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STATEMENT OF DAVID KAPLAN, WASHINGTON, D. C., REPRESENT
ING INTERNATIONAL MACHINISTS' ASSOCIATION
Mr. KAPLAN. Mr. Chairman, Mr. Gauthier is the spokesman for the International Association of Machinists, and I have nothing further to add to his statement.
Mr. Hill. The next witness is Mr. Louis G. Caldwell. Will you state your full name, your address, and the capacity in which you appear? STATEMENT OF LOUIS G. CALDWELL, WASHINGTON, D. C., REP.
RESENTING NORTHERN ILLINOIS COAL CORPORATION Mr. CALDWELL. Mr. Chairman, my name is Louis G. Caldwell. I appear for the Northern Illinois Coal Corporation, with mines principally at Wilmington, Ill., a point about 50 miles from Chicago. Those mines have a production of approximately 1,000,000 tons. They are part of what are sometimes generally described as the northern Illinois coal fields, with a total annual production of about 2,100,000 tons out of a total of about 40,000,000 tons in Illinois.
The situation I want to present to you principally has to do with the pecuilar situation arising out of proximity to the consuming centers. There is one thing which I think is typical to a greater or less extent of a large part of the United States, but the facts in this this case permit it to be brought out, I think, in very understandable form.
The client I represent is not opposing the labor provisions of this bill. I may say we think the whole bill is unconstitutional, but we would not be here except for the price-fixing provisions, and I shall address myself entirely to those.
I would like to file a brief I have prepared.
(The brief referred to appears at the close of Mr. Caldwell's statement.)
Mr. CALDWELL. Mr. Chairman, the situation can be best described in the terms of the map that you now have before you. This is a map showing the State of Illinois and the surrounding territory, and on the yellow sheet there are shown the freight rate groups in the State.
The mines of my client are at Wilmington, 50 miles from Chicago, and the freight rate there is $1.25. The furthest point in Illinois carries a freight rate of $2.10, or 85 cents more.
If we wanted to carry the matter further we might mention western Pennsylvania, for purposes of comparison, with a freight rate of $3.24 to Chicago.
The feature that I want to point out, in connection with this bill, is that it is attempting to counteract the difference in freight rates by imposing a higher price on the 'mines closer to the consuming centers. In other words, the price at our mines will counteract whatever advantage there is in proximity to the consuming centers, or the price at which the more distant mines can sell on the same market.
Ninety percent of our coal is sold in Chicago, and, if necessary, all of it could be. It is almost entirely an intrastate proposition.
To make clear what I have in mind, I would like to refer to subsection (b) on page 14, as the principal example of what this bill does.
That section provides: “The district boards shall, under rules and regulations established by the Commission, coordinate in common consuming market areas upon a fair competitive basis the minimum prices and the rules and regulations established by them, respectively, under subsection (a) hereof.
Such coordination, among other factors, but without limitation, shall take into account the various kinds, qualities, and sizes of coal, and transportation charges upon coal.
This is not permissive, it is a direction to these boards, in coordinating prices, to balance transportation charges of one region against another, and to charge the consumer in Chicago more than these mines in Pennsylvania or somewhere else can sell for in the same market.
Mr. Hill. We have had arguments made by those who are further away from the consuming centers, to the effect that with the minimum price they might be at a disadvantage, because in order to compete with those nearer to the competing centers they would naturally have to sell coal at a lower price at the mine.
Mr. CALDWELL. I do not see how you can escape this language. It says that the district boards shall do so and so.
Mr. Hill. The thing that struck me as peculiar was that those who are far away are using the argument that it would be a disadvantage, and those that are near the consuming centers say they would be deprived of the advantage of nearness. Each side is against the bill, but from entirely different angles. I merely call to your attention.
Mr. CALDWELL. I have not heard all the testimony, but my impression was that those who were in opposition were worrying about the labor costs.
However, that mey be, here is a direction to the boards to take transportation charges into account, and keep in mind that their job in coordinating these prices is to see that the total net return per ton in any district is not less than the total average cost.
