Senator MINTON. What do you think about the selection of these members being based upon the proportion of the annual tonnage output for the preceding calendar year?

Mr. HOSFORD. On this subject of representation, Senator, you can find as many different views of the proper method of selection as you find interests in the industry. I believe that as an additional safeguard there might well be incorporated a provision that the personnel of the membership would be truly representative of the various groups and interests within the district.

Senator MINTON. Who is going to construe that?

Mr. HOSFORD. The only power you have set up to make any construction would be your National Coal Commission.

Senator MINTON. Would they, in your opinion, have the right to set aside some selection made by the local board if it was not, in their opinion, truly representative?

Mr. HOSFORD. The longer I study this problem of regulation of the coal industry the more I feel we must vest rather broad powers in the Bituminous Coal Commission; and it would not be inappropriate under some provision to permit a review by that Commission of the personnel as well as the work of the district boards.

At this point, I believe there is one subject that I do not believe has been covered anywhere in title I of the bill. You gentlemen, as a matter of practical experience, know that the administration of this code by the different boards will entail the expenditure of a considerable sum of money. It would be necessary to have offices, to employ various types of employees, engineers, and others, and undoubtedly on many occasions the district boards will be required to present their views before the Commission at Washington.

There is no provision made anywhere, so far as I have been able to find, under which the expenditures of the district boards in administering the act are provided for. I believe that your committee should carefully consider the inclusion of a provision for the expense of administering the act by the district boards in each district and the money should be collected from the producers subject to that board by assessments made from time to time on a tonnage basis. In that way it will not be left to a matter of voluntary contribution. All those who are receiving the benefit of the act and of the work of the district boards will be required to contribute on a proportionate basis. I think that is the only fair way in which that expense can be borne.

I approach with more or less reluctance the provisions as to marketing and allocation. I think that the members of the committee from the testimony previously submitted have come to understand the vast diversity of opinion in our industry, and I believe that if you were to call 5,000 operators to the stand and ask their individual opinion you would probably have at least 5,001 opinions, because apparently we are, as an industry, even as local groups in an industry, more or less in confusion, in hopeless confusion, as to the best way to work this out in detail.

Taking the subject of allocation, I feel that there are two principles that should be most carefully considered and carried out in the final draft of the provisions as to allocation.

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I have said before that our group endorses the provisions of title I, and, necessarily, that involves an endorsement of the principle of allocation. However, when it comes to the precise method in which that principle is to be applied, then we encounter our difficulties. insofar as the present provisions are concerned for the allotment of standard tonnages to the various districts, particularly since Judge Warrum has presented to your committee his findings as to the effect that this plan would have on possible dislocations of tonnage.

I feel that the rule which is laid down in the bill is as practicable as any plan that can be found. There are many suggestions that I could make, and those suggestions could be objected to just as strenu'ously as I might object to the provisions of the bill.

Senator MINTON. What would you think about leaving it to the Commission itself, without putting any binding formula in the act itself?

Mr. HOSFORD. Senator, this Commission has a tremendous responsibility ahead of it. Frankly, I do not envy the men who make up the personnel of that group. Here is an industry that is in absolute chaos. Here is a principle that has never been tried in this country in our industry.

Senator MINTON. Is not that all the more reason why it should be very elastic and flexible? If you put the wrong formula in this act you would then just strangle the act, would you not?

Mr. HOSFORD. I think there is a further suggestion than what you suggest, Senator. In the first place, I think that no matter what precise plan is adopted by your committee, there should be a definite limitation expressed in the act. It is, frankly, experimental, and I do not believe any living man can foresee just what its effects will be. I think you should provide that the plan would continue in effect for a period of 2 years, during which the Commission should most carefully study its effects, and before the expiration of that period the Commission should be charged with the duty of making recommendations and reports to the Congress as to the basis upon which allocation should be continued, if they deemed it necessary and proper to continue it.

Here is my objection to your suggestion, sir. As I say, it will require considerable time for this Commission to begin to function. It will require a great deal longer time for them to gather all the necessary statistics and data. Would it not be far better to start off with a definite plan, which, apparently, nobody finds so objectionable after all, and which, according to Judge Warrum's study. will result in no great dislocations of present tonnage and permit the Commission to get organized, to begin to function, and then at some later date make provision for changes, if they are necessary? That is the practical objection which I see to leaving that entirely to the Commission.

Senator MOORE. Referring back to previous testimony, did I understand you to say that no provision had been made for administering the code in the way of expense?

Mr. HOSFORD. I did not understand that any provision had been made in the bill to cover cost of administration by the district boards.

Senator MOORE. What about this language on page 10, line 23 of the bill, paragraph (k):

The expense of administering the code by the national and district boards shall be borne by those subject to such boards, each paying his proportionate share, as assessed, computed on a tonnage basis, in accordance with the regulations prescribed by such boards with the approval of the Commission.

Mr. HOSFORD. Then I am in error, Senator.

Senator MOORE. I thought that maybe you had in mind that this did not cover that.

Mr. HOSFORD. No; I am in error, sir.

Now, with regard to the distribution of quotas to the individual mines within districts, there, of course, we get to the place where each producer immediately thinks in terms of what will serve his own interest best, and it is a most difficult thing to find any plan which is not open to some objection,, or one that would meet with general approval.

In the first place, I think one thing should be made clear. We have in our industry certain special use coals, and I think that the power should clearly be conferred to establish, if necessary to meet consuming demands, special allocations covering those particular codes.

Insofar as the method stated in the bill of allotting coal to the individual mines is concerned, again I believe that for the present that method is as good as can be devised. You will find objection from one group or another to any method that is set up.

