tition of other forms of energy, and permits the Commission to recognize those in the establishment of prices. Senator DAVIS. Does it mean that a group of mines can reduce the price of coal to meet competition? Let us take, for instance, the city of Chicago, with pipe lines coming in carrying natural gas from the Oklahoma and Texas fields. Suppose they find that the price of natural gas will produce heat much more cheaply than will coal. Do I understand you to mean, by the statement that you have just made, that you would be able to reduce the price of coal to compete with the natural gas? Mr. HOSFORD. Within reasonable limits. Senator DAVIS. What would you call reasonable limits? Mr. HOSFORD. That would depend upon the circumstances of each case. Senator DAVIS. Have you a case in mind by which you can illustrate it? Mr. HOSFORD. Let me say this, Senator-and, again, I am expressing an opinion without any statement of facts upon which to base it. Let us assume that someone wanted to sell coal in the city of Chicago at 10 cents a ton. That would be, in my judgment, an unreasonable request. In other words, there are situations with respect to competitive fuels where competition of bituminous coal is simply out of the question. Senator DAVIS. What I have in mind is this. I do not want the worker who is producing the coal to suffer a reduction in wage. Mr. HOSFORD. There is always present the requirement sir, under the provisions of the following section, that the realization by the producers of the district must return to them in a general way their costs of production. In other words Senator DAVIS. They cannot reduce the costs of production. All we have is the right that the worker has Mr. HOSFORD. The act does not attempt to deal directly, sir, with the wages or the relations between employer and employee. Senator DAVIS. But it says that there shall be on one of these boards a representative of an organization of workers. Mr. HOSFORD. There is a labor representative on each district board; yes, sir. Senator NEELY. The next amendment appears in line 21, page 2, and is as follows: After the word "thereof" insert the words "and shall not actively engage in any other business, vocation, or employment.' Then follows [reading]: Not more than one commissioner shall be a resident of any one State, and not more than one commissioner shall be a resident of any one of the districts hereinafter established, but a change in any of the boundaries of the districts, made by the Commission as hereinafter provided, shall not affect the tenure of office of any commissioner then serving. Mr. HOSFORD. That provision was included in the original act and was omitted in S. 1 and the companion House bill. The bill as reported requires the members of the Commission to devote their time and attention to the business of the Commission, and that they shall not actively engage in any other business, vocation, or employment. Senator DAVIS. Going back to the discussion of a moment ago: We can produce power more cheaply by coal than we can hydroelectrically, can we not? Mr. HOSFORD. I am informed that that is generally true. Mr. HOSFORD. I have none with me. Senator DAVIS. If you have any, will you insert it in the record? Mr. HOSFORD. I shall be happy to get them or additional information and insert in the record. Senator DAVIS. It provides that all the commissioners shall be familiar with the coal industry, does it not? Mr. HOSFORD. The bill provides that two members of the Commission shall have been experienced bituminous-coal mine workers and two shall have had previous experience as producers. Senator DAVIS. Are all the present members of the Coal Commission experienced men? Mr. HOSFORD. There are some of the members of the Commission, sir Senator DAVIS. I know that you are. Mr. HOSFORD (continuing). Who, prior to their appointment, were not in close touch with or actively engaged in the coal industry. Senator DAVIS. Did they ever have any experience with the coal industry? Mr. HOSFORD. Not to my knowledge, sir. Senator NEELY. To what members particularly do you refer? Mr. HOSFORD. Commissioner Acret and Commissioner Maloney. Senator NEELY. I was interested to know whether you included my friend, Mr. Smith, as one of those who had not had experience. Although he was never an operator or a miner, yet for more than 25 years he has had daily experience with the coal industry and its problems. Mr. HOSFORD. I think Mr. Smith's knowledge and experience are even broader than that of the average operator, Mr. Chairman. Senator NEELY. On page 3, line 6, the House Committee has inserted, after the word "appointed", the words "and their compensation fixed in accordance with the"-and then the bill continues [reading]: provisions of the Civil Service laws and the Classification Act of 1923, as amended. Senator DAVIS. May I ask a question