was set up a code for the wholesale coal industry, which provided among other things, the right of free bargaining between the wholesaler and the producer as to the amount of commission he should be allowed off the published code price on coal sold by him. It was recognized under our code, therefore, that the wholesaler had the right of making an agreement with an individual producer as to the amount of commission that should be allowed him. However, the several subdivisional code authorities of division no. 1, namely, eastern Pennsylvania, western Pennsylvania, northern West Virginia, Pan Handle of northern West Virginia, Ohio, Southern no. 1, and Southern no. 2, persistently published rates of commission or discount which violated the provisions of the wholesale coal code setting forth the right of free bargaining. It was not until February 8, 1935, that Wayne P. Ellis, Acting Deputy Administrator of the Bituminous Coal Čode advised the several subdivisions that the wholesale discounts and commissions published by them were not in order and had not been agreed to by the wholesalers, and should be withdrawn from their price schedules. This order was disregarded by all the subdivisions.

After several conferences between the Wholesale Coal Code Authority and representatives of the several bituminous subdivisional code authorities set forth above, which resulted in repeated disagreements as to an equitable commission for the wholesaler, the National Industrial Recovery Board on March 4, 1935, appointed a special committee-comprised of W. E. Hotchkiss, Roger B. Sheppard, W. Jett Lauck-to deal with the matter of rules and regulations and discounts of the bituminous-coal industry in relation to wholesalers. Hearings were conducted on March 5 and 6, 1935, with representatives of both the wholesalers and producers present. After deliberating on the evidence introduced at the hearings for over 3 weeks, the special committee referred the matter back to the divisional administrators having jurisdiction over the Wholesale Code and the Bituminous Code, who forthwith called another meeting between the interested parties, with the thought in mind of bringing the parties into agreement. This meeting also ended in a disagreement, and the Divisional Administrators referred the matter back to the special committee for their further consideration.

The special committee on May 11, 1935, issued an administrative order which established, rules, regulations and discounts governing the sale of bituminous coal, and these rules, regulations and discounts were made binding on both the producers of division no. 1 and the wholesale coal industry. The discounts as set up were not acceptable to the wholesalers, who continued to fight for their rights until the N. R. A. was declared unconstitutional by the Supreme Court.

We are setting forth this history in detail, because we know that the commission as now set up to regulate the matter of discounts or commissions to wholesalers would lack a member who understood the wholesalers' function in the distribution of bituminous coal.

At this commission would have the power to promulgate all reasonable rules and regulations for carrying out the provisions of the act, it is reasonable to assume that in order that the commission might have a full understanding as to the correlating of prices between the respective districts set up under the act, that a marketing committee (similar to the divisional marketing committee under the Bituminous Coal Code) would be set up where the question of price correlation would be worked out between the various districts, and in the event of disagreement would be referred to the commission for approval.

It was very noticeable under the Bituminous Coal Code that while there might have been differences of opinion as to the prices for the respective grades and qualities of coal of the respective subdivisions into any one of several market areas, the subdivisions were always unanimous in their opinions as to what should be done with the wholesaler. It was very openly expressed by some of the members of this marketing committee that the wholesaler had no place in the bituminous-coal picture, and that he should be glad to take what was given him, which for a good many months was only 10 cents per ton commission for the coal he sold. Rules and regulations promulgated by this market committee, which were approved by the N. R. A., set up general distributors and so-called "regional distributors", who were allowed an unlimited commission for coals sold by them, whereas the wholesaler was restricted to 10 cents a ton.

Page 72 of the printed copy of hearings before your committee on H. R. 8479 (June 18) refers directly to the matter of the wholesaler and his relationship to the small operator, and Mr. Woodruff, a member of your subcommittee, stated that the small coal operator depends on the wholesaler for the marketing of the greater part of his coal. Judge Warrum very definitely stated that it was not intended that this bill should undertake to regulate the fuel industry of the country or even the distributing agencies of coal, and that in any fair regulation decent regard must be paid to the right of the small operator to continue to sell his coal through wholesalers or jobbers.

There is no question in the mind of any one that the wholesaler is an integral factor in the distribution of bituminous coal, or that the smaller producer depends on him to market his coal as he cannot afford the expense of his own selling organization. In different sections of the 'country the wholesaler handles as high as 75 percent of all the bituminous coal sold, which would indicate that even the larger producers of coal recognize his knowledge of marketing conditions in these sections and are satisfied with the services rendered, otherwise they would set up their own selling organizations.

