this experience of the rail carriers. It seems inevitable that the plan devised by this bill for giving the bituminous-coal industry monopolistic powers under the guise of regulation will prove to be a bitter disappointment unless the regulatory powers are administered in the public interest and even then unless corresponding regulations are applied to their competitive substitutes.

Senator MINTON. Do you interpret this bill as giving a monopoly to the bituminous-coal industry?

Mr. DUNCAN. Or monopolistic powers.

Senator MINTON. Do you mean a monopoly or monopolistic powers? Mr. DUNCAN. I don't believe you can give monopolistic powers to the coal industry.

Senator MINTON. I understood you to be arguing awhile that the coal industry, if it were put under this bill, would certainly be met with the competition of oil.

Mr. DUNCAN. That is correct.

Senator MINTON. That would not be a monopoly.

Mr. DUNCAN. That is right. If I may explain my position, the purpose of the bill, as I understand it, in declaring this a public utility, is so as to regulate it. I find from a study of the bill that the power of regulating it is to be within the industry itself. They can determine the amount of output; they can determine the maximum and the minimum prices. Those would be called monopolistic powers. It is my opinion that if, when and as they are exercised they will discover that they cannot be made effective, because of these substitutes that will come in. We have had the same experience. We have been called natural monopolies, but we discovered that there was, always has been, and is now, to a greater extent than ever before, competition, competitive substitutes. So that is what I refer to as monopolistic powers.

We are opposed to this bill, therefore, on the following grounds: First. It extends the power of regulation, by an industry-controlled organization, to railroad captive mines, which are in the nature of plant facilities, and unnecessarily and unjustifiably and contrary to the best interests of an essential public utility so as to interfere with the most efficient and economical operation of such mines.

Second. It would increase railroad operating costs. No one will dispute that this bill aims to increase the cost of coal and thereby increase the cost of railroad operation. A partisan regulatory body is provided for which will undertake to dictate to rail carriers at what price they may secure their coal.

Third. This regulatory body would also have the power, and is directed to exercise it, to dictate to a very large extent at which mines the rail carriers may secure their coal. This would take from the railroad management its right to purchase this commodity without artificial restrictions, a freedom which the carriers have with respect to all other commodities, and a freedom which is essential to their economical and efficient operation. This cannot be in the public interest.

Fourth. Substitutes for bituminous coal have for years been crowding it in all markets. The provisions of this bill would give them new impetus. As carriers of coal the railroads would further suffer a decline in tonnage and revenues.

Fifth. The bill provides that the consumers of coal shall carry the burden of expense, through taxation, in the rehabilitation of the

bituminous industry, validating investments whether wise or unwise, caring for displaced and unemployed miners, and otherwise transferring managerial and labor leaders' responsibility from the industry itself.

May I say that the railroads have a tremendous problem themselves of unemployment. In 1930 the railroad employment fell to the extent of 250,000 men; in 1931 it dropped by an additional 222,000 men; in 1932 it again shrank by 140,000 men. In those 3 years that is a total of 610,000 men. The rail carriers face a deficit this year in their fixed charges of about $225,000,000. Over 40,000 miles of lines are now in receiverships. They have an increased burden of labor costs themselves. They do not believe it can be in the public interest further to burden them, as this bill proposes.

In its entire conception the bill is inconsistent with the responsibilities of a public utility and the regulation of such a public-service industry in the public interest. Under the cloak of an industry affected with public interest, it seeks to escape from antitrust laws but to retain and consolidate monopolistic powers. This purpose cannot surely be in the public interest.

Mr. Chairman, that is all I have to say.

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STATEMENT OF JONAS WAFFLE, MANAGING DIRECTOR, COAL TRADE ASSOCIATION OF INDIANA

Mr. WAFFLE. Mr. Chairman, my name is Jonas Waffle. My address is 400 Opera House Block, Terra Haute, Ind. I appear here in behalf of the producers of Indiana coal, acting through the Coal Trade Association of Indiana. The association includes in its membership operators whose mines produce about 95 percent of the production of coal in the State of Indiana.

The subscribers to this statement are convinced that the interests of the consumer, the general public, the mine workers, the residents of dependent mining communities, and the producers of coal will be better served by an extension of the National Industrial Recovery Act, and the Bituminous Coal Code, for a period of 2 years, than they will be by the enactment of Senate bill 1417.