before you go on with the next amendment? Senator NEELY. Certainly. Senator DAVIS. With regard to page 2, you and I discussed this at length on one occasion on the passage of the first Guffey bill. It states [reading]: The Commission shall have an office in the city of Washington, District of Columbia, and shall convene at such times and places as the majority of the Commission shall determine, and so forth. Is there any objection to having the Commission's headquarters in some city, such as Chicago, Pittsburgh, Indianapolis, Charleston, or some other city outside of Washington, where they are in constant touch with the coal industry all the time and can live with it? They are away from it here. If they had their offices in one of those cities, I should think it would be better for the coal industry and better for everyone concerned. What objection would there be to the Commission's having its headquarters in one of those cities? Mr. HOSFORD. Based upon my brief administrative experience under the present act, I can see certain reasons why the Commission might function to better advantage at some point in the coal areas. On the other hand, particularly for the first few years of life of this Commission there are so many questions constantly arising that can be worked out to better advantage in Washington that it is my own judgment-and I believe it is shared by other members of the Commission-that the problem you speak of, that is, of maintaining our contacts with members of the industry, keeping in touch with the problems in the field, could even better be met by the establishment of a limited number of regional offices at strategic points. Senator DAVIS. You would not object to the Committee, when it goes into executive session, making that broad enough so that when you have had your experience here you could, if the President so wished, move your headquarters to one of these other cities? Mr. HOSFORD. I think it might not be an inappropriate change, Senator. Senator NEELY. The next amendment in order is near the bottom of page 3 and consists of the following language after the word "Commission": No order which is subject to judicial review under section 6, and no rule or regulation which has the force and effect of law, shall be made or prescribed by the Commission, unless it has given reasonable public notice of a hearing, and unless it has afforded to interested parties an opportunity to be heard, and unless it has made findings of fact. Such findings, if supported by substantial evidence, * * ** and so forth. Mr. HOSFORD. The language as changed means that wherever an order is to be entered, which is subject to judicial review, and wherever a rule or regulation is to be promulgated which is to have the force and effect of law, then the Commission must conduct public hearings after notice and afford all interested parties a full opportunity to be heard; but hearings will be unnecessary on minor matters. Senator NEELY. There are minor changes on pages 4 and 5. Without objection, we shall pass on to page 6. In line 3 the House committee has inserted, after the word "appointed", the words "and their compensation fixed in accordance with", and so forth. Does anyone wish an explanation of that language? sponse.) (No re If not, there is an insertion after line 6, on page 6, as follows: (4) The counsel shall annually make a full report of the activities of his office directly to the Congress. Does anyone desire to have that explained? Senator DAVIS. By "counsel" you mean the attorney? Mr. HOSFORD. The consumers' counsel. That is an office created under the act of 1935 and appearing in both S. 1 and H. R. 4985, to represent the consumers. Senator DAVIS. Should you not say "the consumers' counsel"? Senator MINTON. That is in a section where no other counsel is referred to. Senator AUSTIN. It refers to line 14, on page 4, creating the office of consumers' counsel. Senator NEELY. There is a change in line 11 from 112 percent to one-half of 1 percent. What are your observations concerning this change? Mr. HOSFORD. Here is an act of Congress intended to relieve conditions in a depressed industry. The bill proposes to provide by means of this tax an amount of money sufficient to meet the costs of administration. On the basis of 12 percent, figuring coal at an average price of $2 a ton, f. o. b. mine, and assuming that the normal production in the United States annually would be not less than 400.000,000 tons, this tax would yield a revenue of approximately $12,000,000 per year, which certainly is in excess of any amount that might be expended in the administration of the act. The reduction was made, and on the present basis of one-half of 1 percent it would yield approximately $4,000,000, which I believe is substantially in excess of the costs of administration. Senator AUSTIN. May I ask a question at this