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The prices of coal to-day are fairly well known; they do not require any confirmation from me. It does seem to me that there is a public necessity for action; that there should be some restraint on the extortionate prices. It is obvious that regardless of the resumption of mining there will be an alteration of the situation from that of a short production to that of short trausportation, that we have a continuous condition of effective famine in coal. In the face of shortage in supply the coal will go to the highest bidder, and price alone is not from a social point of view a proper basis of distribution. That means the poorer classes must bear the burden of the deprivation. If distribution is to be based solely upon the highest bidder it means suffering for a large portion of our population, and it des not in this situation mean no addition to production.
The usual defense of unlimited price during shortage is that it stimulates production. Our limit of coal at fair prices is a limitation on transportaton, not of mining. The bituminous coal mines to-day could probably produce, if they had all the transportation that they would require, somewhere in the neighborhood of 13,000,000 or 14,000,000 tons of coal a week. It seems scarcely probable that transportation could ever exceed the maximum attained under the most complete organization during the war, when it would not, even in periods of effective direction, average more than 11,000,000 tous a week. With the de'erioration in transportation arising out of the shopien's strike, the decreased motive power in the country, it seems to me impossible to contemplate any such movement as that. It seems to me that we would be lucky if we secure a movement of over 8,000,000 tons per week. The normal neeel of bituminous coal (within the next four or five weeks, as we enter into the winter season) is estimated at about 9,000,000 tons a week, and in addition to those 9,000,000 tons we have various other accumulated demands that must be, at least in part, satisfied.
The movement to the upper lakes is behind now something over 10,000,000 tons. The only hope of saving the situation in the Northwest is to vastly increase the volume of coal in lake shipments. Then that puts an increased and additional load upon the normal. Further than that we are behind some 35,000,000 tons in the production of anthracite coal. The anthracite production is positively limited at so much a week-it is not capable of expansion as is bituminous. This lost tonnage would normally have been in the consumers' bins by this time and cannot now be recovered. It must be made up by substitution of bituminous, which means an additional burden on the bituminous production. Beyond that again, the normal amount of coal required in circulation in the conduct of industry and commerce appears to be somewhere in the neighborhood of 25 000,000 or 30,000,000 tons. That circulating stock of coal has tremendously diminished; it probably does not amount today to 10,000,000 tons, if even that amount. Before industry can function properly and continuously it is necessary to have somewhere near the sum of conl I have stated in circulat'on. Therefore, in addition to the normal demands for bituminous coal, we have these three additions, the additional supply for the Great Lakes, the additional supply that will be required in substitution for anthracite and the additional necessity of building up stocks. Even if the coal situation could be solved quickly it would certainly require the movement of something between 15,000,000 and 14,000,000 tons of bituminous coal a week for the next 15 or 20 weeks.
I should think that in view of the fact that the railways have never been able to bandle that volume of coal even at the best, and with the very much deteriorated mot ve power, they will not be able to prevent a shortage in delivery to ('Onsiunel's. In consequence it does seem to me that there will be an effective shortage for some time which will require a controlled distribution to the most essential of industries in order to maintain those industries and to protect the householder. In such a situation the possession of a coal car establishes :: monopoly to the possessor upon which he can exact undue prices. In the matter of price restraint I would say this on behalf of the coal operators: Last May we milertook a voluntary arrangement with the operators in an endeavor to secure a restraint in the price of coal during the strike. Something like 70 per cent of the producing operators have adhered to those agreements. It is my belief that the great majority of operators of coal mines everywhere are anxious that there should be some effective restraint on price. The larger portion of those men are like other Americans they wish a basis of fair business transactions. They know that they and their industry are prejudiced in public opinion hy runaway prices. I wish to emphasize the public spirited action of these men. They have from fine principle sought to avoid any color of taking advantage of public necessity to earn extortionate profits. The 70 per cent, or whatever the per cent is, of decent men in the industry are brought into disrepute by the action of 30 per cent, and they are blamed for the independent speculator. I feel confident that a large part of them would welcome some proper price restraint. There are, of course, the inherent difficulties in the constitutional questions that makes effective control of price extremely difficult, because even assuming that this legislation can be made effective there still remains a large field of action that will be required of the State authorities. I am advised that it would be impossible to restrain the price of coal produced for domestic consumption within the boundaries of the State by such action as here provided or any other action that I have yet seen proposed. Likewise it is doubtful whether or not it is possible to restrain speculation and the resale of coal moving in interstate commerce except through the authority of the State governments and, therefore, any action taken requires a large measure of cooperation from the State authorities.