With one exception, I do not believe that any power should be vested in any district board, or in the National Commission, to award additional quotas to any individual operator. It seems to me that that opens the door for an endless flood of applications to the Commission. It seems to me that the purpose could best be accomplished by providing that when there was an increased demand for any special class or type of coal upon proof of that demand, the district quota might be increased, and where the circumstances required it the quotas generally for that type of coal within the district might be increased; but not to set up an arrangement under which producer A or producer B as an individual producer could go in and receive special consideration. I have not attempted to phrase that, but I do think that is one condition that should be guarded against. Furthermore, if there is an increased award in any special type of coal, such as byproduct coal, that that increase could not be taken away, not be deducted from the general allotment to that district.

This whole thing is more or less the best practical way of putting the principle into effect, and I believe it should be done, not with reference to individual producers, but with reference to districts as a whole and with reference to types of coal as a whole.

I would specifically suggest that on page 10, the first two lines of subsection (j) be revised to read as follows:

Any code member desiring to open a new mine, or to reopen a mine which has not been in operation since 1929, for which no quota has previously been allotted

And so forth. My purpose is to clarify and avoid the use of that word "abandoned." And there can be much dispute as to what constitutes an abandoned mine.

Here it provides that if the mine has not been in operation since 1929, then application must be made under this section for authority before proceeding to reopen the mines.

Page 9, subsection (h) was referred to by Judge Warrum. That subsection relates to transfers. I do not recall his exact language. but I concur that the change should be made and suggest the following:

No quota assigned a man in one district shall be transferred to a man in another district, and no code member shall sell or transfer any quota, or part thereof, to another code member.

I believe the purpose of that is quite obvious.

Referring to section 4, part II, the marketing provisions of the bill, I confess that I find myself in the same dilemma as on allocation, only worse confused, if that is possible.

As I read this section, what I believe will result very promptly after this act goes into effect is that the National Coal Commission will have thrust upon it the enormous task of attempting to establish a price for every grade and class and size of coal in every market in the country; and I do not believe that any commission can be found that can accomplish successfully that task in a practical way.

It seems to me, getting back to the principle I stated previously, that in the end we must vest in this National Coal Commission very broad powers, but, at the same time, not attempting to impose upon that Commission such detailed duties that they will be absolutely swamped.

Your committee has heard a great deal of discussion as to minimum prices and correlation. I am frank to say that I have been associated with the Code Authority of Western Pennsylvania since its inception; and, while I have not been so actively engaged in the work of solving marketing problems; that is, establishment of minimum prices under the code, I have been compelled to listen to many of their disputes and arguments over prices. The word "correlation" has been used a great deal, and I have never yet found any one who could give me a satisfactory definition of correlation.

It seems to me that if we attempt not only to swamp this Commission with a myriad details of duties, but also attempt to impose upon them some principle which is not clearly understood, then we defeat the whole purpose of this section.

I believe, in spite of all that has been said against the code, in spite of all that has been said against the producers in our industry. the code has accomplished one purpose if nothing else; it has brought them to a better understanding, not only of their individual problems. but the problems of their neighbors; and I believe that today more than ever before there is a willingness to work together under some definite authoritative power. I feel that your problem as to the establishment of prices can be best disposed of in a way slightly different from that provided for in the bill.

I fully agree that the prices on the one side must be sufficient to support the proper wage levels and, on the other hand, they must be so restricted and limited that they will not result in an excessive price for coal. I think to attempt at this time to establish prices

on any basis of, returning cost to the operators, or average cost of production, opens up a field of questions that are almost innumerable and impossible of solution, particularly when none of us as yet knows or can foresee the effect of a program of allocation.

I have attempted to outline in detail what our group favors, but I would like to state very briefly the principle upon which we believe prices should be determined and the manner in which that determination should be made.

First, I would certainly vest in the National Commission full power to review all prices and all classifications of codes that might be set up by various district boards.

Second, I would impose upon the various district boards the express duty of establishing minimum fair market prices for all grades and sizes of coal in their respective districts.

Instead of setting up a hard and fast formula, I think that there should be laid down for the guidance of those boards a broad general principle, which I would state in the following language:

Such prices shall be fair and reasonable and not unduly prejudicial or discriminatory as between producers, and shall yield a sufficient return to the producer to maintain the general-wage structure and the wage agreements in each district and to give effect to the principles and policies of this act.

As I previously stated, then vest in the Commission power to disapprove prices that are proposed when they are found to be in violation of those broad principles.

Supplementing that, I feel that provision should be made under which district boards or marketing agencies authorized under the act and conforming to it, should have authority, subject to review and approval by the Commission, to enter into agreements as to prices in competing markets with other district boards or agencies; and that where those agreements were arrived at voluntarily and were approved by the Commission as not being contrary to the principles of the act, that those agreements should be fully binding and effective upon members of the industry in the particular districts joining in the agreement.

That would leave to the individual district much of its autonomy, if you please, of establishing prices; it would offer them the right and the power of sitting down with competing districts, their neighbors, and arriving at a soluton; but all subject to the review of the Commission.

In the first instance, at least, it would remove from the shoulders of the National Coal Commission a task which, in my judgment, is almost an endless and a hopeless one, and would retain for our industry a reasonable degree of self-government.

Certainly, there must be retained, as I have said, the provision as to maximum prices so that there can be no unfair prices as to consumers; but in this way I believe that your problem might well be solved.

There are other provisions of the bill as to which minor suggestions might be made, from the standpoint of practical operation and effect upon industry; but I do not think that I should attempt to consume the time of the committee.

Senator NEELY. We shall be glad to insert in the record any additional statement that you may offer.