point? Senator NEELY. Certainly. Senator AUSTIN. I ask you to look at line 13, on page 6, for the purpose of saying whether these words, "coal disposed of otherwise than by sale at the time" include captive coal. Mr. HOSFORD. They do, sir. Senator DAVIS. Do you think that this one-half of 1 percent would be sufficient at all times? Mr. HOSFORD. Well, so far as the costs of administration can be foreseen, I would say that it would be adequate, Senator. Senator DAVIS. If the production should go up to the amount it reached in 1920 and along about 1929, that would be too much? Mr. HOSFORD. Yes, sir. Senator DAVIS. If such a thing should take place as that the coal production would go back to its high peak, do you think that we could delegate the power to the Commission to reduce it so there would not be that added cost if it is not needed for operating expenses? Mr. HOSFORD. I would rather assume, Senator Davis, that it would hardly be a proper delegation to have the amount of tax that is to be levied and collected determined in this manner by a commission. I think that you should recognize this fact, that if at any time coal production jumps up to that extent and gives evidence of being permanent, then the Congress can readily pass an act reducing this tax as imposed by section 3-A. The Court said, further: It is very clear that the tax is not imposed for revenue, but exacted as a penalty to compel compliance with the regulatory provisions of the act. The exaction here is a penalty and not a tax within the test laid down by this Court in numerous cases. The Court then goes on to say: The position of the Government, as we understand it, is that the validity of the exaction does not rest upon the taxing power, but upon the power of Congress to regulate interstate commerce, and that if the act in respect of the labor and price fixing provisions be not upheld, the tax must fall with them. With that position we agree and confine our consideration accordingly. Senator MINTON. In other words, if the Congress has power, under the commerce clause, to set up the regulations it proposed to set up in the act, then it can use the tax as an incidental power to compel compliance with its regulations? Mr. HOSFORD. That is my understanding of the law. Senator MINTON. Of course, if we have no power under the commerce clause to do what we set out to do, we cannot use the taxing power alone to do that? Mr. HOSFORD. That is correct. Senator DAVIS. I presume they increased the tax from 1312 to 192 percent because that would make the penalty more severe and have them come in on this lower excise tax? Mr. HOSFORD. The committee evidently believed that the 132 percent was not adequate to bring about acceptance of the code and compliance with the policy of this law, and therefore the committee, after a lengthy discussion, agreed to an increase to 1912 percent. Senator DAVIS. As I see it, it may be somewhat somewhat difficult in years to come to make any amendment to this particular bill, especially if the Treasury of the United States is in need of money. It would be rather difficult then to have it reduced. Mr. HOSFORD. On the other hand, Senator Davis, you have this fact confronting you, that if this bill accomplishes for the coal industry even a substantial part of what is believed it will accomplish, the tax on the present basis only amounts to 1 cent a ton, and it certainly is not an excessive price to pay to put it back on its feet. Senator DAVIS. I agree that it would be worth 12 percent. Senator DAVIS. Yes. Senator AUSTIN. I would like to ask a question for clarification and get the witness' interpretation of the tax in section 3-B, 191⁄2 percent of the sales price. Is it your opinion that that tax is of a penalty character? Mr. HOSFORD. I can best answer that, Senator Austin, by reading the language of the Supreme Court, sir. [Reading:] The so-called tax In that case it was 15 percent on the sale price of coal at the mine is clearly not a tax, but a penalty. The exaction applies to all bituminous coal produced. You recall that when the original bill was up for discussion the proposed penalty at that time was 25 percent. So this represents a substantial modification from the original proposal. Senator NEELY. Are there any other questions concerning any of the minor changes made by the committee on pages 6 and 7? [No response.] If not, we shall turn to page 8. Senator MOORE. Just before you get to that. You spoke of your having too much money, and then changing the language with regard to it. Why could not all the money be paid into the United States Treasury, and then you budget your annual expenses and draw from the Treasury, and if there were any surplus it would go into the general fund? Mr. HOSFORD. What actually occurs, sir, under the present act, or rather what would have occurred had the act not been set aside |