Since the bill was introduced, a large majority of the bituminouscoal industry has approved the extension of the act and the code, for a period of 2 years beyond June 16, 1935. This action was taken at a meeting of the National Coal Association on January 31, 1935, at which time the Association approved an amendment to the N. I. R. A., copy of which is attached to this statement and identified as Appendix A."

The bituminous-coal industry has been materially benefited by the code, and we believe a majority of the producers of bituminous coal prefer to continue under the code for at least another 2 years. During that period, the industry will have acquired a sufficiently broad experience with self-regulation to determine whether it should be made permanent, or whether it has been demonstrated that the industry is incapable of self-regulation and should, therefore, be controlled by specific legislation.

Senator MINTON. Mr. Waffle, may I inquire if you have had any knowledge of extensive violations of the code in the industry in Indiana?

Mr. WAFFLE. There have been violations, but I would not say they have been extensive, except perhaps in connection with the socalled "local mines" employing less than 10 men per day and producing anywhere from 1 to 25 or 50 tons per day. We have a very large number of those mines in the State. Our last survey developed about 700, and perhaps there may today be a thousand of them.

The violations come not so much from the operators of the mines as they do from the chap that comes out with a truck, purchases his coal, takes it to the nearby market, perhaps Indianapolis, and sells it for whatever he can secure for it, in competition with the retail dealer, usually from 50 to 75 cents or a dollar less than the retail dealer can sell it for.

Senator MINTON. Such operations take place within the 5 percent not represented by your association?

Mr. WAFFLE. I think so. We have had an amazing amount of success in operating under the code, notwithstanding the fact that there has been very little enforcement, so far as the N. R. A. organization here in Washington is concerned. I might say it is remarkable, the results we have had in the operation under the code up to date.

Senator MINTON. Then, within your own group, you would say there have been no violations of the code?

Mr. WAFFLE. I would not say there had been no violations of the code. I do not believe that would be a correct statement. We have had some, and those, at my request, are now under investigation by the Federal Trade Commission. There are two or three, or a very few operators, who confine their operations entirely within State lines. They have been advised by their counsel that by so doing they can escape any penalty under the National Industrial Recovery Act.

During the extended period, the interests of the mine workers, in respect to maximum hours of labor, minimum rates of pay, and conditions of employment, will be fully protected under the provisions of articles III, IV, and V of the code.

While it may be contended by some proponents of the bill that the code is breaking down, the fact remains that certain steps have been taken, and other steps have been proposed, that will effectively remedy the conditions which it is alleged are adversely affecting performance under the code. These measures are embodied in amendment no. 6 to the code, and in an amendment to the N. I. R. A. proposed by the National Coal Association.

The belief of some of the Guffey bill proponents that the code is breaking down has its origin in the price correlation controversies which have prevailed for several months between certain of the eastern and southern groups. These groups have tried several plans in an effort to compose their differences. Their last effort was the so-called "Board of Review" of presidential members. This agency failed to function because its rules of procedure required a unanimous vote to make its decisions effective.

Finally, along in the early part of January, the legislative committee of the National Coal Association drafted an amendment to the code and submitted the amendment to the National Bituminous Coal Industrial Board, then in session, for its consideration. The latter board unanimously recommended the amendment to the National Industrial Recovery Board, and the Recovery Board approved it to

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become effective January 25, 1935, and it has since been published as Amendment No. 6 to the code.

This amendment makes it mandatory for the industry to establish and maintain a national coal board of arbitration, whose majority decisions are final in all inter subdivisional controversies that come before it for ajudication. The personnel of the arbitration board has been selected, its organization and procedure has been established, and the board is diligently engaged in hearing and disposing of intersubdivisional controversies. The creation of this board, it is felt, has provided an effective agency for promptly disposing of the type of disputes that seemingly were having a detrimental effect on code operation.

Amendment No. 6 also established certain specifications for determining fair market prices within, and between, competing subdivisions. This amendment also provides for an arbitration board for each subdivision, to hear and decide complaints of any individual producer who may have a grievance in respect to the classification of his coal, or the prices established thereon. It is felt that the creation of these boards is the most constructive step heretofore taken to strengthen the code.