About a month ago, as the situation became more tense, speculation began to grow among dealers in coal and as it was impossible to secure 100 per cent cooperation amongst the coal operators-30 per cent of them obviously profiteer.ng in coal—we sought to extend the purely voluntary measures of restraint by asking the governors of the States if they would not set up some local machinery of their own. That has been done in a great many States. Like the Federal Government, most of them lack any specific legislative authority. They have set up standards as to the price of coal at the mine in some of the producing States and they have set up standards for the charges to be made on the resale and distribution of coal. Most of their organizations are voluntary and they function with a certain degree of failure, as all such organizations must. The prices determined by the State authorit'es in coal-producing States have been universally somewhat larger than those that were established under the voluntary arrangements that we set up at earlier dates. We used as a basis for arriving at a fair price the last Garfield pr ce scales. Those price scales were determined during the war after exhaustive investigation; they were held in operation for a considerable period and seemed to have protected production and right profit, and we therefore adopted that as the basis, with additions to it, such as would compensate for the very materially increased wage scales and other expenses in different districts. That resulted in fixing a fair maximum price varying from $2.20 to $3.50 in various Southern States then engaged in production. The prices that have been fixed by the State authorities, since they have begun to review the matter, have been pretty generally $1 higher than those that were set up through the Federal agencies. We have felt that the State authorities, with ther independent means of investigation for the determination of conditions from day to day, were in a better position to determine these matters than we were here in Washington, and that in any event the primary responsibility for the welfare of the people within their States rested with the State authorities, and therefore their view as to price has been adoped as current. The only point I wish to make on that is that the prices made by the State authorities through the Southern States are about $4.50 for run-of-mine coal; Pennsylvania has $3.75 for thick veins and $4.75 for thin vein coal. I understand prices are under discussion in Ohio that will result in about the same level as Pemisylvania prices for thick and thin vein coal. Those prices, even on that level, would be very materially less than those being charged in trade today.
The CHAIRMAN, If you have nothing more to say the members of the committee, perhaps, would like to ask some questions,
Mr. NEWTON. As I understand it, Mr. Secretary, you feel that the plan embodied in the bill that is before us is about the most effective and expeditious way of handling this coal question ?
Secretary HOOVER. Yes, sir. There were, as the result of studies made in the departments as to the constitutional basis for Federal action, two different lines of thought developed. The first of those was to use the various Federal authority as a foundation for the Government taking possession of coal, at a fair price. Taking possession of coal at once means to buy it and if you buy it you must resell it. That logically means that the Government must go into the coal business, to condemn and negotiate for coal at a fair price in resell it.
Tip clifficulties with that plan are very great from the point of view of organization, if from no other point of view, in that to set up machinery of
that kind, which would take care of some percentage of the coal that would create an effective balance wheel on price, would require 60 or 90 days for the very organization and functioning of the organization. The situation is urgent and, therefore, the committee appointed by the President to investigate this matter---which committee consisted of Secretary Fall, the Attorney General, Mr. Aitchison, of the Interstate Commerce Commission, together with myself-concluded that for immediate and urgent use the extension of the powers of the Interstate Commerce Commission would be far and away the most effective. Moreover, the plan provided here keeps the Government out of business and relies upon regulatory powers instead of "buying and selling. Of course, it is the hope of all of us that this period may not extend over 90 days, but it may extend over six months, and if we can have some regulatory machinery, as distinguished from method by which the Government is plunged into business, it will be infinitely more expeditious in its action and it avoids the dreadful pitfalls of the Government going into active business.
Mr. NEWTON. The claim has been made that the maximum prices that would be fixed in different mines and localities would, in effect, become the minimum. What is your judgment on that?
Secretary HOOVER. I do not think there is any question of doubt about that until such a time as the strain is relieved and competitive action began.
Mr. NEWTON. But, assuming that to be the case—and I concede that would be the case it would be far preferable to the present situation, where the maximum price is whatever the buyer might bid for it, due to the seriousness of his own situation and his ability to pay?
Secretary HOOVER. Yes; and I wish to add that such action is only justified in case of famine. The buyer is, of course, as much responsible as the seller for kiting prices. We have had very fine examples of that during the last three or four weeks. In this time of desperation for coal for the critical services, such as the railways, the public utilities, and the public institutions, the Interstate Commerce Commission established priorities that excluded many consumers. Many desperate buyers in other industries have offered as high as $12 or $15 for coal to operators who were selling coal at $3.50 under their agreements, so that the question of the rise in coal prices is not always to be laid at the door of the seller; it is often a question of the buyer.