Taking the figures we have heard here, that the average cost for minimum price area number 1 is $1.85, that is the price below which they cannot go in fixing the return for either Illinois or Pennsylvania, so one or the other must come up, depending upon what consuming market area you have in mind.
If you have in mind Chicago, it means that there must be added to the Illinois price enough to counteract at least some of the transportation cost.
We have already had a showing of what the difference in cost is, regardless of transportation. I think it was shown yesterday that there was some 40 cents difference. The Illinois cost is $1.55, and the western Pennsylvania cost is $1.94.
Now, that transportation cost must be added to the consumer's price, and you should remember that these boards cannot go below the minimum. The same thing is true of the districts, although the language is a little more vague.
Returning to pages 10 and 11, at the bottom of page 10, you will notice that there is this provision, that each district board shall "establish minimum prices free on board transportation facilities at
the mines for kinds, qualities, and sizes of coal produced in said district, with full authority, in establishing such minimum prices, to make such classification of coals and price variations as to mines and consuming market areas as it may deem necessary and proper."
To start with the classification of coal, if you are going to have a price, you will have to have classification, undoubtedly. That, in itself, is a dangerous, broad power. But the sentence gives the Board authority to make price variation as to mines and consuming market areas.
That means in Illinois you will have there a variation not based on the average cost, but on something independent of it. It will be based on some standard not given in the act, according to mines and consuming market areas.
You should keep in mind that these boards have pretty broad legislative power. They start out by ascertaining the average cost in the various districts, and then after the commission has figured out the average cost for the whole price area the boards put into effect the minimum price. But when it comes to fixing the minimum price there is no standard in the act. They can make any variation they choose, so long as the total net return per ton in the district meets the test, and the total is the total average cost. With this point in mind, I will not attempt to cover minor illustrations of the same thing. We have several amendments to suggest, but I will deal only with
We ask to strike out the provision for coordination of prices. Even that will not get us back to where we were.
Under the N. R. A. Illinois was not treated as one district. Under N. R. A. they had several groups of producing fields, each of which originated its own price. This bill sets up Illinois as one field, with its price to be coordinated with that of other fields, which is practically the entire United States.
We ask that the coordination of prices be eliminated. Then we ask that when the boards fix the price for the district that they be not allowed to take into account transportation costs. We ask that no price be effective as to any producing field unless it shall be with the approval of a representative of the producing field on the board. We do not want our price fixed by a board composed of producers from the southern half of the State.
Out of 127 mines in Ilinois, that is, mines of companies that are shipping companies, nine of them control over half the tonnage. In other words, the small producer has not a chance in Illinois in connection with any question at issue between the large and small fields, and the northern fields have not any chance to say anything about transportation rates.
The other amendments we suggest are so nearly along the same line that I need not refer to them in detail.
We do also ask that the boards be instructed to take into account the necessity for meeting the competition of oil and gas.
There is one other thing I would like to refer to in closing. The Supreme Court has said in the Schechter case that you cannot delegate legislative power to the sort of tribunal you set up in the district boards. The members of these boards are not Government officials, and yet they have broad legislative power from the beginning to the end, and no one has the right to be heard before them. These boards have legislative power.
Mr. Hill. The theory of the bill is that it is based on voluntary agreements. Of course, there are certain provisions that may involve a little element of compulsion as to entering into an agreement. But if it is based on a voluntary agreement then you would not say that it was a matter of compulsion.
Mr. CALDWELL. If you have a voluntary agreement, it is a different thing. But let me read you a short quotation from the decision in the Schechter case, which has to do exactly with this situation.
The court said:
But would it be seriously contended that Congress could delegate its legislative authority to trade or industrial associations or groups so as to empower them to enact the laws they deem to be wise and beneficent for the rehabilitation and expansion of their trade or industries?
Could trade or industrial associations or groups be constituted legislative bodies for that purpose because such associations or groups are familiar with the prob lems of their enterprises?
And could an effort of that sort be made valid by such a preface of generalities as to permissible aims as we find in section 1 of title I? The answer is obvious. Such a delegation of legislative power is unknown to our law and is utterly inconsistent with the constitutional prerogatives and duties of Congress.