The amendment to the statute proposed by the National Coal Association, we feel, will effectively remove any anxiety about code compliance, or, if it is not sufficiently broad to accomplish that purpose, an amendment to the statute can be devised that will provide effective enforcement. We, therefore, believe that with the publication of Amendment No. 6 to the code, and with the adoption of an amendment to the statute, there is no reason why the code cannot be made to function effectively.

The President, at a recent press conference, in reply to a question concerning the bill, said in part:

The present code seems to be fulfilling requirements and giving people plenty of employment throughout the year. I see no reason at the present time to change if the present method will continue to work; if it does not, we will try something else.

Since making that statement, the President has sent a special message to Congress, uring the extension of the N. I. R. A. For a further period of 2 years, and at this point I desire to state that the producers of Indiana coal whole-heartedly endorse the action of the President.

Several provisions of the bill will operate to materially increase the cost of bituminous coal to all consumers, namely, domestic, industrial, railroads, and others. These increases will reuslt from the 10 cents. per ton tax provided for in section 9, of title II; from the 1 percent of the 25-percent tax levied on the sale price of coal; from the cost to the industry of administering certain provisions of the code; and from the price increases that are certain to result from the operation of both the price and production control provisions of the bill.

Some of the provisions of the bill will also result in materially increasing taxes. For example, the purchase by the Government of coal reserves and marginal mines will withdraw millions of dollars of property from local taxation, and the taxes formerly paid on this property will be shifted to the remaining taxable property. This is a matter of serious concern to the taxpayers in the coal-bearing States, and particularly to the taxing units in the mining communities, most

of which are unable to raise sufficient revenue to maintain their schools.

The increased cost of fuel to the Federal, State, county, municipal, and township governments, for heating public buildings, and for relief distribution, will, of course, result in an increase in Federal, State, and local taxes.

In addition to these items, the expense of administering the statute, the cost of which no one can estimate today, will add materially to the national tax burden.

The general public will also be affected by possible higher railroad and public-utility charges, by reason of the substantial increases in the cost of fuel to those industries which will follow the enactment of this bill. Likewise, any substantial decrease in the coal-transportation revenues of the carriers, by reason of the substitution of natural gas and fuel oil, which are certain to result from any undue increase in the price of coal, will adversely affect the general public in two respects: First, by a reduction of employment of railroad workers; and second, by an increase in the rates on all other commodities sufficient to offset the loss of revenue from the transportation or coal.

Without going into a detailed discussion of the price control provisions of the bill, it will suffice to say that, in our opinion, this plan of price control will not work in practical application, for various

reasons.

Coal that is sold in the same general markets is produced at several hundreds of individual mines, scattered over an immense geographical area. There is a wide difference between the grades and qualities of these coals. There is a wide difference in the freight rates on which they are transported. There is a wide difference in their use value. There is a wide difference in the adaptability of these coals in various types of equipment in which they are utilized. There is a wide difference in the chemical content of the coals, the fusion temperature of the ash, the heat value, and numerous other elements.

Under all of the circumstances and conditions cited, it is absolutely impossible to market coal except under a wide range of flexibility in price fixing, similar to that which prevails under the price control provisions of the Bituminous Coal Code.

Furthermore, we do not believe it is humanly possible for a commission of five men to even attempt to fix the prices of some 40 or 50 different sizes of coal, produced in thousands of mines, in 27 States of the Union, sold in hnudreds of thousands of communities, to thousands of industrial consumers and millions of domestic consumers, involving transportation on a myriad of freight rates that enter into the final delivered cost of the commodity.

The inevitable result of the proposed method of price fixing will be chaos, confusion, constant hearings before the National Bituminous Coal Commission, and endless litigation in the Federal courts.

To force production control by allocation and allotment upon the bituminous-coal industry, has all of the aspects of embarking upon an uncharted sea. Merely because this type of control has been in vogue in Great Britain and Germany, where conditions are entirely different from those in this country, does not furnish a valid reason for setting up in this land a plan of which little is known by the American producers of coal. There is no evidence that the plan has worked with success over there; and, even if it has, they may have peculiar