and thousands of inhabitants of dependent mining communities, will be the principal victims of the demoralization that the price fixing provisions of the bill will create in the Indiana mining industry. In addition, the mine operators, of course, will suffer irreparable financial loss.

Mr. VINSON. How many miners did you have in Indiana in 1934? Mr. WAFFLE. About 10,000 in the shipping mines. There were approximately 4,000 employed in the haul-off-rail lines, called truck mines.

Mr. VINSON. In other words, all together, about 14,000?

Mr. WAFFLE. Approximately so; yes, sir.

Mr. VINSON. I see here in a table that the average cost per ton for Indiana last year was $1.52.

Mr. WAFFLE. That was the average cost for a 10-year period ending on January 31, 1935.

Mr. VINSON. Was that a 10-year period.

Mr. WAFFLE. That was a 10-month period.

Mr. VINSON. That is what I thought. If you have the average costs under this bill fixed as they are supposed to be, how could it hurt you with that low cost of production?

Mr. WAFFLE. If you will let me proceed with my statement I will bring that out, Mr. Vinson.

Mr. VINSON. All right.

Mr. WAFFLE. As set up, the price provisions of the bill require the maintenance of a price structure that, in our judgment, will not only be unduly prejudicial to the producers and mine workers in Indiana, but in addition will be extremely unfair to the consumers of Indiana coal for the reason that under the bill the minimum price for Indiana coal must be based, not on the lower production cost of the Indiana coal mines, but upon the higher average production cost of all the mines in the large producing area described on page 11 of the bill as minimum price area no. 1.

The average production cost of the mines in the eastern and southern districts, with which Indiana is grouped, is about 40 cents per ton higher than the average production cost in the State of Indiana. This means that the minimum prices for Indiana coal must be pegged at least 40 cents per ton higher than would be necessary if they were predicated exclusively on the average cost of production of the Indiana mines..

This method of price determination not only denies to the producers of Indiana coal their inherent right to the benefit of their lower production costs, but will actually force the consumers of Indiana coal to pay prices not justified by our average cost of production. Obviously, the pegging of Indiana coal prices 40 cents per ton higher than would otherwise be justified on the average production cost of the State of Indiana, will substantially reduce the production and sale of Indiana coal for at least two reasons:

First: It will force the Indiana price level so close to the price level of the higher grade Appalachian coals that the producers of Indiana coal will be unable to sell in competition with the Appalachian coals in the same markets. By that statement I mean that the differential that existed between the price of Indiana and Appalachian coals under and prior to the code, will be narrowed almost to the point of distinction and, therefore, create a situation where the inherently

low-grade Indiana coals cannot be sold in competition with the highgrade Appalachian coals.

The same condition would be created between our coals and the high-grade coals of the southern Illinois fields.

Second: It will force the price level of Indiana coal to a point where its producers will be unable to sell it in competition with natural gas and fuel oil, both of which have already displaced several million tons of our coal.

Our biggest market is in the Chicago district-the largest bituminous coal consuming area in the United States. This district is served by a 24-inch natural-gas pipe line from the Amarillo field in Texas; and since its entrance into the Chicago district, a large number of industries have turned from coal to gas. Notably among these is the Swift & Co. plant at Chicago, where natural gas has displaced 30 cars of Indiana and Illinois coal per day.

Mr. VINSON. When was the pipe line built into Chicago?

Mr. WAFFLE. About 3 years ago.

Mr. VINSON. Then a lot of that coal business was lost before there was increased price of coal under the code, was it not?

Mr. WAFFLE. Yes, sir.

Mr. VINSON. How much have you lost in the last year?

Mr. WAFFLE. There is still an increasingly productive loss of coal in that district. Within the past 3 or 4 months a number of large office buildings and stores in the city of Chicago have turned to natural gas. I would be very glad to file a list of that as an exhibit.

The Crane Co. plants at Chicago are another outstanding example. Only within the past 60 days, several large office buildings and hotels in Chicago have replaced coal with natural gas, and many industries are now negotiating for the installation of gas in their plants. Add 40 to 50 cents per ton to the price of Indiana coal, which this bill is certain to do, and the coal mines in our State will begin to fold up at a rapid rate and, when they do, hundreds of miners will be tramping the roads in search of work, to say nothing of the devastation that will be visited on the mining communities that depend upon these mines for their existence.