The CHAIRMAN. Can you tell us anything about the probable average level of the supply of bituminous coal in the country for miscellaneous and general purposes?
Secretary HOOVER. The railway consumption is approximately 2,000,000 tons a week—perhaps 100,000 tons over that; the strictly public utilities probably use 700,000 tons a week; there is another line of semipublic utilities, like the byproduct gas works, who use gas for public purposes and who sell coke, that might embrace another 300,000 or 400.000 tons a week; then there are the public institutions. We have no very definite figure as to their consumption. It might run into 300.000 or 400,000 tons a week, including hospitals, schools, public buildings, etc. Then there follows the industries manufacturing food and other absolute necessities. All together this group, which omits household use and normal industry, probably amounts to 4,000,000 tons a week. Out of a transportation of 8 000,000 or 9,000,000 tons of bituminous per week we should have a margin of five or six million tons a week for industry generally and for household use. With the settlement of the anthracite strike there will be an addition to the supply of from a million and a half to a million and threequarters tons. This, however, has been taken into account in the estimates of the bituminous shortage.
Mr. MAPES. Do those figures include the entire consumption of coal shipped in interstate commerce?
Secretary HOOVER. No; the total consumption in the country. I wish to say about these figures that we have no real sound analysis of the different descriptions .of coal used; we rely upon certain approximations made during the Fuel Administration.
The CHAIRMAN. Can you give any information as to the necessity of shutting down commercial operation in the country due to the lack of coal?
Secretary HOOVER. There has not as yet been any very considerable closing of industry. Some industries like lime kilns, brick works, and industries of that type have in some sections closed down, but as yet there has been no great industrial suspension.
The CHAIRMAN. How imminent is such a situation?
Secretary HOOVER. I would hardly like to answer that question, because with the rapidly accumulating production it may be possible to prevent any major closing of industry.
Mr. COOPER. Mr. Secretary, I just want to ask you one question and it will be a short one. I have listened with a great deal of interest to your statement and as one member of the committee agree with you. You have said that we are facing a very serious situation in our country relative to the coal question, and I believe you stated your observations led you to believe that about 30 per cent of the coal operators were inclined to be profiteers and that about 70 per cent wanted to be fair, Do I understand that this bill will give to the Interstate Commerce Commission the power to say to these 30 per cent of operators who are inclined to profiteer, “ If you are going to carry on your business in that way you are not going to have cars?” Is that the purpose of this bill?
Secretary HOOVER. It is, but I do not know that under the provisions of the bill the commission would need to resort to the restriction of production of 30 per cent in order to make it effective. In other words, it is my impression that the penalties under the bill could be applied to a single offense rather than to closing 30 per cent of the mines. Moreover, the offender is as often the dealer as it is the operator. Beyond this the desperate buyer must not be restrained; his bidding adds nothing to the available transportation.
Mr. COOPER. I did not have in mind that it would apply to all of the 30 per cent but would apply to any operator who is inclined to ask extortionate prices for his coal and that where other operators would be inclined to be fair the commission would have the power to furnish them with cars.
Secretary HOOVER. That is the purpose of it.
Mr. GRAHAM, Mr. Secretary, extortionate charging at this time, with the winter coming on and with people in the market bidding against each other, constitutes a burden on interstate commerce, does it not?
Secretary HOOVER. It certainly constitutes a very great burden.
Mr. GRAHAM. And after all is not that the real basis of any action of this kind by Congress?
Secretary HOOVER. Of course that must be the legal basis, but I do not think that prevents us from taking into vision the other consequences of the situation.
Mr. GRAHAM. What I am getting at is that the situation which has arisen with reference to the scarcity of coal is disturbing the better conduct of the commerce of the country in that it sends coal to one place and deprives other places of coal that ought to have it.
Secretary HOOVER. Certainly.
Mr. SANDERS. Mr. Secretary, as I understand the provisions of this bill, they undertake to meet two difficulties that attend the present emergency. One is the question of where coal shall go and the other is the question of the price to be charged for coal. The Interstate Commerce Commission, of course, now has very wide authority with reference to distribution and, together with those who are helping in the emergency, it has been using those powers. I should like to know what additional powers with reference to distribution--leaving out of the question of profiteering and the price charged-it is proposed to give to the Interstate Commerce Commission by this measure.
