projects, an obligation rests upon the public to rehabilitate the workers displaced.

It has further been suggested that such a tax be used to purchase reserve coal lands accessible to existing railroads and available for immediate development, these lands to be held as a national coal reserve and later leased as needed for payment of royalty to the United States. This plan accords with the Mineral Leasing Act of 1920, by which coal deposits on the western public domain no longer pass with the surface title but are leased under royalty. The plan provides a market for coal lands, thereby relieving the pressure on land owners to open more mines in order to meet taxes and interest which, it is well known, has always been one of the most powerful causes forcing overdevelopment. To make the plan workable it would also be necessary for operating companies remaining in business to agree not to expand their own capacity beyond limits approved by the central authority. Possibly this could be done by contract or by code agreement. If such agreement to control the expansion of capacity of operating companies is provided, the plan for a national coal reserve deserves most careful consideration. In this form it resembles the national forest reserves.

The committee, therefore, would commend the importance of capacity control alike to the industry, the mine workers, and the Government. We would urge the industry to remember that some limitations on the individual are necessary in any form of joint action. We would urge upon the public the great importance of the ends in view and feel that a friendly bearing should be accorded to any serious attempt by this industry to stabilize production and capacity on a national scale. Above all, we would counsel against a defeatist attitude. We cannot believe but that if the bituminous coal industry really desires to achieve economic stability there will be found both economic devices and constitutional powers sufficient for the purpose.

It was in view of that situation of the industry generally that these trade representatives at White Sulphur Springs acknowledged that the bituminous coal industry was one that deserved special treatment; that its problems were not temporary or the outgrowth of the depression or of a national industrial emergency, but had continued for years. It was in view of the report of the Consumers' Advisory Board, and their protest against price fixing and the monopolistic practices of production control, and their warm advocacy of the enforcement of the antitrust laws, and the opportunity to the consumer to buy, as I said, at the bargain counter; it was in view of the report of the National Resources Board, which I take it indicated at least to some extent the attitude of this administration, that this bill has been drawn and is receiving the support of the miners. Now, the bill contains a congressional declaration that, for the reasons given in the declaration, the production and distribution of bituminous coal are affected with a national public interest and should be regulated in the public interest; and, further, that the production and distribution of bituminous coal directly bear upon and affect its interstate commerce and national public service; and that the elimination of unfair trade practices which have tended to destroy the bituminous coal industry and its interstate commerce is dependent upon the elimination of unfair practices in relation to hours of labor, wages, and conditions of employment.

Section 2 provides for a national bituminous-coal commission. They are the representatives of the Government. The bill calls for five members to be appointed by the President, but it does provide that of those five, one shall be a representative of the operators and one shall be a representative of the employees. It is our feeling with respect to that provision that any commission under the provisions of the act would consider the questions of the transportation

and the sale of coal as problems of the industry, more or less theoretically, and their approach would be more or less in an academic spirit; that three representatives of the public cannot be swayed, but they would be well advised by the other two members, one representing the operators and one representing the miners. Their function would be largely that of advisers on the specific questions that may come before the commission.

There is a tax levied on bituminous coal of 25 percent of its selling price, with a drawback of 90 percent of that amount, leaving a final tax of about one-half cent, the drawback being given to producers who accept the code set out in section 4. The tax is resorted to for the reason that it is a familiar method of enforcing regulations. It is one method adopted by the N. R. A. in regulating quota production, and it has its coercive effect. It will result, as we believe most certainly, in the acceptance of and compliance with the code in section 4, and the sanction of the law expressed by injunctive processes and indictments.

Section 4 contains the code. The central idea of this legislative code was that it should be set out by Congress; that it should not be a matter to be delegated to an administrative board or any official of the Government, but should contain in congressional language in legislative form all of the standards, formulas, and so forth, that are required to secure these regulations of the industry.

It is divided into three parts-the first part dealing with production, the second part dealing with marketing of coal, and the third part dealing with labor relations.