Consumers have always purchased Indiana coal at prices made in relation to the cost of its production, and we cannot conceive of any valid reasons that justify "soaking" the consumers of Indiana coal with a price based upon the cost of producing coal in central Pennsylvania, or districts located several hundred miles distant from the Indiana field where, in some instances, the production cost runs over $2 a ton, compared with an average cost in the State of Indiana of less than $1.50 per ton, from the Indiana field.

Mr. VINSON. Before N. R. A. went into effect-and I will see that you get enough time credited you that is used up by these questions-before N. R. A. went into effect, did you make that same argument in regard to the N. R. A. set-up?

Mr. WAFFLE. No, sir.

Mr. VINSON. Did you favor N. R. A.?

Mr. WAFFLE. That is an entirely different situation, Mr. Vinson, because under the N. R. A. all the price level went up in about the same proportion, but here you are undertaking to raise our price level about 40 cents per ton higher than it was under the code.

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Mr. VINSON. What was Indiana coal selling for before N. R. A.? Mr. WAFFLE. Various prices. I am unable to give you that. Mr. VINSON. What was the average?

Mr. WAFFLE. Down around $1.50 or $1.45 per ton.

Mr. VINSON. Do you mean to say that N. R. A. only increased it 21⁄2 cents a ton?

Mr. WAFFLE. Our average realization is higher than $1.52 under the N. R. A.

Mr. VINSON. My information here is, from a table filed by Mr. Francis, for the 10 months period, that your cost per ton was $1.52. Mr. WAFFLE. That is right.

Mr. VINSON. I thought you agreed to that.

Mr. WAFFLE. That is cost and not realization, Mr. Vinson.
Mr. VINSON. I am talking about costs.

prior to N. R. A.?

Mr. WAFFLE. Average cost per ton?

Mr. VINSON. Yes, sir.

What were your costs

Mr. WAFFLE. I have not those figures available.

Mr. VINSON. Could you state approximately what it was?

Mr. WAFFLE. I would say that at the least the labor cost of production has gone up approximately 15 percent since the N. R. Â. Mr. VINSON. Of course, if we cannot get some figure to discuss, go right ahead and present your statement.

Mr. WAFFLE. We therefore recommend that the primary price determination basis, set out on pages 10 to 14, inclusive, be amended to provide that the minimum prices for each individual district, as identified on pages 48 to 54, inclusive, be predicated on the average cost of production of each such district, without reference or in relation to the average production cost of the minimum-price areas described on pages 11 and 12 of the bill. This action would obviate the necessity for determining the average cost of production for the minimum-price areas described on pages 11 and 12 of this bill.

Speaking briefly on coordination of prices in common consuming markets, we do not see how it is possible, in coordinating the prices of the coals of the long-and-short-haul fields, to maintain for any long-haul field a return on all its coal equal to the average production cost of all coal in the minimum-price area, except by increasing the prices of the short-haul coals to the point of extortion, so far as the consumer is concerned, and in fact to a point so high that the shorthaul coal could not be sold in competition with competitive fuels.

This situation can well be illustrated by reference to what will happen in the coordination of the prices of western Kentucky and southern Illinois coals.

I merely use that as a convenient means of illustrating the situation. To begin with, it is conceded, that the average cost of production in minimum price area no. 1, described on page 11 of the bill, is $1.85, which is the amount per ton that the price structure of both western Kentucky and Illinois must yield to those districts.

To the territory north of the Ohio River the freight rates from western Kentucky are 35 cents per ton higher than from southern Illinois. During the existence of the code the western Kentucky producers claimed the right to and did maintain the prices of their coal 80 cents f. o. b. mines per ton under the southern Illinois f. o. b. mine prices. This 80 cents was made up of 35 cents freight-rate

differential and 45 cents for difference in quality of western Kentucky and southern Illinois coals.

Now if the price structure of western Kentucky coal, f. o. b. mines, is to be maintained on a basis that will return that district $1.85, it necessarily follows that in the coordination of its prices with southern Illinois, the price structure of southern Illinois must be increased 80 cents per ton above what would be necessary to maintain an average return of $1.85 for the southern Illinois operators. On the basis of the differential contended for by western Kentucky, the southern Illinois price structure would, therefore, have to be fixed so as to return an average of $2.65.

Mr. VINSON. Of course, I take it that you are solicitous about the coal operator in western Kentucky?