Mr. Hill. I appreciate that language in reference to the power sought to be delegated under the N.I.R. A. But that is a little different from the theory of this legislation.
Mr. TREADWAY. Mr. Caldwell, Mr. Hill, if I understood him correctly, in an exchange of remarks with you, referred to a "slight” compulsion, so far as the theory of this bíll is concerned.
What would your view be as to whether the bill contains a "slight” compulsion provision?
Mr. Áill. I will amend my remarks by removing the expression as to the degree of compulsion, and say some element of compulsion.
Mr. TREADWAY. Of course, even the proponents indicate that it is compulsion.
Mr. CaldwELL. May I say this, that it seems to me this bill proposes a sort of license system. It places the whole bituminous coal industry under a license system. By filing your application with the Commission, or your acceptance, you get your right to do business. How one can distinguish that from a license system I do not know.
Mr. TREADWAY. What is your view along that line, as to putting into effect the prohibition against the use of the mails if you have not joined this code or gotten this license?
Mr. CALDWELL. I think this is all unconstitutional; it seems to me that it is compulsory. I do not know wbat the rest of it means. It says you cannot use other means of communication, so I suppose that means the telephone, the telegraph, or the radio. How you will stop that, I do not know.
Mr. Treadway. I would like to ask you another question. During the presentation of this matter we have had witnesses testifying that if this bill were put into effect it would close the mines in southern Illinois. Where would that be? What class of these fields would that represent on your map?
Mr. CALDWELL. The witnesses you refer to, as I understand it, had reference to the fields closest to St. Louis, and I am not familiar enough with that territory to be positive.
Mr. TREADWAY. There is one field on your map that is marked central Illinois.
Mr. CALDWELL. I could not state whether he was referring to southern Illinois, or to some other district.
Mr. TREADWAY. I notice that you indicate that your freight rate into Chicago is $1.25.
Mr. CALDWELL. That is right.
Mr. TREADWAY. What is the output of the mines you are representing?
Mr. CALDWELL. The mines in Wilmington produce a million tons a year. We have other mines at Atkinson with an output of 500,000 tons a year.
Mr. TREADWAY. What percentage of your production would supply the needs of Chicago, or in that territory?
Mr. CALDWELL. We are only a small company. I cannot give you the total consumption at Chicago. We are only a comparatively small factor in the consumption in Chicago.
Mr. TREADWAY. So that this all being intrastate, and you not being able to supply all the needs of Chicago, you feel that you ought not to be subjected to the provisions that appear in this bill?
Mr. CALDWELL. I say that we ought not to have our price raised 85 cents above what we have to have for a reasonable return, so that other mines more distant can sell in Chicago, so that the consumers in Chicago have to pay that much more.
May I also say that we have a grade of coal inferior in quality to much of that in southern Illinois.
Mr. TREADWAY. How is that inferiority recognized in the price structure in Chicago?
Mr. CaldwELL. I cannot give it to you in cents. It is always a matter of price.
Mr. TREADWAY. But the large consumers, as a rule, buy on the B. t. u. principle, do they not?
Mr. CALDWELL. I believe in a general way they do.
Mr. TREADWAY. So there has to be a differential in the price in order that the inferior mines may get into the market at all?
Mr. CALDWELL. That is correct.
Mr. TREADWAY. This scheme would raise your prices about 85 cents?
Mr. CALDWELL. No one can tell what the boards will do. I think it would be more likely gradual; they will go to that figure gradually. They are directed to take the transportation cost into account in fixing the price.
Mr. TREADWAY. How is that feature handled now?
Mr. CALDWELL. It is handled in the open market by the law of supply and demand at present.
Mr. TREADWAY. On the basis of your output, which you say is a million tons
Mr. CALDWELL. Yes; a million tons.
Mr. TREADWAY. Say that amount was 75 cents; that would raise the price to the consumer in Chicago by the amount of $750,000. That would be the payment to one small mine above what you feel you rightly should receive, in order to bring in other coal producers, and put you on a parity with them.