Part 1, dealing with production, creates a national board of producers, provides for 24 districts, the attempt being made to follow, so far as possible, the districts under which the coal operators have functioned under the bituminous-coal code. The national board is to allocate the tonnage to the districts on the formulas set out in the act. That formula is based on two averages: One, showing the production history of the district by taking the average annual tonnage of the district from 1918 down to 1934, inclusive, and the other the current production in 1934. I think we will have before the committee today a chart or statement of the United States Bureau of Mines showing exactly how that average, applied to the districts set out in the bill, will disturb the current production. I think, from what I have seen of it, that it will show there is very little disturbance at all.

Of course, the miners could not very well propose or endorse any measure that would dislocate employment, and if tonnage is dislocated to any extent employment is bound to be dislocated. The reason for the two bases for determining what to allocate to the districts grows out of the desire to restrict the production history of the districts to some extent, because some of the districts feel there have been shifts of tonnage during the last 15 years, due to strikes, due to lower wages paid in one section than in another, due to the fact that there has been a diminishing production cost in parts of the South as compared with parts of the North, by reason of the fact that the South was not unionized. For those reasons the attempt has been made to give some regard to the production history of the districts for the last 16 years.

But, as I say, even on those bases, we think the charts that will be furnished the committee will show there is very little shifting of the tonnage as it flowed in 1934. And, in those instances, the Commission is reserved the right to protect any district that feels it has been dealt with unfairly through the rigid formula in the bill for allocating tonnage to West Virginia, or western Pennsylvania, or wherever it may be, by giving the district the right to come before the Commission and show that the allocation is disturbing the marketing service, or that the contracting for coal or the market requirements for the coal exceeds the quota under the formula of the bill, and to ask that the Commission take the necessary action to meet the situation that prevails.

It is unquestionably true that there will have to be an allocation of the mines in each district. It would be utterly futile to allocate tonnage to a district without allocating the mines. If that were not done, it would unquestionably result in confusion and trouble. The allocation of the mines in each district is based on the average annual production since 1929, a 5-year period.

If any producer is aggrieved by the quota allotted to him under this formula, he can go to the Commission and show for any reason that his marketing service or the output of his mine does not accord with the quota allotted him, and have the correction made. The bill provides:

If any producer is aggrieved by the decision of the board as to the periodic quota allotted a mine, he may submit his grievance to the Commission which shall give notice to the district board and grant a hearing thereon. Upon finding that the current market requirements for any coal or grades of coal produced at such mine and/or the current market service of the product of such mine, reasonably warrants an increase in the quota therefor in the public interest, the Commission may so order.

Now, it was provided in the bill that no code member may transfer his quota or any part thereof from one mine to another, except upon express approval by the Commission after a hearing with due notice to the board and representatives of the employees. It has been pointed out and suggested by a good many operators that that would work a hardship where a producer may want to close down one mine, because the purchasers were dissatisfied with that coal and wanted coal produced from some other vein, or for some other reason, or in the event of a break-down, and it has been suggested, and we have no objection to it, that the clause be changed so as to read: No code member may sell his quota to any other code member.

That allocation is based on the principle developed by the German and English law.

Senator NEELY. Where would that amendment appear?

Mr. WARRUM. That is at page 9, paragraph (h). The curse of the industry lies in the fact that they have perfect freedom to sell their quotas or to deal in quotas instead of in coal. There is a big traffic in quotas, and labor is left unemployed. Not only that, but it serves to keep alive mines that really ought to be out of business. Senator MOORE. Do you provide against that in this bill?

Mr. WARRUM. The provision in the act as it stands would prevent any transfer of a quota from one mine to another. It has been suggested that it ought to be limited to the transfer of a quota from one

coal producer to another, but that if one producer has two or three mines in a district he should be allowed to make the transfer of his quota from one mine to another; that if he has a thousand tons in each mine, or 3,000 altogether, that he ought to be allowed without having to go to the commission, on account of the fact that he has not worked it for years, on account of a break-down of machinery or shift of demand on the part of some consumers, he ought to be allowed to transfer part of his operations from one mine to another. As I say, we have no great objection to that. We do object to one producer selling out to another.

Senator MOORE. You object to one producer selling his entire quota to another?

Mr. WARRUM. Yes.

Senator MOORE. Suppose for some reason or other he cannot operate.