Secretary HOOVER. I do not think the commission's powers of distribution are extended by the bill materially or that it necessary to extend them. The power over distribution itself is, I believe, fairly comprehensive in the Interstate (Commerce Commission acts, but there is the primary difficulty with distribution under priorities. The commission can set a priority for the movement of coal, but the movement does not take place unless there is a bargain made between the buyer and seller. That problem, for instance, arises in connection with Lake shipments, and before the actual movement of coal into an area of short supply can take place there must be set up some organization of buyers and some organization of sellers who will take advantage of the priorities given to facilitate the movement of the products. This requires, as in tbe Lake case, some promotive action outside the determination of priorities. There is also the problem of determining the actual shortage of coal and the best market from which it can be obtained, of setting up a series of cooperative measures with State authorities, and so on, all of which it is proposed to set up here by the creation of a Federal Fuel Distributor who will cooperate, in turn with the Interstate Commerce ('oumission. The powers given the Federal Fuel I stributor are very limited. They practically amount to the determination of facts and the establishment of cooperation. There is thu
the creation of a piece of administrative and executive machinery to supplement the Interstate Commerce Commission in the matter of distribution. The Interstate Commerce Commission does not possess that executive machinery to-day.
Mr. SANDERS. In other words, the Federal Distributor, with his machinery, is authorized under this measure to ascertain in a comprehensive way what the situation is and make recommendations to the Interstate Commerce Commission?
Secretary HOOVER. Yes.
Mr. SANDERS. At the top of page 4, section 5, there is language which gives the Interstate Commerce Commission the power to “ other suitable measures.” Do you know what that means? I mean, do you know what the purpose of that language is?
Secretary HOOVER. The purpose, I imagine, was to enable the commission to take care of unexpected emergencies. It is almost impossible to anticipate what may arise out of a shifting situation of this character, and I assume those words were put in in order to put the commission in a position to do everything that can be done.
Mr. SANDERS. You do not recall anything except the question of priority and embargo that is meant to be covered by this language, do you? I was wondering whether by that language it is intended to give the Interstate Copimerce Commission the power to do what Doctor Garfield did during the Fuel Administration; that is, stop all the industries of the country for the period of a week. Secretary HOOVER. No; nothing of that kind has been discussed.
As an instance of the use of such powers I might suggest that in dire emergency of further breakdown in transportation that the movement of coal should be zoned so as to secure the most effective use of our transportation. You will realize that there is a great amount of crosshauling in coal and considerable wastage in transportation. That use of zoning was one that was developed during the war with some considerable effect, but it is a very difficult operation and I do not imagine it is in the field at the present moment, but it seem's to me that while we are dealing with an emergency there should be wide enough powers to take care of such activities as that.
Mr. SANDERS. As I understand it, the way this is intended to work out is about as follows: “The Federal Fuel Distributor shall ascertain, much in the way that Doctor Garfield did, what he regards as a reasonable price and to cover the entire country so far as coal proposed to be shipped in interstate commerce is concerned; that after ascertaining those prices he shall then make a recommendation to the Interstate Commerce Commission that they shall issue priorities and permit the use of cars only to those persons and corporations who comply in their dealings with the prices so fixed.
Secretary HOOVER. That is approximately the plan, plus the fact that the Federal Fuel Distributer in all those matters will act in cooperation with the State authorities.
Mr. SANDERS. But once he has cooperated and gotten the information the Interstate Commerce Commission may take the prices he fixes as being all right or they may overrule him on the question, because it is only directory, or they may say that the prices fixed by the Federal Fuel Distributer have not proved right and then issue priorities on a different basis.
Secretary HOOVER. Surely.
Mr. SANDERS. But the general purpose of the act is to take the power under the commerce law which controls the priorities of car service, and to say to those who propose to charge a price not in accord with the price fixed by the Fuel Administrator, We will penalize you for imposing an extortionate price by refusing any cars in which to make shipments"?
Secretary HOOVER. That is not the primary, but probably is the major object of the act. I should not put it higher than major, because the distribution side is very important as setting up executive machinery to enable a more equitable distribution.
Mr. SANDERS. Of course, there is no hearing provider, and there is no chance or opportunity for presenting the side of the operator or the owner of the (oal on the question of the price that is fixed. There would be no chance of getting it changed in any way through consideration by any tribunal, as I understand it.
Secretary HOOVER. No; there is no provision here for that, but the fact that the Interstate Commerce Commission itself is a tribunal for the just determination of matters of that sort.