You have heard in the past day or two from representatives of wholesale coal associations located in Chicago, Detroit and St. Louis. We have also had letters (which have not been read for the record) setting forth the position of wholesaler groups in New England, New York, Pittsburgh, Cleveland, and Cincinnati, who are all vitally interested as to the effect that this bill may have on their future. They are all as one in agreeing that subsection (i) on page 19 of H. R. 8479 should be amended to read as follows:

(i) All sales and contracts for the sale of coal shall be subject to the operation of this Act and to the code prices herein provided for. The Commission, after investigation and full hearing and upon notice to the interested parties, shall prescribe a fair and reasonable price allowance to and receivable by persons who purchase coal for resale and resell it in not less than cargo or railroad carload lots; and shall require the maintenance by such persons, in the resale of coal, of the minimum prices established under this Act.

We recognize the fact that we are vitally tied up with the bituminouscoal industry and that unless the industry prospers we cannot hope to prosper. However, under the N. R. A. the commissions or discounts allowed to the wholesaler were not considered as being equitable. Therefore, a goodly percentage of the wholesalers were dissatisfied with the restrictions placed on them under the N. R. A., and felt that the subdivisions of division no. 1 did not accord them fair treatment.

We fully appreciate that the matter of commission to be allowed wholesalers from the minimum prices set up under this bill cannot help but be a real problem to the commission named to administer this act, and we must consider that five of the members of this proposed commission will know nothing whatever about the bituminous coal industry; that they will have to look to the representatives of the producers and employees for enlightenment on the various questions that are bound to come up during the years that this act will be in effect in event of its enactment.

We desire the opportunity of a full hearing on matters affecting the wholesale coal industry, and it is for this reason that we have requested that subsection (i), on page 19 of H. R. 8479 be amended so that in event of the enactment of this bill the commission will have set before it very clearly the procedure to be followed with relation to the determination of the price allowance to and receivable by persons who purchase coal for resale and resell it in not less than cargo or railroad carload lots. We feel that if we are given an opportunity to state our side of the case that we will be able to prove to the satisfaction of the proposed commission that a fair and reasonable price allowance, as we understand it, will not impose an undue burden on the producers of bituminous coal in the United States.

Mr. HILL. Thank you, Mr. Buckley. The next witness is Charles W. Hendley, representing the American Wholesale Coal Association, Washington, D. C.

Mr. BUCKLEY. Mr. Chairman, Mr. Hendley will not be here. Mr. HILL. The next witness is Mr. Darius A. Thomas, Birmingham, Ala., representing the coal operators of the State of Alabama. I have been given to understand that it is desired that Mr. Johnson be heard before Mr. Thomas.

We will hear Mr. Johnson now.

STATEMENT OF FORNEY JOHNSTON, REPRESENTING THE COAL OPERATORS OF THE STATE OF ALABAMA, BIRMINGHAM, ALA.

I

Mr. HILL. Mr. Johnston, we want to give you ample time to present your case, but we cannot possibly allow you anything like 2 hours. We have had quite a complete exposition of both sides of this case. think you can probably cover the points you have in mind in less time than some of the others have taken, in view of the fact that the subject has been very completely covered from both sides. Will you please start with that understanding.

Mr. JOHNSTON. Mr. Chairman, I appear here primarily for the purpose of stating the case as this pending bill affects the situation of division 3 and more particularly the Alabama bituminous-coal operators.

I think it proper to say at the outset that there is a unanimity among the producers as to their attitude both as to this legislation and their effort to adjust themselves to the difficult conditions which confront the bituminous coal industry in the Nation.

With slight interruptions of the entire harmony between division 3 operators and the staff of the National Recovery Administration under the N. R. A., I believe it is fair to say that the Alabama operators have cooperated fully with the Federal Government in its purposes under the Bituminous Coal Code.

As I say, they are in entire harmony both as to their apprehension as to what may result from the adoption of this bill, and as to their willingness to go forward with any constructive measures which may be advanced in aid of the industry.

There is no emergency situation in the State of Alabama or in division 3. Their difficulties are not lack of cooperation; they are not lack of the ability of the industry to take such steps as are available within the law for its own stabilization. Their difficulty is one of competition in the field with competitive fuels.

They are wholly without ability to advance the price of their product, even if it is true that at the present time they are, with present wages and present mining costs, not realizing a compensatory return, and not paying the cost of production, if depreciation be taken into consideration.

They cannot raise the price of their commodity. It is already higher than any scale of coal prices east of the Mississippi River, and they run into the law of diminishing volume if they increase the price.

They are convinced that the operation of this proposed act will increase their price. For that reason, even if there were not other fundamental reasons against it, they have no alternative but to urge that the pending measure be not adopted, and to take such measures for their own protection, if it would be adopted, as might be necessary. They simply cannot preserve the volume of business which they have held by active and prompt adjustment of their price structures to competitive requirements, if they are confronted with any additional cost.

That is not an obstinate attitude. It is not one which they desire this committee to misunderstand in any sense. They simply cannot