Mr. WARRUM. Then why should he operate? Why should he sell it, if he cannot operate?

Senator MOORE. He may have an investment in the mine that would otherwise be lost.

Mr, WARRUM. Well, would it be true that without the act he would not be able to realize on his investment? Should the legislation give him an opportunity to realize on an investment of that kind when he could not have done it without the act? That enables him to have a commercial asset in his right to transfer his operations.

Senator MOORE. I can see that it might disarrange the whole program by his transferring his quota.

Mr. WARRUM. It is just a question of whether or not one producer should be allowed, instead of selling coal, to acquire quotas under the law and then traffic in his quotas. If he does, he is going to keep his mine open all the time. I do not mean to keep it open for operation, but for the purpose of selling his quota.

Senator MOORE. I understand your point.

Mr. WARRUM. After all is said and done there has to be, I suppose, a careful scrutiny given to every feature that will operate against production control as a measure of conservation of coal. There can be nothing, in my judgment, that would so operate against production control, against the elimination of mines that ought to be out of the picture, against the cost of high coal mining and the gradual weeding out of uneconomical production-nothing would operate more against that than the right of owners having such mines to traffic in and sell them.

There is a provision in the bill that any code member desiring to open a new or an abandoned mine, for which no quota has been allotted, or any person desiring to become a member of the code and open a mine, and to recieve a quota for such new operation shall file application therefor with the commission; that the request for a quota assignment to such new operation shall be referred to the national and district boards which shall within 30 days report to the commission all the facts thereon, and the commission shall bear the parties in interest; and, if it finds that increased demand for such coal or a market shortage therein requires such quota assignment in the public interest, it may so order.

Now, of course, that is a measure of production control. That contemplates certificates of convenience and necessity in opening

new mines. It is based, of course, upon the theory that the Congress can regulate that as a public utility and that the industry is impressed with a national public interest. The curse of the mining industry lies very largely in the fact that there is no method of scrapping it. An ordinary manufacturing plant is scrapped, if it becomes unprofitable. It passes through the hands of receivers, is sold and goes onto the junk pile. But you take a coal mine which may have been abandoned, and it is surrounded by a community that has lived on the pay roll from the mine, and if the coal trade gets prosperous, if prices begin to look as though operations might prove successful, every one of those mines will be opened. They will just organize new companies subscribed to by the barbers and the doctors and the grocers and the lawyers and the preachers and the editors and open the mine. The labor is there. That is the one source they have for making some money. The result is, you never get rid of a coal mine.

Senator DAVIS. Does this board or commission have any jurisdiction over freight rates?

Mr. WARRUM. No. I do not know how you could do that. Senator Davis. Does Congress, under our general law, give power to these commissions to coordinate those preferential rates that are given to certain districts over other districts?

Mr. WARRUM. I do no suppose that Congress has any limits. If it could repose that power in the Interstate Commerce Commission, it could probably do so in any other commission, but it did not occur to me that Congress would divorce from the Interstate Commerce Commission its control of rates. It is true that the Commission may study rates and may recommend rates, but I never heard it suggested that there should be taken away from the Interstate Commerce Commission the power to fix rates for coal. I think the coal traffic is about 30 percent of all the freight traffic. You take that away and they would have to get very close together to establish the freight-rate structure, would they not? I do not think they could do that, but I may be mistaken. Nothing in this act gives them that power.

Senator DAVIS. They could recommend a change in the rate structure, could they not?

Mr. WARRUM. Certainly.

Senator MOORE. Which would bring a new element into the discussion of the bill?

Mr. WARRUM. Yes.

Senator NEELY. For example, if the board found that the coal region of a certain State had during the last 15 or 20 years been given increases of 300 or 400 percent in freight-rate handicaps over the coal region in an adjoining State, it could recommend an adjustment designed to do justice to the latter?

Mr. WARRUM. Not only that, but I imagine the commission, if they represented the industry they are supposed to represent, would perhaps take a position before the Interstate Commerce Commission that all coal rates are too high. That is the attitude that the industry has taken. That is what the miners think about it. They are not only charging too much to transport coal, but we feel the railroads are cutting their own throats and sacrificing themselves.