Mr. WAFFLE. I hold no brief for western Kentucky. I am using that as an illustration, for the reason that western Kentucky freight rates are universally 35 cents per ton higher over the entire district north of the Ohio River. I could just as well have used eastern Kentucky, but they have no fixed differential there. There is a difference which varies with almost every destination.

As the southern Illinois prices would be related to the prices of other Illinois coals, and to the prices of Indiana coals, the price structure of these latter groups would likewise have to be increased proportionately.

Such procedure would establish an exorbitant price on Indiana and Illinois coal, and if the operators were able to sell their coal at those prices, in competition with competing fuels, such prices would net the operators, in some instances, with a margin over cost of production of more than 150 percent.

Now if we proceed via the other route and coordinate western Kentucky and Illinois prices by reducing the f. o. b. mine prices of western Kentucky coals sufficiently to absorb the difference in freight rates and quality of coal, obviously that district would not receive an average return of $1.85, unless it was done by fixing an exorbitantly high price in their local market, if they have done any such thing, which they probably do not have except as to a very limited tonnage. This illustration strongly emphasizes the futility of the price-control plan set up in the bill.

The collapse of price fixing under the code of fair competition resulted largely from the futile attempts which were made to coordinate prices in common consuming markets. Coordination of prices has never worked and we do not believe it can be made to work satisfactorily. Of course, it may be argued that the Commission has power which did not exist under the code and can coordinate the district prices in common consuming markets. While that may be true, it does not necessarily follow that the Commission would be capable of establishing a coordination of prices which would be entirely fair and reasonable to each producing district, or to the operators within each district. We are convinced from our experience under code price fixing that coordination of prices by the Commission will result in endless litigation in the Federal courts and may eventually result in this provision of the bill being declared illegal, and the bill thereby be stripped of its most important feature.

We therefore submit that the bill should be amended so that each district will be permitted to base its prices on its average cost of pro

duction, without relation to the cost in any other district, and, further, that each district be permitted to set up prices in the various consuming markets independent of any other district, subject at all times to approval, disapproval, or modification by the commission, and with the further provision that the entire price structure in all consuming markets must yield a mine-run return of not less than the district average cost of production.

We also recommend that district boards should be permitted, from time to time, in order to meet changing market conditions, to revise their price structures upon notice to and approval by the commission, subject, always, to the provision that the entire price structure of the district must yield not less than the average district cost of production. And finally, we recommend that the provisions published in subsections (b), (c), and (d) on pages 14, 15, and 16, be stricken from the bill. The adoption of this recommendation would result in completely removing from the bill the requirement that prices shall be coordinated in common consuming markets.

We believe the acceptance of these amendments will so simplify the price-fixing features of the bill as to avoid a vast number of hearings before the commission and an enormous amount of litigation in the Federal courts.

Even if the price-fixing provisions of the bill are held constitutional, unless they are workable, they will eventually fall of their own weight. I have two or three other matters which I intended to refer to, but they have been covered by other witnesses, and in the interest of time I will pass them over.

Mr. HILL. Thank you very much.

Mr. HILL. Mr. Grant Stauffer.

STATEMENT OF GRANT STAUFFER, KANSAS CITY, MO., REPRESENTING SOUTHWESTERN COAL OPERATORS

Mr. STAUFFER. I represent the companies in which I am personally interested, operating in Arkansas, Oklahoma, Kansas, Missouri, and Illinois, and the operators of Missouri and Kansas.

I have been in the coal business since 1911, working for other people and myself. I have been operating since 1916.

I believe, speaking for the companies in which I am interested and the operators of Missouri and Kansas, that this House bill 8479 would do the opposite of what it is intended to do, of what it says on the face of it. I believe it would do just the opposite of stabilizing the industry. That is, I have heard the proponents of the bill here say that we should have one wage scale as a standard for the whole country. I am a believer in paying just as high wages as one can pay, and I think that makes for prosperity, but we have gas and oil. competition that is a pretty serious matter in our section. In fact, we made a poll by telephone and mail of all the operators in Missouri and Kansas, about 700 of them, and we failed to find one in favor of this bill, for the simple reason that in our experience and we believe it that any such legislation as this will increase our cost of production. We have gone from 21,000,000 down to 8,000,000, or down to 6,000,000, in Missouri and Kansas, annual production. Probably 85 percent of that has gone to competitive fuels. We gentlemen who have spent all our lives in the business do not want to lose the 6,000,000